Coffee is made up of four subsegments: Core Instant, Mixes, Roast & Ground (R&G) and Pods. All segments are in growth and driving value in the category (IRI).
Core Instant has been driven by all subsegments: Regular (+3.9%), Premium (+4.3%), Super Premium (+1.0%), Origins (+9.6%) and Decaf (+18.0%, IRI).
Mixes performance has been driven by In1’s (+11.4%, IRI), which is a segment that is very important in wholesale and convenience. Nescafe Original PMP 3in1 is the third largest SKU in wholesale and convenience (IRI).
R&G growth has been driven by all segments: Ground (+3.6%), Beans (+17.2%) and Coffee Bags (+11.5%, IRI). Beans and Bags are significantly smaller segments than Ground, so the majority of absolute growth has been driven by Ground.
Growth in Pods has been driven by Tassimo (+1.4%) and Nespresso (+4.4%, IRI). Pods is an area that can drive value for wholesale and convenience retailers, but under trades in wholesale and convenience.
Having the best-selling variant of each machine type listed can help target a wider range of Pods shoppers.
Nescafe outperforms the Total Market, growing value (+13.3%) in wholesale and convenience and growing its share of wholesale and convenience coffee to 54.8% of wholesale and convenience (+4.2ppts, IRI). The strong growth of Nescafe has been driven by Nescafe Original, Nescafe Gold Blend, Nescafe Gold Sachets, Nescafe Origins and Nescafe In1’s. If wholesale and convenience retailers want to win in the market, then these brands should be their focus in order to help deliver value growth.
“Wholesalers’ primary focus should be ranging on Core Coffee. Core Instant is the largest segment in the Total Coffee market, and even bigger in Wholesale and is therefore the greatest penetration driver,” comments Haydn Parker, Coffee Customer Category Manager, Nestle UK&I Beverage. “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.”
Richard Milner, Category Insight Manager at Lincoln and York Coffee Roasters, comments:“For the wholesale market, we’re currently seeing growth in a number of sub-sectors, but primarily within beans, alternative packaging formats and decaf.”
The whole coffee beans sub-sector continues to show the highest rate of growth in the in-home coffee market at +15.5% (NIQ).
This is strongly linked to the growth in ownership of bean to cup machines at home, as consumers choose to upgrade their coffee drinking experiences.
“The growth is also in line with the enduring appeal of “affordable luxury”, so while consumers might be looking to manage household budgets more than in the past, we find that consumers are still keen to prioritise treats and rewards,” adds Milner. “This may take the form of trading up to a premium coffee by choosing an interesting origin or format, or simply choosing to visit a coffee shop over, for example, opting for the ubiquitous Friday night takeaway.”
It’s striking that Kantar data reveals that there are 7.8% more shoppers contributing to the OOH coffee market growth than last year, and they are also buying 2.7% more coffee than a year ago.
“While a relatively small part of the overall market, we’re also seeing growth within alternative serving formats such as coffee bags,” says Milner. “We expect to see this growth trend continue both in retail and in the out-of-home (OOH) market.”
Consumers are increasingly prioritising better-quality coffee experiences at home, and the coffee bag format that Lincoln and York offers is a convenient way to provide the sense of luxury or ‘treat’ that they are looking for. Within the OOH market, hotel operators, for example, are also exploring how they can further elevate the guest experience, and being able to offer branded coffee bags is a highly effective way of adding that premium, boutique touch.
Decaf coffee has also seen a rise over the last year (Kantar). There are a number of reasons behind this, the main one being changing attitudes to health and a greater awareness of the impact of caffeine on the body, particularly when it comes to affecting sleep quality. In the past, choosing a decaffeinated coffee frequently meant compromising on the taste, as the process used to remove the caffeine traditionally involved soaking and drying the beans before they were roasted, leading to a more bitter or acidic flavour profile.
“However, today we are increasingly seeing the introduction of some really delicious decaf coffees thanks to the advances that have been made in caffeine extraction techniques,” Milner continues. “The trend is so strong that we’ve now introduced our own ready-to-buy house range of decaf coffee in multiple formats, from ESE (Easy Serve Espresso) pods through to ground coffee for cafetières; we also continue to be a leading supplier of decaf into an increasingly broad wholesale market.”
Lincoln and York is especially well known for serving the Out of Home (OOH) market as the discreet sourcing, blending, labelling and packaging partner of choice for leading high street chains, independent coffee shops, wholesalers and retailers. As such, 1kg bags of beans have long been the brand’s best-selling product, thanks to the convenience of the format and the value for money that it provides.
“To maximise opportunities within the coffee market, wholesalers need to fully to understand the range, capability and dependability of their coffee partner,” advises Milner. “They should also look to that partner to help understand the latest consumer trends at every level.”
Lincoln and York complements its class-leading coffee supply with experienced marketing and category knowledge and insight teams, which are important support tools in responding to changing trends.
“With the world economy in such a state of flux, customer demand and spending patterns can change quickly. Ensure that your coffee partner can accommodate and adapt to help you deliver on this demand,” suggests Milner.
“Whether it’s quickly introducing different blends, switching to more premium single-origin coffees, or expanding the range of packaging formats that you offer – including pods and coffee bags – make sure that your coffee partner has a robust supply chain and can deliver what you want, when you want.”
“It all comes down to range and choice, especially when capitalising on those growth sub-sectors. Wholesalers need to make sure there’s flexibility in the range to be able to change one or two SKUs to provide for seasonal variation and interest, introduce customers to exciting origins and blends, and to inspire with the widest range of whole bean, pod and coffee bag formats,” adds Milner.
“With decaf not only growing in popularity but also now being able to stand as a fantastic alternative to caffeinated coffee, wholesalers need to ensure they rotate their decaffeinated offer to showcase the variety now on offer within this sub-sector.”
Additionally, with affordable luxury continuing to grow in appeal, many customers are looking at ways to add something extra to their out of home coffee drinking experience, transforming the daily ritual into a more indulgent treat. This appeal is not limited to the OOH segment: replicating these more complex or sophisticated drinks is also proving popular in home, underlining for both retail and OOH wholesalers the benefit of offering a range of syrups and flavour additions to allow consumers to elevate their drinks both at home and in the OOH.
With sales topping £19 million in retail over the last year, distribution up +15%, market share rising to 8.2% (IRI) and recent launches adding a further £117,000 at the till during the first six weeks of 2023, Cafédirect is aiming to cause an even bigger stir this year with the launch of new recyclable packaging, a new brand vision, new products, and a new campaign that will reassure consumers they really are making a difference when they choose Cafédirect.
“Famous for working directly with farmer cooperatives around the world for more than 30 years with the aim of improving smallholder farmer livelihoods, Cafédirect is already popular with a wide group of shoppers who love that they’re getting great coffee that also has a purpose,” explains Lesley Parker, Brand Controller for Cafédirect at distributor RH Amar.
“And with the nation’s discerning coffee drinkers continuing to trade up to premium options at home, there has never been a better time to take this message further, as well as giving shoppers even more reasons to choose Cafédirect.”
Among them is a new look and feel for the Cafédirect family of products as part of a brand revitalisation programme for 2023. An evolved logo now gives the brand an even more distinctive and characterful presence on shelf, whilst a move to recyclable polyethylene across the brand’s Blends and Single Origins pouches – coupled with new 100% premium recycled tin across its instant range – means that 99% of its packaging will be recyclable from April.
“With new pouch packaging that is recyclable with soft plastic bags at large supermarkets, we are providing a solution here and now, whilst a Government commitment to providing flexible kerbside collections nationwide by 2027 means we are contributing to both the short- and medium-term solutions that all shoppers ultimately want to see from their favourite brands,” adds Parker.
With an aim of being instantly recognisable as the coffee brand that’s better for everyone, a high impact marketing campaign from this spring will play out across social and digital channels, alongside a new look website.
“Featuring our new ‘Better for Everyone’ strapline and logo, which will also appear on all packs alongside an infinity coffee bean and coffee cup logo, our aim is to communicate how we are making a positive impact on the world,” explains Parker. “As a result, shoppers can be reassured that our coffee not only tastes great but also that we are doing good by sourcing our coffee direct from our growers who are guaranteed a fair price.
“We have been working directly with farmer cooperatives around the world for more than 30 years, and it’s important that we continue to communicate this so that shoppers can make an informed choice.”
As part of its campaign for 2023, Cafédirect has also launched its second series of ‘Better Business’ podcasts, featuring key stakeholders from the food and drink industry to address how we can make the world a better place.
As well as rolling out a new look across its existing range of Single Origin and Blended beans, decaf, instant, and roast & ground, Cafédirect is introducing two new ranges to its line up.
Available now, Be the Change is a new range of roast & ground coffees with the promise to contribute to making ‘better lives, better planet, better coffee’ whilst having a direct impact on people and planet.
Empower (RRP: £4.45) is Cafédirect’s smoothest coffee to date, medium roasted for a balanced flavour and natural sweetness. Promoting gender equality and women-led enterprises, Cafédirect will be supporting projects that offer training and help to female growers that will improve the quality and yield of the crops they sell, as well as giving them the technology they need to sell their product collectively and improve their negotiating power.
Taking action against climate change, Restore (RRP: £4.45) is a vibrant, well-rounded coffee roasted medium-dark to deliver a deliciously nutty taste, and is the result of a partnership with Producers Direct to provide training, funding, technology and technical support for farmers to adapt to and mitigate against climate change. Not only does this help to restore the land and biodiversity, but it also improves yields and coffee quality, boosting incomes and community health and welfare. Producers Direct also established Centres of Excellence in Peru and Uganda, which are farmer-run enterprises that provide complete comprehensive environmental support.
Thrive (RRP: £4.45), meanwhile, is a dark roasted coffee blended that delivers a rich, intense flavour, profits from which will be invested in future coffee production by fostering employment opportunities from farming and selling, to logistics and digital specialist roles. Scholarships will be made available to support young people in communities with professional skills, whilst low-interest loans – usually unavailable to young people in agriculture – will be offered to support youth-led agri-enterprises.
Meanwhile, available from April, a range of new freeze dried, single origin instant coffees will allow coffee lovers to enjoy the Cafédirect roast & ground taste in an easy to prepare format, available in Decaf Machu Picchu, Machu Picchu, and Mayan Gold variants (RRP: £4.50). As well as featuring colour-coded lids featuring Cafédirect’s infinity coffee bean and coffee cup logo, under-lid inserts will feature QR codes to help shoppers discover more about their favourite Cafédirect coffees, as well as encouraging them to try the instant range’s roast & ground siblings.
“Both new ranges are aimed at appealing to the wide range of shoppers who are looking for something both different, meaningful, but always enjoyable, from their coffee purchasing choices,” explains Parker. Now a top three growth brand in roast & ground, Cafédirect added more than £1.4 million to the category last year (IRI), and is going for further growth this year.
And with an average selling price point that is more than 10% higher than a year ago – without any significant resulting effect on volume sales – the brand is clearly continuing to attract discerning shoppers who understand the brand’s ethical and premium proposition.
“This is one of the real strengths of the Cafédirect brand,” explains Parker. “It’s why sales of our single origin beans are up by 62% in the last year, whilst Mayan Gold alone is up by 78%.
“We’re also bringing in new shoppers – 36,000 in total to be precise – as our penetration grew by 3.2 per cent (Kantar).
“And it’s why we feel confident that, with the launch of a new look, new campaign and a range of exciting new products that go beyond a standard transaction with the shopper, we will help to grow sales of Cafédirect through our partner retailers and wholesalers even further in 2023.”
Amy Burgess, Senior Trade Communications Manager at Coca-Cola Europacific Partners (CCEP), comments: “The RTD coffee sector is a key driver of growth within soft drinks, now worth £276.2m and up 19.6% in value over the past twelve months (Nielsen). The segment is incredibly diverse, in terms of flavours, formats and caffeine intensity – and there’s always innovation on the horizon. And that means the segment is increasing its appeal to more consumers on more occasions.”
Costa Coffee’s RTD range is outperforming the segment by some margin, up 60.7% in value (Nielsen). This success can be put down to the widespread popularity of Costa Coffee, the nation’s favourite coffee shop for the last 12 years, and the quality of what’s inside the can.
“Costa’s RTD range taps into the Chill Break and Energising Break growth drivers in our Refresh Tomorrow soft drinks category vision, which identifies opportunities for further sales growth over the next three years,” adds Burgess.
“A ‘coffee-first’ proposition, Costa Coffee RTD uses the same beans as they do in our coffee shops, and is one of the only full ranges in the segment to be 100% HFSS-compliant.”
Featuring Lattes, Flat Whites and Frappés, the range caters to a broad variety of different tastes and occasions, and offers a choice of low intensity, medium intensity and high intensity, where distinct audience groups have an option on the various different levels of caffeine, coffee flavour and sweetness.
Josh Corrigan, Senior National Account Manager at St Pierre Groupe, comments: “The St Pierre food to go range is the perfect complement for hot beverages and RTD cold Coffees. It comprises Caramel Waffles, Millionaires Waffles 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. The range is ambient, meaning retailers and operators alike have no need to wait for products to thaw before serving and with extended shelf-life, they can also reduce the risk of wastage.”
St Pierre Groupe reformulated its multi-pack Croissants and Pains au Chocolate. The brand is continuously reviewing its products to ensure it offers the best quality. As part of that process, it has updated these products, and a by-product of doing so is that they are now suitable for vegans. This is another key selling point for the wholesale market, as vegetarian and vegan options continue to be popular.
“Wholesalers would do well to place sweet bakery items and snacking products in their depots near displays of hot beverages and RTD Cold Coffees, where retailer customers can see them immediately, advises Corrigan. “Bakery and snacking products are perfectly positioned to be enjoyed with a hot drink or cold coffee, and provide attractive margins for retailers, meaning they can work effectively as part of or alongside their stores’ hot drinks stations.”
St Pierre’s freshly individually-wrapped bakery products can be consumed with any meal occasion, providing a strong sales opportunity for wholesalers’ retailer customers looking to cater to consumers who are not necessarily wedded to the hot drinks or food to go fixture at ‘traditional’ day parts like breakfast.
“Wholesalers should encourage savvy retailers to take cues from foodservice and approach their in-store hot drinks stations as more of a destination and enhance their appeal with sweet bakery products placed nearby,” adds Corrigan. “Retailers, forecourts, and other coffee shop competitors need to think about how to engage their audience and provide reasons for consumers to choose to visit them regularly. Offering a full range of brand-led sweet bakery products near hot beverages and cold RTD coffees in depots is one way for wholesalers to encourage their retailer customers to entice consumers in this way.”
“Wholesalers should encourage retailers to use St Pierre’s sweet bakery products to help shoppers recreate the café culture wherever they are – at home, work or on-the-move, with these fast-selling products merchandised on a bakery fixture, in a food-to-go area or alongside other sweet treats, like cakes,” suggests Corrigan.
All St Pierre morning goods products offer an extended shelf-life, resulting in growth across the board. Such products enable retailers to provide a strong bakery offering throughout the year, minimising the risk of wastage. St Pierre’s morning goods’ extended shelf-life also makes it easier for wholesalers to maintain their displays of these items in their depots without worrying about waste in unpredictable trading conditions.
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