A cuppa is a c-store pick-me-up

The line between takeaway hot drinks and drinks to be consumed at home is increasingly blurred as food to go becomes an ever-greater presence and revenue stream in the convenience channel.

As the nation socialises more, heading back into the office and city centre, pre-pandemic patterns are beginning to return, resulting in increased on-the-go single serves. At the same time, these can be complementary and incremental to in-home beverages, especially with flexible working becoming the norm for many.

The hot beverages market enjoyed a boost in 2020 and into 2021 as the Covid-19 pandemic saw various restrictions that forced a sharp shift in food and drink occasions to the home. With consumers increasingly conscious about their emotional wellbeing after the pandemic, seeking out new ways of staying calm and unwinding, the calming effects of hot drinks could prove valuable to the sector going forward.

The UK Tea and Other Hot Drinks Market Report 2021 by Mintel emphasises this, with 38 per cent of tea drinkers saying they are interested in tea that helps de-stress/calm users. Hot chocolate and malted drinks have also the potential to stay on the menu even amidst the heightened health focus, according to the report, as 53 per cent and 50 per cent of people think there should be a wider range of lower sugar and lower calorie variants, respectively.

Kenton Burchell, group trading director at Bestway Wholesale, concurs. “We know that many shoppers are looking to switch to healthier options. Shoppers are increasingly switching into healthier, decaffeinated options and there is an opportunity to expand these ranges in stores,” he says.

“Fruit and Herbal (+6.1 per cent) and Decaf (+8.9 per cent) are rapidly growing ranges [Kantar, 52w/e 13.06.21], so retailers would do well to capitalise on this growing trend,” he adds.

Coffee Domination

According to the latest Statista market report, revenue in the hot drinks market, which includes the coffee, tea and cocoa segments, is set to touch £9.16bn this year, with the market expected to grow annually by 5.66 per cent between 2022 and 2025.

Coffee is the largest segment, with a market volume of £7.14bn in 2022, and Burchell notes that this is the case with the convenience channel too. “The hot beverages market is worth £287m in convenience, and while many might attribute this figure to our love of tea, it’s actually coffee that does the heavy lifting in this category – forming 70 per cent of the category and with a worth of £201m,” he says.

He says coffee pods in particular are performing remarkably well and are the fastest-growing segment in the total market, up 18 per cent, and when it comes to the convenience channel, it outperforms the total market with coffee pod growth at an impressive +22.7 per cent.

Instant Coffee is still highly popular, forming 54 per cent of the category and is worth £155m to the convenience channel.

In fact, the UK is one of Europe’s biggest markets when it comes to coffee consumption, with an estimated 95 million cups of coffee consumed every day. While, the market is traditionally dominated by specialist coffee retailers, almost 44 per cent of Brits buy their coffee from non-specialists like supermarkets, fast food restaurants or convenience stores, according to a market report by the Confederation of British Industry.

Emerging brand Solo Coffee aims to tap into this huge opportunity in retail, with their new Solo Espresso Shot, delivering a coffee shop quality pick me up in a convenient bottled format. The shot is made from Solo’s award winning coffee concentrate, and each shot contains 127 mg of caffeine, with no sugar or artificial additives.

“We have always wanted to make a product for retail and when the idea of the espresso shot presented itself, it felt so obvious to us that we just had to do it,” Theo Garcia, co-founder and head of marketing at Solo, comments.

“For us, coffee is about functionality. Yes, we are obsessed with the coffee itself, our true love lies in what the coffee allows us to do. This is why we want to make great coffee more accessible. By making a shot of espresso readily available in shot format, we have categorically made great coffee much more accessible.”

The Solo Espresso Shot comes in a 60ml shot bottle of espresso strength cold brew coffee, and is a single serve of speciality grade espresso. The concentrate was developed by Solo to taste best when drunk neat, finely filtered to make a smooth mouthfeel, but maintaining that bold and strong espresso flavour (and caffeine hit).

Providing healthy on-the-go energy at any time of the day, Solo Espresso Shot aims to take its place beside energy drinks and chilled coffees in fridges at stores across the UK, and targets the Gen Z who make up 40 per cent of the RTD coffee market, which is the fastest growing segment in soft drinks, accounting for almost 10 per cent of soft drink sales.

“RTD cold coffee is up 25 per cent YoY, and functional health shots are up 20 per cent YoY. We believe that our espresso shot taps into the trends of both functional health shots and RTD coffee,” Garcia adds.

The Solo Espresso Shot is available in the following formats: single shot (RRP £1.65) and one box of 10 x 60ml Espresso Shot bottles (£16.50).

Another recent innovation that caters to the growing self-serve coffee-to-go market is Pret Express, a smart solution featuring Pret A Manger’s 100 per cent organic coffee and tea.

Launched in partnership with JDE Peet’s, Pret Express offers the same organic coffees and teas as Pret shops but in places where Pret Baristas aren’t able to operate, and will be introduced in convenience stores and forecourts, among other places.

JDE Peet’s will be providing the self-service technology and capabilities, with bespoke furniture designed exclusively for Pret.

Each Pret Express coffee station offers a large range of slow roasted 100 per cent organic speciality coffees and fresh organic milk combinations, as well as teas, a first in the self-serve coffee-to-go sector. Each solution will create up to 21 drink recipes and everything is included. From ingredients to machine and housing installation, each machine comes with its own cashless payment terminal and service package as standard.

“Expectations for coffee and tea on-the-go have evolved, with people seeking the highest quality experiences at any location. Through this innovative partnership, Pret Express will deliver a wider range of products across all out-of-home segments, to a broader audience than ever before,” Sarah Lonorgan, marketing director professional UK&I at JDE Peet’s, commented.

Hot Choc in the fast lane

Last year, Hot Milky Drinks was the fastest growing segment within hot beverages with growth of 8.2 per cent YoY (versus coffee at +8.0 per cent YoY and tea at +2.7 per cent YoY),contributing to the segment growth of £16m, largely driven by volume purchased and new shoppers [Kantar, 52w/e 11.07.21].

Just under £1 in every £10 in hot beverages is spent on Hot Milky Drinks, demonstrating the importance of the segment to the wider category. The category, which includes hot chocolate, accounts for £211m of sales with hot chocolate representing 67 per cent, with an annual sales value of £141m.

In the same 52-week period, 3.4 million British households bought Galaxy and Maltesers Hot Chocolate. These major brands from Mars Chocolate Drinks and Treats have grown substantially, doubling in size over the last five years. Galaxy Hot Chocolate has been the driving force, adding over £1m in entirely incremental gains over the last year.

“Over the past year consumer habits have shifted but our hot chocolate range caters for these changes,” Michelle Frost, general manager at Mars Chocolate Drinks and Treats, says. “Whether a customer is looking for an instant, low calorie, or fuss free hot chocolate our selection offers customers the opportunity to create luxury café style drinks to enjoy at home with toppings and flavours.”

She recommends retailers to stock and merchandise a range of products fromrecognisable brands to maximise sales and attract customers of all ages to the hot beverages aisle.

“Hot chocolate is best displayed alongside tea and coffee (within hot beverages). Offering consumers a choice is key so consider stocking instant hot chocolate, low calorie, pods, single serve sticks and traditional add milk drinking chocolate,” Frost adds.

Bestway’s Burchell also stresses on the importance of brands in the channel.

“Research has shown that more than 20 per cent of customers will not make a purchase if their preferred brand is unavailable,” he says. “Aside from the right range, price and promotion are also key factors, so retailers must keep all three considerations in mind.”

Susan Nash, trade communications manager at Mondelēz International, highlights the ongoing relevance of hot chocolate segment to shoppers throughout the year, evidenced by its strong year-on-year growth.

“Balance and wellbeing remains an important consideration for many, which provides an opportunity for retailers,” Nash says, adding that 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.

Cadbury is the UK’s number one hot chocolate brand and is growing at 8.7 per cent year-on-year [MAT Nielsen July 2021]. Mondelēz International’s extensive range also includes Cadbury Instant, Cadbury Bournville Cocoa Powder, Fry’s Hot Chocolate, and premium brand Green & Black’s Cocoa and Hot Chocolate – with products tapping into the Drinking Chocolate, Instant Chocolate and Cocoa sub-categories.

Nash also identifies premiumisation as a key trend within the hot chocolate category, saying that their Green & Black’s brand has benefitted greatly from this, which has grown 8.2 per cent over the past year. The brand’s hot chocolate is made with the finest organic cocoa beans which are ethically-sourced, reflecting the values of the Green & Black’s brand.

Mondelēz is currently running a new promotion across Cadbury hot chocolate core packs in order to help retailers drive additional sales from the popular brand this winter. The ‘Make it Yours’ competition will feature on Cadbury Drinking Chocolate 500g and Cadbury Instant Hot Chocolate 400g packs until mid-March, helping retailers to make the most of this category while the weather remains cold.

Lucky shoppers can enter their information at www.makeityours.cadbury.co.ukfor the chance to win their Perfect £5,000 Weekend – with festivals, spa days, football experiences and more up for grabs – as well as one of thousands of Cadbury Hot Chocolate hampers. With the highest rate of sale across hot chocolate [Nielsen, 52w/e 17.07.21], the range is set to see an even larger boost in sales as ‘Make it Yours’ hits packs.

“The winter months are of course the key selling season for hot beverages like hot chocolate so it’s important that retailers make the most of the additional shoppers and sales opportunities at this time of year,” said Lorena Moyano, brand manager for Cadbury Hot Chocolate. “That’s why we’re bringing the ‘Make it Yours’ promotion to life across our bestselling range – generating extra stand-out on shelf to encourage sales at this key time and offering our consumers the chance to win some really fun prizes. It’s a win-win!”

Taking a tea break?

FMCG giant Unilever’s decision in November last year to sell its global tea business, including the PG Tips, Lipton and Brooke Bond brands, to a private equity firm, citing falling sales of black tea, has raised some doubts over the future of the traditional British cup of tea.

Coffee sales are more than double those of tea, but Burchell says tea’s time is far from over. “Of course, the tea sector remains strong and forms 30 per cent of the hot beverage category, and while standard black tea accounts for a majority of the tea sector at 72 per cent, retailers should consider stocking decaf, fruit and herbal teas which are delivering strong growth in the total market,” he says.

In fact, the increased demand for expensive herbal and fruit infusions has been the major driver of growth in tea sales last year, and Mintel forecast predicts that the dominant standard black tea segment is set to continue to see other drink options chip away at its role as the go-to beverage.

“Tea and other hot drinks have benefited from the uptick in at-home food and drink occasions brought about by Covid-19. While standard black tea looks set to face continued pressure from ever-growing competition, the focus on health puts herbal tea in a strong position to appeal thanks to its sugar-free credentials and functional benefits,” Angharad Goode, research analyst at Mintel, said.

With standard black tea still taking the largest portion of the tea sector, Helen Boulter, of Yorkshire Tea, notes that stores need to get this offering right by stocking the bestselling brands that customers know and love.

“Despite a declining tea market, in this category Yorkshire Tea is growing and is the number one tea brand by value in grocery retail, with more than a third of the entire market share (33.7 per cent) [IRI and Kantar, 52w/e 04.12.21]. This is a result of our desire to always do things properly and never compromise on quality,” she says.

The brand’s top sellers within convenience are the 80s PMP pack, followed by the 40s PMP pack. “PMPs are a great choice for independent stores as they give consumers confidence in pricing, making them more likely to purchase,” Boulter, who is multi sector sales controller at brand owner Taylors of Harrogate, adds.

She also highlights the continuing popularity of the decaf tea, with the decaf market growing by 2.8 per cent in value sales since last year, as more people are keen to try new things and adding different types of drinks to their at-home repertoire.

“Yorkshire Tea Decaf is a key driver in this trend and is at the forefront of the decaf tea sector, with a 15.7 per cent rise in value retail sales and 21.1 per cent rise in volume retail sales, over the last year. Our customers choose it as it is a flavour-packed brew that doesn’t lose its character when the caffeine is removed,” she says.

“Customers won’t expect a huge range of products in their local convenience store, but stocking options such as decaf tea will appeal to a more diverse range of shoppers. In particular, stocking a recognisable and well-loved brand such as Yorkshire Tea Decaf, which comes in a 40s PMP pack, will exceed expectations and give people a reason to visit your store.”

Parminder Walia, category development manager at Tata Consumer Products, which owns Tetley, agrees that a black decaf should feature in the core offering, as a companion to everyday black.

“Decaf drinkers won’t choose an alternative tea if decaf is not available,” she notes. “Where many options can disappoint in taste,Tetley decaf has a Great Taste Award and is the best-selling decaf on the market, accounting for 29 per cent of all decaf sales in the market and close to 61 per cent of all decaf sales in impulse[AC Nielsen, Total Impulse year to 01.01.22].”

Room for growth

Walia identifies a gap for non-black teas in the impulse channel, as the share of standard black tea stands at around 88 per cent of all tea sales in impulse, according to the Nielsen data, whereas this falls to 80 per cent in total convenience and 71 per cent in  grocery multiples. “[This] suggests impulse might be under-trading in non-black teas,” she notes.

This brings us back to the attraction of fruit and herbals. Tetley anticipates that in time non-black tea sales such as decaf, green, fruit and herbal and rooibos will edge closer to everyday black sales.

“So it makes sense to pave the way for the future and capitalise on current and future trends,” Walia says. “Particularly popular among 18-24s higher value fruit and herbal teas are good to consider, with 39 per cent regularly choosing herbal tea and 26 per cent a fruity brew.”

Tetley’s new fruit and herbal range is helping stores to explore the opportunities in fruit and herbal, providing a familiar and safe pathway for shoppers to taste different teas, at a price point which offers a risk-free trial. The range includes six trending flavours: Fresh Mint; Zingy Lemon & Ginger; Pure Camomile; Rose, Rosehip & Hibiscus; Nutmeg, Rhubarb & Vanilla; and Turmeric & Echinacea.

“Functional food and drinks are expected to increase in popularity in 2022, so are worth a look. For impulse and convenience, Tetley Super Fruits Boost with added Vitamin B6 in Blueberry & Raspberry and Tetley Super Fruits Immune with added vitamin C in Lemon & Ginger are strong choices,” Walia recommends.

Pairing up

Stocking complementary categories alongside hot beverages fixture offers retailers the chance to increase consumer spend in-store by encouraging impulse purchases.

“Ensure hot beverages are easily located in store, ideally adjacent to associated categories such as sugar, biscuits, cakes and morning goods. This will not only inspire shoppers but can also increase basket spend,” Burchell says.

Being a staple of the shopping basket and a key top up item, tea is particularly known for increasing sales in other categories. The typically larger basket sale of tea shoppers can benefit sales of companion items like biscuits, cakes, milk, or breakfast products.

“Research shows that tea shoppers are valuable shoppers, more likely to add other items to their basket, in fact 43 per cent of tea shoppers tend to include five or more items,” Walia notes.

“Anything that helps shoppers envisage the tea occasion is a boost, whether an energising breakfast, a mid-morning break, or wind down time in the evening there is a tea to suit.Whatever tea occasion seems right, with the right product selection, brands that appeal, and creative presentation, top up buys and regular basket sales can increase.”

Popular categories that work well together with hot drinks include morning goods and bakery items, both of which are in growth, comments Paul Baker, founder of St Pierre Groupe.

The St Pierre individually-wrapped range, which was extended during the pandemic in order to maximise the opportunity for retailers losing sales that would usually come through the in-store bakery comprise Butter Croissants, Chocolate Filled Croissants, Brioche Waffle, Millionaires Waffle, Caramel Waffle and Pains au Chocolat.

“The products are perfectly positioned to be enjoyed with a hot drink and provide attractive margins for retailers, meaning they can work effectively as part of or alongside a hot drinks fixture,” Baker says.

“The fresh individually-wrapped bakery products can be consumed with any meal occasion, providing a strong sales opportunity for retailers looking to cater to consumers who are not necessarily wedded to the fixture at ‘traditional’ day parts – e.g. breakfast. The St Pierre range is also 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.”

With many consumers saving money during that pandemic, which they are now willing to spend on more indulgent treats, Baker urged retailers to take a cue from foodservice and approach the fixture as more of a destination.

“Retailers, forecourts and other coffee shop competitors need to think about how to re-engage an audience and provide reasons for consumers to choose them. Offering a full range of brand-led products is one way to entice consumers,” he suggests.