Hot beverages have long been an essential purchase for shoppers, either as a top up or included in their regular shopping baskets.
Over the past couple of years, as a response to the pandemic and subsequent closure of cafés, sales of hot beverages increased in the wholesale channel.
Sales have more recently levelled out, with shoppers seeking choice and variety from their favourite brands to enjoy at home.
Liz Kerr, Marketing Manager at Typhoo Tea, comments: “At Typhoo Tea, we’ve been making Great British tea since 1903 and have cemented ourselves as one of the nation’s favourite choices. The brand is the perfect solution for both shoppers, retailers and wholesalers, offering value for money, quality and brand assurance to customers, whilst also providing category boosting margins.”
Wholesalers should consider stocking a variety of tea blends in different pack sizes to offer choice in flavour and format.
Typhoo Tea is an ideal choice, providing quality and value from a brand that shoppers know and trust, whilst also offering margins that can drive profits.
Typhoo Tea Original, Decaf and Gold are staples in the Hot Beverages fixture, with a mixture of pack sizes from 40s and 80s to 240s.
“Decaf is a must stock as one of the fastest growing sectors of the tea market,” adds Kerr. “Wholesalers should consider stocking Typhoo Decaf In their core range as more and more consumers swap one or more of their regular brews for the decaf variant.”
Typhoo kicked off 2022 with its first brand campaign in almost five years. The first phase of the ‘OO Please campaign included a huge consumer stunt with visual projection, mass experiential sampling, radio advertising and sponsorships, PR, and social media.
The ‘OO Please campaign gives the infamous ‘OO in Typhoo a new lease of life.
Tuuli Turunen, Head of Marketing for Tetley, comments: “No-one could have predicted the turbulence of the last few years and on the heels of the pandemic plenty of challenges remain, not least supply issues, anxiety over the cost of living and the ongoing focus and concern of health post pandemic.”
Within the market, spend in retail overall has dipped significantly in recent months, in grocery this is reflected in a decline in frequency of visit and average spend.
For the tea category however, with the average cuppa still well under 4p a cup, even with marginal price increases, tea represents good value for money and the opportunities to increase sales are very real.
“Combined; the drive to improve work life balance and to make moments of self and togetherness matter, opportunities for valuable tea moments both within and outside the home abound, and with them, scope to broaden the attraction of tea to new audiences,” adds Turunen.
Tetley’s research shows that tea lovers know what they like and when it comes to tea are brand loyal.
Tetley continues to have the highest number of buyers among the major tea brands and is the top stock in impulse with 32% volume share; no. 1 in Scotland with 44.5% market share and the number 3 brand in total market with volume share up 0.3% yoy (Nielsen).
As a staple of the weekly shop, the tea offering is important to get right and in these difficult times, being seen to offer value for money is critical.
“Own label might provide a short-term fix when budgets are straightened, but if the substitute fails to excite and deliver on taste, then a return to safer ground is more than likely with the next buy,” says Turunen. In smaller stores, offering the right choice of price marked packs provides transparency of a good value offering, which makes PMP a useful tool to help stores compete. A pack of Tetley 80s PMP £2.89 PMP offers great value, coming in at little more than 3p a serve for instance.
In larger retailers, purchase is driven by brand loyalty, promotional offers as well as associated buying. “Tea buyers tend to add more items to their shopping basket than other shoppers, so dual siting tea with breakfast items, milk, bread products or pastries, or biscuits and cakes for break times can all help to boost sales,” comments Turunen.
Within the category itself black teas remain the bedrock and the most popular choice, accounting for 73.2% of tea sales in grocery mults, rising to 88.6% in smaller impulse stores (Nielsen).
Haydn Parker, Category Executive at Nestle UK&I Beverage comments: “As consumers are becoming more conscious of their health and lifestyle, there has been an increase in shoppers cutting out caffeine and therefore switching into Decaf. Decaf has seen growth in a market that is marginally declining and therefore should be part of wholesaler’s Core Hot Bevs.”
Shoppers are becoming ever more mindful about sustainability now and this is especially true of younger shoppers. Packaging, especially recyclability, is one of the fundamental drivers for these shoppers and can influence purchase decisions. Health and wellbeing is a growing trend and therefore Decaf has seen an increase in sales and is a growing market. Having a range of Decaf Hot Bevs is crucial for retailers to be targeting this particular need state.
In the total market, Nestle Coffee is growing value ahead of the market in the latest12 week read. This strong growth has been driven across an outperformance across the market across all Core Instant propositions: Regular, Premium, Super Premium, Decaf and Origins & Organic.
In addition, Nestle outperforms the total market in both Mixes, driven by Frothy coffee through Nescafe Gold Frothy and Pods through Nescafe Dolce Gusto.
Nestle has had several bursts of BVOD on channel 4 – across Gold Frothy Core, Iced, and Plant Based.
The brand has two bursts of FRIENDS sponsorship on TV for Iced and Gold Frothy Core.
It has had emails, PR, social support, and on pack support (amongst other things) for Win Your Me Moment.
“Wholesalers’ primary focus should be ranging on Core Coffee,” adds Haydn. “Core instant is the largest segment in the total coffee market, and even bigger in wholesale and is therefore the greatest penetration driver. Ensuring that wholesalers have an optimum range across all of the core segments with all of the best selling SKUs in range is essential to try and maximise their core sales.”
“Wholesalers should utilise their suppliers’ category contacts,” says Haydn. “They will have a view of what is going on elsewhere in both the total market and other retailers and therefore can give objective advise on how to grow their wholesalers’ business as well as identifying opportunities and risks.”
During covid the UK went through a period of panic buying, whereby shoppers stocked up on ambient groceries and sales significantly spiked. This was also true of coffee whereby shoppers stock bought in March 2020 as the UK went into lockdown.
During the lockdowns, households were working from home and therefore in home coffee consumption increased and sales continued to rise due to frequency of purchase increasing. Now as workers are starting to go back into the office we are starting to see coffee sales marginally decline versus a year ago, as there is less in home consumption. However, versus pre covid, sales are up as well as the number of UK coffee shoppers which is positive for the category.
Ross Schofield, Commercial Director at Lincoln & York, comments: “It makes sense for wholesalers to have a wide offering and become a ‘one stop shop’ to allow their customers to create a well-rounded hot beverage offering.”
The global decaf coffee market is projected to reach a value of £12.28bn by 2031 – with sales booming in January every year thanks to consumers’ new year’s resolutions (Transparency), meaning decaf options should certainly be a part of core range.
Consumers are increasingly aware of the negative effects of caffeine, such as the effects it can have on sleep when it’s consumed in the late afternoon.
“We expect demand to only increase – in fact, we are already seeing a spike in the number of people drinking decaf coffee after midday as a way to receive their coffee fix without the energising effect of caffeine,” adds Schofield.
Consumers are becoming more aware of the different coffee options available to them and over the last year we have seen significant growth in the popularity of specialty coffee.
With consumers no longer limited to instant or filtered coffee in their day-to-day lives, they are seeking more variety – from dark roasts, through to milder, lighter blends.
“We’re seeing wholesalers react to this trend, broadening their ranges to ensure they have a choice of formats, from ground to bags to beans, and a selection of blends and roast profiles, allowing them to enable their customers to appeal to changing consumer tastes and preferences,” says Schofield.
Lincoln & York offers a diverse portfolio of products from bags to beans, across more than 600 different blends of coffee.
The Ready-to-Drink Coffee Market is projected to grow at a CAGR of 2.4% between 2022 and 2027 showcasing the popularity of grab-and-go cold coffee formats (MordorIntelligence). What’s more, since the removal of Covid restrictions, 41% of Brits have bought RTD coffee more than once a week, 17% are getting their fix two or three times a week, and for 9% it’s a daily habit (Lumina).
“We know the demand for RTD is clearly there, and wholesalers should be encouraging their customers to take advantage of the boom,” Schofield continues.
While supermarkets are the most popular place to buy RTD coffee, the second most popular destination was coffee shops and cafés (chosen by 60% of people) and 38% of people also cited convenience stores as a go-to for purchase (Lumina). With the category valued at £94 million – up 59.1% year-on-year (Kantar) – it will soon become a must-stock product. By getting ahead of the trend, it adds a new revenue opportunity for wholesalers.
“As we approach autumn, wholesalers should increase their stock of flavoured syrups as coffee shops and OOH venues look to make simple, seasonal adaptations to beverages,” Schofield suggests. “It is likely we will see the usual cinnamon, salted caramel and pumpkin spiced flavours peak in popularity. Stocking these near the coffee in-store or listing them alongside coffee products online will help create a natural association.
To encourage incremental purchase or even initial trial from shops and OOH venues, wholesalers could create a combined seasonal offer.”
Stocking sustainable options is becoming increasingly important. With 52% of consumers making purchase decisions based on a brand’s eco-credentials, retailers and coffee shops will soon be turning to their wholesaler for options with strong sustainable credentials. Social media has certainly played a key role in the increased awareness of environmental credentials and bean to cup traceability.
Over 80% of Lincoln & York’s coffee is certified either fairtrade, organic, or rainforest alliance, ensuring an ethical and sustainable option is available to all our customers. Its packaging is made from award-winning, fully recyclable low-density polyethylene material (LDPE), helping with eco-credentials from bean to cup.
“While some people like to spend time over their coffee, the majority of today’s consumers want variety, quality, good-tasting coffee which comes in a convenient format,” Schofield continues. “For wholesalers supplying retailers, stocking easy-to-use formats outside of instant coffee will allow customers to tap into this trend.”
Coffee bags, for instance, which offer a high-quality experience with a familiar preparation method, are seeing their overall market share grow as consumers become more comfortable with the format – up 14.8% to reach a value of £20.1m (Nielsen). Alongside this, with the rise of the ‘instant coffee machine’ comes an increase in demand for single-serve coffee pods, especially amongst those aged 16 – 34 who account for 16% of all buyers (British Coffee Association).
“Wholesalers could also tap into the trend of ‘special editions’ or guests roasts,” says Schofield. “This offers choice and a chance to try something new, which we know is important to consumers today. Thanks to the limited nature of these products, wholesalers can even charge a slight premium for these options.”
“To maximise sales, wholesalers need to ensure they are appealing to the right audiences, with the type of coffee on offer and when,” suggests Schofield. “As we enter the autumn months, it makes sense for wholesalers to stock more hot coffee styles as we are likely to see hot beverage sales increase. Additionally, wholesalers could also offer promotional discounts on coffee blends to grab the attention of customers, such as offering a free autumnal flavoured syrup with every pack of coffee bought.”
During lockdown, in-home coffee sales spiked as consumers were still keen to receive their coffee fix. As the nation begins to return to work in offices, there is likely to be an increase in out of home coffee sales, meaning a growth in the market is predicted.
Susan Nash, Trade Communications Manager at Mondelez International, comments: “The Hot Chocolate segment as a whole is in strong year-on-year growth (Nielsen), proving its ongoing relevance to shoppers throughout the year.”
Mondel?z International’s extensive range includes Cadbury Hot Chocolate, Cadbury Instant, Cadbury Highlights, Cadbury Bournville Cocoa Powder, Fry’s Hot Chocolate, and premium brand Green & Black’s Cocoa and Hot Chocolate (Nielsen) – with products tapping into the Drinking Chocolate, Instant Chocolate and Cocoa sub-categories. Cadbury is the UK’s number one (Nielsen) hot chocolate brand and is growing at 8.7% (Nielsen) year-on-year.
“Balance and wellbeing remain important considerations for many, which provides an opportunity for wholesalers and retailers,” adds Nash.
Cadbury offers a lighter alternative to enjoy hot chocolate through the Cadbury Highlights brand. Cadbury Highlights Milk Chocolate has the smooth, milk-chocolatey taste of the number one chocolate brand, with a recently improved flavour and pack-design, to give strong standout on shelf. At only 38 calories per cup, the product meets shopper demand for lower calorie options.
Adrian Hipkiss, Marketing and International Business Director at Boost Drinks, comments: “Now worth £200m, the RTD Iced Coffee Category is growing rapidly, with Symbols and Independents sales having now grown to over £37m (IRI).”
With 75% of sales value made on 4 flavours – Latte, Caramel, Espresso & Mocha, Boost is now the #2 largest selling and 1st fastest growing RTD iced coffee brand in unit sales and building on its RTD Iced Coffee range with the addition of a Mocha variant. Adding Mocha to the portfolio allows Boost to capture the consumer demand and provide more choice for customers.
This year, Boost Drinks diversified its portfolio with new products in both coffee and stimulation. The brand is building on its RTD Iced Coffee range with the addition of a Mocha variant. Within the RTD Iced Coffee sector, 75% of the sales value are made up of just 4 flavours – Latte, Caramel, Espresso & Mocha (IRI) – adding Mocha to the portfolio allows Boost to capture the consumer demand and provide more choice for customers.
“The RTD iced coffee category is growing rapidly,” adds Hipkiss. “To capitalise on the future growth and stock fast growing brands such as Boost’s RTD Iced coffee range, retailers should allow for sufficient fridge space, highlighting the range of products on offer and allowing them to grab consumer attention.”
Supported by a cross-channel media strategy with touchpoints across OOH, social, trade advertising and a depot activation, Boost’s new Mocha variant is set to seek maximum exposure. Backed by high-impact advertising Boost seeks to drive maximum brand awareness and hopes to amplify consumer and retail trial and engagement around the new Mocha variant.
Harry King, National Account Manager at Jimmy’s, comments: “Appealing to a wide range of shoppers and consumer needs is the key to every successful category.”
Latest data shows that Iced Coffee is becoming more mainstream, and that consumption is continuing to grow across all age demographics (Allegra World Coffee Portal). RTD Iced Coffee is one of the fastest growing categories and contributing strong growth to the total soft-drinks market
Premium offerings are driving value growth in the category, as well as flavours and bigger pack formats that appeal to a variety of shopper missions. Multi-pack for take home (+84%), Oat (For growing vegan and dairy alternative shoppers)
Jimmy’s best seller is Original- milk & coffee, closely followed by Mocha- Milk, Coffee & Belgian Chocolate. That being said what is starting to gain more popularity is our new Oat Iced Coffee. Dairy alternatives are gaining more traction, with Oat now being the fastest growing alternative in the market.
Jimmy’s is continuing to outperform and drive growth within the category – Jimmy’s +76% YOY vs Category +26% YOY.
“It is important for wholesalers and retailers to provide an offering to appeal to a wide range of shoppers,” adds King. “This will mean providing a variety of flavours, pack sizes and formats to choose from, to meet a variety of different shopping missions.”
Smaller pack sizes and a strong promotional plan can be a useful way of bringing new shoppers into the category. A more accessible price point will help to drive trial and ongoing purchase. Providing a premium, branded offering will then drive trade up for existing shoppers in the category and larger pack formats provide a bigger size, bigger value offering for loyal Iced Coffee shoppers.
Jimmy’s will be supported by a nationwide billboards and sampling campaign. QR codes on the billboards lead to a digital voucher for consumers to claim a free Jimmy’s from multiple retailers. As well as digital vouchers, the brand continues to sample using paper vouchers and product to get people trying the products. ‘
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