With the coffee category now worth over £1.6 billion and more than 24.4 million households in the UK buying coffee (Kantar), wholesalers can continue to benefit from the growing opportunity from this category.
As the second largest ambient segment (NIQ), only trailing breakfast cereal, and boasting a healthy 2.5% growth in the last year (NIQ), coffee presents a significant opportunity for convenience stores to optimise their category management strategies. With consumers increasingly looking for more evolved coffee shop-style coffees that deliver on taste and quality, it remains vital for wholesalers to offer an exciting and diverse coffee range to make the most of the category.
While the UK has historically been known as a nation of tea drinkers, more cups of coffee are now consumed throughout the day than tea and many consider coffee one of the hardest beverages to go without (JDEP Toluna).
Maria Kabalyk, Head of Category & Shopper at JDE Peet’s, comments: “Wholesalers should consider stocking household favourites such as Kenco, L’OR, Douwe Egberts and Tassimo which allows retailers to purchase convenient but still delicious ways to display coffee shop favourites.”
The coffee shop at home trend continues to grow, with 49% of consumers claiming to visit coffee shops less to save money – and most drinking more at home (NIQ).
Consumers are trading up on their weekly shop with products that allow them to easily recreate their favourite coffee shop experiences in the comfort of their own homes. One format that continues to do well is instant coffee, particularly within the in-home market. Instant coffee accounts for a remarkable 78% of all in-home coffee cups consumed (NielsenIQ), this enduring dominance isn’t just about volume; it signals a growing opportunity for premium instant coffee products that deliver rich, indulgent taste with minimum fuss, all while costing significantly less per drink than a typical coffee shop order. What’s more, these products are also key to recruiting a younger shopper and expanding the popularity within the coffee category.
Tapping into the market trend for coffee-shop-worthy beverages, Kenco Cappuccino and Latte sachets allow consumers to recreate that great tasting, frothy coffee without the need for a coffee machine.
Brands that tap into coffee shop culture, like JDE’s Tassimo Costa range, continue to be incredibly popular. With options from cappuccinos to lattes, shoppers can bring versions of their usual Costa experience into the home, presenting a real opportunity as shoppers look for coffee shop quality beverages at the touch of a button.
With the cost-of-living crisis there is continued pressure on household spending. Consumers are looking at how they can make simple switches to save money – including swapping their coffee shop visit for a delicious version at home. With over half of coffee consumers drinking instant coffee at home in the UK (Mintel) and 79% of in-home coffee cups being made using soluble products (NIQ), it’s clear that there is still a demand to provide consumers with great-tasting instant coffee.
“JDE continues to be a household staple as consumers are turning to trusted and familiar brands that they know deliver on taste and quality (Forbes),” adds Kabalyk. “This is particularly important within the instant coffee category as 9.4 million households buy JDE instant coffee products specifically, showcasing a valuable opportunity in the market which wholesalers should capitalise on.”
Kenco Smooth, Kenco Rich and Kenco Decaf use a special blend of premium coffee beans which are roasted with care and expertise to create a rich flavour and irresistible aroma. Kenco Smooth is an incredibly smooth medium roast coffee, that boasts well-balanced, rounded flavour. Also in the range is Kenco Decaf, which is expertly roasted to deliver the unique smooth Kenco coffee taste that consumers look for. The range is available in PMP formats which provides consumers with a sense of confidence that they are not being overcharged, driving incremental coffee sales.
A format that is gaining increasing importance in the minds of consumers is decaf. With the choice between caffeine and decaf products being one of the main considerations for the health-conscious shopper (Allegra), many shoppers are turning to decaf products to enjoy the experience of having coffee without caffeine.
While some segments continue to see decline, total decaf value sales have remained in growth (Kantar) and now make up a quarter of all instant coffee sales, showing the opportunity for wholesalers to offer shoppers high-quality decaf options to enjoy at home.
“With Kenco being the number one brand for instant decaf (Nielsen), Kenco Decaf SKU is expertly roasted to capture the unique, smooth Kenco coffee taste that can be enjoyed any time of the day,” says Kabalyk. “Offering a decaf version from a trusted and familiar brand that consumers know delivers on taste and quality, makes it a key product for wholesalers as we look ahead.”
Ed Sykes, Customer Category and Shopper Lead at Nestlé, comments: “Our best-sellers come from our Nescafé Original, Nescafé Gold Blend and Nescafé Azera brands. We would recommend stocking our instant coffee lines in the PMP format, which are designed for the convenience channel to support retailers with shopper price perception.
Sales for iced coffee are in double digit growth (Circana) and research shows that Gen Z in particular are embracing this trend. In fact, searches for iced coffee on the Nescafé website have increased by 380% on the previous year. The recently launched Nescafé Espresso Concentrated range is a new way for consumers to enjoy a ‘coffee shop at home’ iced coffee experience in just three easy steps. The range comes in three flavours: Classic, Vanilla and Caramel. Nescafé has also coupled up with ITV2 and ITVX’s hit-show, Love Island, as its official iced coffee partner.
Nestlé Coffee is growing at +2.2% YoY, with over 611 billion cups of the coffee consumed in the convenience channel each year. Its products cater to a variety of different shopper need states and demand moments. Mixes sachet coffee has grown +16.2% this year and Nescafé Original 3in1 PMP pack has a strong weekly average weighted unit rate of sale of 4.58 (Circana), supporting this growth.
“We recommend the following general merchandising principles for wholesalers. Segmentation is critical for supporting retailers to navigate Hot Beverages in the depot. So grouping products by segment within a single bay, ensures that retailers can make informed decisions by easily comparing products and prices,” adds Sykes.
“Within each bay/segment area, the highest quality products should be on the top shelves.
“Within each shelf, products should be merchandised to have the base cost (i.e price excluding promo) per case increasing, as you move left to right.
“Consider aiding retailers to find their products with in-aisle signage to aid navigation.
“Online makes up 47% of sales in the wholesale channel. Encourage your suppliers to work on their eContent, making sure PMP images are up to date and easy to read. We also recommend considering how your website can include category insight pages too, to support retailers with decision making.
“It’s important for wholesalers to follow these principles as they aid shopper navigation and ensure that your customers can easily find their favourite products.”
Richard Milner, Category & Insight Manager at Lincoln & York, comments: “Lincoln & York is a leading independent, family-owned UK coffee roaster and the private label partner of choice for retailers, wholesalers and hospitality businesses across both the UK and Europe.”
Now valued at almost £8.2bn, the out of home coffee market has grown 6.9% year-on-year (Worldpanel) and continues to flourish despite challenging market conditions and record-breaking green coffee prices. This ongoing demand, and high level of consumer engagement with the category, offers wholesalers an opportunity to stock a broad range of high-quality coffee options to meet the ever-evolving needs of coffee operators and their customers.
Today’s coffee consumers are actively seeking specialty blends and indulgent extras, and Lincoln & York’s independent research shows they’re also willing to pay more for this premium coffee fix. Nearly half of those surveyed said they ‘always’ or ‘occasionally’ spend more to try a special blend or single origin coffee (Vypr). This response is also backed up by market statistics, with purchase frequency up 10.8% and over 640,000 more coffee buying consumers than 2 years ago, despite a 12% increase in average coffee prices over the same period (Worldpanel). This demonstrates consumers’ engagement with coffee and their willingness to prioritise their ‘caffeine fix’, which is an opportunity wholesalers should be taking advantage of.
With a large proportion of customers now choosing their coffee based on its provenance, wholesalers can also tap into the growing demand for single origin coffees. Offering premium coffees from regions like Brazil, Kenya or Colombia allows wholesalers to support their customers in driving higher-margin sales. Also, by supplying a range of origins, wholesalers can help operators refresh their coffee menus and encourage repeat customers looking to try something different.
Another trend which continues to evolve in the out of home coffee market is demand for indulgent drinks. Examples of these more extravagant drinks include Spanish lattes made with condensed milk, Nutella lattes and gold leaf cappuccinos. Not only do these drinks show consumers’ desire to try something new but also prove they want drinks which look as good as they taste. The role of social media in engaging younger coffee connoisseurs shouldn’t be underestimated, with 45% of under 35s sharing a picture of their beverage online in the past 12 months (Allegra).
“By offering a range of premium options, from specialty blends and single origins to more indulgent extras like trending syrups, creams and toppings, wholesalers can better support operators in meeting the needs of their customers, increasing sales values and growing consumers’ interest in where their coffee comes from,” adds Milner.
Research shows the growing popularity of RTD and cold coffee options is being driven by the younger generation of coffee drinkers.
Iced coffee is now worth £302m (Worldpanel) and is the third most popular drink for those aged 18-35 {5}. It’s also a similar story for RTD, with 80% of 25–34-year-olds purchasing an RTD coffee in the past year (Lincoln & York) and RTD reaching a value of £347m in retail, a full 9.4% higher than last year (NielsenIQ).
With over 40% of beverages now purchased ‘to-go’, convenient formats like RTD coffee are becoming essential, not just in retail, but across cafes, hospitality venues and the wider foodservice sector, making them a must-stock option for wholesalers (Allegra).
“At Lincoln & York, we are working with partners to create new high quality cold coffee solutions which can be used to improve the quality and speed of iced coffees in out of home. By using coffee extracts when making iced coffees, baristas no longer need to cool an espresso, and the bitterness of quick cooling is avoided. Not only does this speed up service but also improves consistency and flavour in every serve,” says Milner.
For those looking to limit their caffeine intake, wholesalers should ensure they are stocking a high-quality decaf option. Decaf sales out of home are up 13% in value year on year with purchase frequency up 12% (Worldpanel). And in retail, increased demand is evident too, with sales up 15.6% in value and 8.9% in volume compared with 2 years ago (NielsenIQ).
Innovation in caffeine extraction means we’re also seeing the emergence of decaf options with rich smooth flavours, offering a delicious coffee taste without the caffeine kick and avoiding the bitterness which was so long associated with decaffeinated coffee.
“The key for wholesalers looking to take advantage of a thriving coffee market is to prioritise quality and consistency whilst also ensuring their range is diverse and interesting. From stocking a number of single origins to offering speciality blends on rotation, variety is essential for operators to meet the needs of increasingly adventurous and engaged coffee consumers,” suggests Milner.
“Being open to innovation and new formats such as RTD and coffee extracts opens up new opportunities for wholesalers and operators alike, making the increasing demand for cold coffee easier to meet and manage. “Finally, keeping abreast of the latest flavour trends and being able to offer the new ‘must try’ syrups and trending drinks helps operators appeal to new, younger audiences and shows they’re up to date with what’s hot in coffee.”
Kate Abbotson, Senior Trade Communications Manager at Coca-Cola Europacific Partners (CCEP), comments: “The ready-to-drink (RTD) chilled coffee category continues to go from strength to strength, firmly establishing itself as a leading dairy drink option – now worth over £323m (Nielsen) and the segment is now forecast as the highest growth category in soft drinks (Nielsen).”
Costa Coffee’s fully HFSS-compliant RTD range remains a popular choice among shoppers seeking high-quality, coffee shop-style dairy drinks for any occasion. This popularity is underpinned by Costa Coffee’s long-standing status as the nation’s favourite coffee shop for 15 consecutive years (Allegra).
Continuing to innovate in the category, CCEP has reinvigorated the RTD coffee fixture with a bold relaunch of the Costa Coffee ready-to-drink range, rolling out now across wholesale. This sees its Lattes featuring a silkier, smoother coffee recipe, crafted using Costa Coffee’s Signature Blend and two delicious additions: the Creamy Tiramisu Frappé, inspired by the classic dessert and offering the perfect summer treat, and the Double Shot + Caramel, which delivers a smooth coffee kick.
Value also remains a lead motivator for shoppers in the convenience channel (Lumina), closely followed by the demand for trusted brands and consistent quality (Lumina).
“Wholesalers and retailers can meet these needs by stocking leading brands in a variety of price-marked pack (PMP) formats, from on-the-go to multipacks, offering a premium RTD dairy drink selection that stands out from the larger store experience,” adds Abbotson. “Our PMP range includes popular favourites like Costa Coffee Latte and Caramel Latte RTD.”
Adele Ward, Marketing Director at Ecotone UK, comments: “Healthier options, such as decaffeinated, herbal and fruit teas, are becoming more popular and Clipper is well placed to meet this demand, offering a wide range of infusions and a 100% natural decaffeination process. While the decaf black tea category is growing by 5.8%, Clipper is up 20% year-on-year (Circana,).”
Premium is in growth, which reflects a wider shift in consumer priorities: with shoppers hunting for quality from their daily cuppa. This encapsulates ethical and sustainable credentials, too – which we’ve long championed at Clipper.
Clipper continues to out-perform the market in value and volume terms, proving the fastest growing major brand at +7% over the past year (Circana 52 w/e 12thJuly). The brand continues to see steady growth, up 7% year-on-year in value sales despite the slowdown in hot beverage consumption over the summer, versus a category growing only at +0.6%.
Louise Reynard, Customer Development Director, UK at St Pierre Groupe comments on behalf of the St Pierre brand: “An important part of our brand plans involves promoting St Pierre’s individually wrapped range as the perfect complement to hot beverages and ready to drink coffees. Retailers can give their hot drink sales a boost when shoppers are hybrid working or out and about by making the store’s bakery offering highly visible to customers buying hot drinks and food to go. Shoppers are being careful with their cash, but bakery is still an everyday affordable treat.
The move towards premiumisation hasn’t slowed in this staple category, and premium brands like St Pierre give consumers an affordable opportunity to ‘trade up’ and elevate their everyday meals, including when they are on the move. The ongoing financial pressures have made the shopping audience more discerning but offering an appetising mix of indulgence and impulse buys will still drive sales in this sector.
“Hot drinks machines are an important part of independent retailers’ food to go offer, and wholesalers should encourage their retailer customers to invest in appropriate equipment for their store size and footfall to enable them to meet the demand,” adds Reynard. “To take full advantage, retailers should also invest time to make sure hot drinks machines are kept clean, stocked up and in good working order, and the accompanying food to go selection is kept stocked with individually products like those from St Pierre, and looks appealing to shoppers.”
Consumers have got used to convenience stores’ food to go and snacking offerings being a core part of these outlets’ propositions, and shop them at all times of day, along with hot beverages and ready to drink coffee and tea. This also generates secondary spending in other parts of the store.
The way shoppers work has normalised too, leading to stabilised, regular shopper visits. People have settled back down to going to their workplaces full time or flexi working from home, with both presenting growing opportunities for retailers to sell food and hot drinks to go. Morning goods and sweet snacks from quality brands like St Pierre complement hot drinks perfectly as sweet treats at any time of day, merchandised alongside hot drinks machines, and are a great opportunity for retailers to increase basket spend.
One clear growth area is morning goods and sweet treats from brands that consumers know and trust, like St Pierre. The St Pierre food-to-go range comprises of individually wrapped Caramel Waffles, Millionaires Waffle, Butter Croissants, Chocolate Filled Croissants and Brioche Waffles, whilst its multipack offerings include Brioche Swirls, Chocolate Chip Brioche Swirls, Brioche Rolls, Chocolate Chip Brioche Rolls, Chocolate Filled Crepes, Vegan Croissants and Vegan Pains au Chocolat.
Indulgence is a major factor in bakery purchases, and the bakery category overall continues to benefit from consumers choosing premium options, as they look for ways to treat themselves well at home, and on the move – hence in sweet bakery, the popularity of our food to go range and multi-packs. In the wider bakery category, the move towards premiumisation shows no sign of slowing, and quality brands like St Pierre give consumers an opportunity to ‘trade up’ and elevate everyday meals, including breakfast on the move.
Overall, in the current economic climate, our desire for affordable treats is even more pronounced, and indulgence is another trend gaining traction as many embrace the little pick-me-ups that we all need from time to time. Retailers’ bakery sales will continue to benefit from offering a mix of indulgence and impulse buys.
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