As a nation, we collectively consume whopping100 million cups of tea every day. Not to forget 95 million cups of coffee which are gulped down each day! Understandably, hot beverages are staple integral part of every household kitchen. So when the stock goes low and tempers fly high, it is usually the local store that comes to the rescue.
UK hot drinks market size was £4.34 billion in 2021 and is expected to grow at a CAGR of more than 7 per cent by 2026, according to GobalData. Interestingly, London has the largest consumption of hot drinks sector in the country, followed by Manchester, Glasgow and Liverpool.
Apart from usual tea and coffee, herbal teas and hot chocolates are also gaining popularity. Clearly, stocking a good wide wholesome range of hot drinks covering everything from bestsellers to new innovative flavours is a sure shot way to ensure a consistent footfall.
The key names associated in the hot drinks market are Nestlé, JAB Holding Company, Bettys & Tailors, Associated British Foods and Ekaterra.
For coffee lovers, 2022 turned out to be a great year – with a plethora of delicious innovations to be enjoyed both in and out of the home.
“Shoppers are looking for ways to treat themselves well at home, which feeds into how we snack at home when we pop the kettle on,” Josh Corrigan, Senior National Account Manager at St Pierre Groupe, told Asian Trader.
Paul Junor, revenue and category growth controller, Jacobs Douwe Egberts (JDE), states that coffee category now worth over £1.5bn. With around 24 million households buying coffee, the demand for retailers to stock a diverse range across the category has never been more important in this channel.
Tracey Wakelin, Global Head of Marketing, Ahmad Tea, has high hopes from 2023 owing to its series of premium products.
“With many people continuing to work from home, we’re seeing growth in demand for our Classic Teas (English Breakfast, Earl Grey and English Tea No.1) which offer convenience shoppers great value, high quality tea to enjoy at home,” Wakelin said.
Apart from tea and coffee, other hot cuppas too demand retailers’ attention.
Hot milky category is worth £192m which is an increase of 5.3 per cent when compared to the last normal trading period. The category is split between hot chocolate with a value of £132m, with malted drinks and cocoa contributing the remaining £60m.
Not-so-new kid on the block here is ready-to-drink (RTD) coffee, which is now worth £209m, showing a growth of +35.4 per cent. Part of the category’s popularity can be attributed to the fact it meets more than one consumer need – taste, hydration, an energy boost and satiety.
“With an eye to the future, we expect this pattern to remain consistent and for the significant pace of category growth to be reinforced by further pack and flavour innovation,” states Adam Hacking, Head of beverages at Arla.
Where’s my cup?
Tea is woven intricately in British life. Whether we take our tea with milk, sugar, lemon or just plain, it’s clear that we have a deep-rooted fondness for it.
Tetley is the leading tea brand in convenience and independent grocery stores. In a close second is PG Tips with sales of £8m followed by Yorkshire Tea. According to Statista, while PG Tips was most popular amongst those aged 18 to 49, Yorkshire Tea was more likely to be the brand of choice amongst the older generations.
A cup of tea makes everything better. And popular brands of Tata Consumer Products like Tetley and Tata Tea Gold make things even better!
“Offerings of Tata Consumer Products are made of exquisite tea leaves which are made by blending 15 per cent gently rolled aromatic long leaves with 85 per cent Assam CTC tea leaves,” Tata Consumer Products’ spokesperson says.
“Blended by Tata tea experts, ensuring unmatched and consistent quality standards, this unique offering will leave you longing for more, every time, especially the superior balance of rich taste and irresistible aroma with Tata Tea Gold.”
Taylors of Harrogate Yorkshire Tea, Typhoo, Tick Tock and Twinings are some of the key items that need to be present in hot drinks aisle.
The “elixir of life” though is getting some tough competition from coffee. Whether it’s cappuccinos for the commute or an after-meal Americano, us Brits are getting more and more hooked to our daily dose of hot coffee.
The leading brands here are Nescafé Gold Blend, followed by Nescafé Original – Granules and Kenco Smooth/Rich.
It is important for retailers to offer a good range and availability of coffee options. Stocking a diverse range of products from trusted and familiar brands that consumers know and trust as well as different coffee sub-categories is a great way to appeal to a wider range of shoppers.
JDE’s top products for convenience to be noted here are Kenco Smooth, Tassimo Costa Latte, Kenco Cappuccino, Kenco Decaf 100g and L’OR Classique.
Other hot drinks are another enticing category which is seeing some buzz. Maltesers Hot Chocolate and Galaxy Hot Chocolate are the bestsellers here with the latter now the second largest hot chocolate brand, with more than three million households now purchasing the delicious drink.
Michelle Frost, general manager at Mars Chocolate Drinks and Treats, says that instant drinking chocolates, such as Galaxy Hot Chocolate have now become a household staple rather than a luxury choice.
“While some households might only purchase hot chocolate as the temperatures drop, there is no doubt that this comforting drink is becoming more of an all-year-round purchase.
“The strength of our Galaxy and Maltesers brands encourages first time purchases, while the taste of the products encourages consumers to keep purchasing,” Frost told Asian Trader.
Cadbury is another huge star here which seems to be outperforming the category growth.
Mondelēz International’s extensive range includes Cadbury Hot Chocolate, Cadbury Instant, Cadbury Highlights, Cadbury Bournville Cocoa Powder, Fry’s Hot Chocolate, and premium brand Green and Black’s Cocoa and Hot Chocolate.
“Cadbury is the UK’s number one hot chocolate brand and is growing at 8.7 per cent year-on-year,” Susan Nash, Trade Communications Manager at Mondelēz International, told Asian Trader.
The hot beverages category is always brewing with new innovations and interesting launches.
Lately, there has been a growing trend for premium black tea, which is on the rise as shoppers look for comforting quality brew.
Ahmad Tea’s bestselling classic English Breakfast blend caters to this by balancing the highest quality Indian Assam leaves with brisk Ceylon and bright Kenyan teas, creating a bold, satisfying brew, says Wakelin.
Another interesting trend in this aisle is the revival of loose-leaf tea, which not only have a smaller carbon footprint than teabags due to less packaging and processing, but they can also offer a depth of flavour and freshness that’s harder to achieve with teabags.
“Our Great Taste award-winning ‘Beyond the Leaf’ loose leaf tea collection from our collaboration with Kew Gardens, taps into this; Featuring four classic blends – Majestic Breakfast, Splendid Ceylon, Garden Afternoon and Elegant Earl Grey – we’ve elevated Great British classics to a new level, offering tea drinkers a premium selection of the highest quality loose leaf teas that have been nurtured at every stage in their tea journey,” Wakelin tells Asian Trader.
Functional wellbeing teas continue to be a growth driver for the category, particularly herbal teas that promote productivity and relaxation.
“Our Great Taste 2-star award winning Natural Benefits collection of herbal and green teas with added vitamins and botanicals is proving really popular. The six blends – Energy, Beauty, Immune, Digest, Slim and Sleep – have been designed to support consumers throughout the day, whether they’re looking for a morning energy boost or a restful night’s sleep,” says Wakelin.
Sustainability is another key area to be taken care of. Ahmad Tea sustainability is “woven into every single strand of business, from the way our tea is sourced and manufactured, to the partners we work with and the global communities we support”, says Wakelin.
“Our commitment to reducing carbon emissions is one part of the picture. Last year, we successfully reduced carbon emissions by 8 per cent. We’re also now reliant on solar panels- 20 per cent of our energy at our production site and head office is solar powered
“Packaging is another part of the picture, with 92 per cent of the packaging produced at our planet-friendly UAE factory now biodegradable – up from 89 per cent in 2019. Our goal is 100 per cent by the end of 2025. We’ve also removed the cellophane from our loose and enveloped teabag ranges in our bid to cut plastic use, and created inner cases from 100 per cent recycled paper board,” Wakelin informs Asian Trader.
When it comes to sustainability factor, JDE’s Kenco Cappuccino and L’OR Classique too rank high on this meter owing to its smart and recyclable packaging respectively.
One thing that pandemic did is that it made Britons fall in love with the comforts of their home and coffee lovers are no different. Retailers should take note that shoppers are now looking for more variety, beyond the classic hits.
Junor from JDE expresses similar sentiments, urging retailers to stock a range of products that allow shoppers enjoy their coffee shop favourites at home.
“Coffee shop trends have made their way into the home as consumers continue to trade up on their weekly shop with products that allow them to easily recreate their favourite coffee shop experiences.”
“In fact, we know that one in three UK households are now buying these products, gaining greater penetration than any other in the last six years, with the segment now worth over £215 million,” Junor tells Asian Trader.
Key brands here are Kenco Duo and Tassimo Costa Range- both promises to offer coffee-shop experience at home.
Consumers are also looking for flavoured coffee, which now makes up over 35 per cent of the specialty sector. In fact, the top three flavours amongst shoppers are caramel, vanilla and mocha, with caramel accounting for 24 per cent of flavoured specialties segment. Therefore, retailers should consider stocking best-sellers, such as Kenco Iced/Hot in Salted Caramel and Vanilla to meet this demand.
Kenco’s Iced-Hot Salted Caramel and Vanilla Lattes achieved over £1m value sales in 2022, showcasing the opportunity for retailers to maximise their rate of sale throughout the entire year owing to dual nature of this innovative product.
For health-conscious shoppers, JDE has Kenco Decaf – the leading brand for instant decaf.
Health indeed is on shoppers’ mind. Nash from Mondelez states that balance and wellbeing remain important considerations for many, which provides an opportunity for retailers.
“Cadbury offers a lighter alternative to enjoy hot chocolate through the Cadbury Highlights brand. Cadbury Highlights Milk Chocolate has the smooth, milk-chocolaty 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,” says Nash.
The RTD Coffee category too continues to see consumption with household penetration growth seen throughout last year, implying more people are buying in to the category, to a greater extent, and on a more frequent basis than ever before.
Innovative NPDs are continuously hitting the shelves keeping this sub-category fresh and relevant as it progresses at pace to match ever changing consumer consumption habits. In June 2022, within its Frappuccino range – Starbucks Limited-Edition Frappuccino Toffee Honeycomb, was launched. Limited Editions will become more of a feature within the Starbucks RTD range.
Brew more, sell more
Now that people are out and about again, they are also enjoying hot drinks in convenience stores, as part of these outlets’ food to go offerings. Morning goods complement hot drinks perfectly and are a great opportunity for retailers to increase basket spend.
“The morning run presents a clear opportunity for retailers to merchandise a range of morning goods near the hot drinks dispenser and use the strength of the St Pierre brand to draw shoppers back to the store on repeat visits and increase their linked food to go sales in other product categories during these occasions,” Corrigan said.
The St Pierre food to go range comprises of Caramel Waffles, Millionaires Waffle and Brioche Waffle 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 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.
“St Pierre products are designed to help shoppers recreate the café culture wherever they are – at home, work or on-the-move in between, so can be merchandised on a bakery fixture, in a food-to-go area or alongside other sweet treats, like cakes,” Corrigan told Asian Trader, adding that all the products offer an extended shelf-life, which is increasingly popular with consumers watching their purses.
“Retailers should convey value by addressing consumers’ growing concern about household budgets, sustainability and offering foods that deliver on taste, convenience and versatility, helping minimise waste and catering for multiple meal occasions,” Corrigan said, adding that there is an opportunity here for bakery brands with long-life multi-pack formats, like those from St Pierre.
To catch shoppers’ attention, retailers should allow good shelf space for coffee display to help maximise visibility and offer a breadth of brand choice to meet evolving shopper needs with two facings per SKU
“With 80 per cent of convenience shoppers saying brand is the most important factor when choosing coffee, this is pivotal when choosing what to stock,” Junor from JDE tells Asian Trader.
“Encourage trade up by using our proposed planogram with more affordable options on the bottom shelf such as instant granules, more premium instant products above and then the likes of frothy coffees and machine pods on top,” says Junor, asking retailers to use eye-catching signage and POS to drive interest to the coffee aisle to encourage sales.
Hot beverages and beverages-to-go aisles should be planned and merchandised smartly to trigger impulse purchase.
“The RTD Coffee category, including Starbucks chilled coffee, should be sited within the soft drinks fixture alongside dairy drinks and as close as possible the energy category. It is also important to give RTD coffee SKUs appropriate space within the feature, with multiple facings a key way to encourage a purchase,” Hacking from Arla tells Asian Trader.
RTD coffee is also an ideal addition to meal and link deal executions and many retailers are already experiencing the advantages of including these drinks in their existing offers.
Interestingly, the very English tradition of having biscuits with tea seems to be making way for more varied flavours as a new survey found that many youngsters opt for more filling options such as samosas and granola bars as a tea accompaniment.
According to a survey of 1,000 people by the United Kingdom Tea & Infusions Association (UKTIA), granola bars are the tea snack of choice for one in ten 18 to 29-year-olds, more than
double the proportion of over-65s.In second place was samosa, with some eight per cent of youngsters surveyed opting for the savoury Indian snack with their tea – but no one over 65 did.
In fact, Mintel, which interviewed around 2,000 tea drinkers between August and October last year, warned that “future sales of sweet biscuits are at risk if the younger generation do not establish the hot drink with biscuits habit”.
Whatever the accompaniment one chooses, it is clear tea and coffee continue to soothe our nerves. After all, a good hot cup is what we need first thing in the morning and after a tiring day and during most hours in between.
Understandably, convenience stores should make sure they are stocking well, by keeping a tab on the mood and needs of its community. A wholesome range can go a long way in establishing a local shop as a resourceful hub for everyone.