Hot Drinks in Malaysia
Euromonitor International's Hot Drinks in Malaysia market report offers a comprehensive guide to the size and shape of the market at a national level. It provides the latest retail sales data, allowing you to identify the sectors driving growth. It identifies the leading companies, the leading brands and offers strategic analysis of key factors influencing the market - be they new product developments, packaging innovations, economic/lifestyle influences, distribution or pricing issues. Forecasts illustrate how the market is set to change.
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Tables: 70 | Publication date: May 2009
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- Get insight into trends in market performance
- Pinpoint growth sectors and identify factors driving change
- Identify market and brand leaders and understand the competitive environment
Product coverage
Coffee; Other hot drinks; Tea
Executive summary
[Q – check section after Appendix
Hot drinks sees stronger performance in 2008
During 2008, hot drinks enjoyed a stronger performance in total volume terms than it did in 2007. One key contributing factor was the proliferation of on-trade outlets, particularly chained specialist coffee shops and other cafes/bars such as Old Town White Coffee cafe which had a positive impact on the coffee-drinking culture in Malaysia. Media reports on the health benefits of tea were another reason behind the positive performance of hot drinks as a whole, with increased pickup of tea observed in 2008. Lastly, other hot drinks which consists of malt-based hot drinks, a key drink for many consumers during breakfast and tea time, also contributed to the continued positive performance of hot drinks in 2008.
Health consciousness spurs hot drinks’ development
As the Ministry of Health intensifies its education campaigns on healthy living, this spurs consumers’ health consciousness in 2008. In lieu of this, manufacturers have introduced a series of products that seek to meet consumer demand, such as Old Town White Coffee 3-in-1 with Natural Sugar Cane that utilises natural cane sugar instead of the usual white sugar. Though these products costs slightly more than the usual variants, consumers were still willing to part with their money as long as the benefits are justified and can meet their needs effectively.
Nestlé (M) Bhd remains unshakeable
Multinational player, Nestlé (M) Bhd continues to lead hot drinks through the dominance of its Nescafé brand in coffee and Lipton in tea. Regular product innovations such as Nescafé Gold 3-in-1 during 2008 were a key contributory factor behind the company’s unshakeable performance. However, the company still faced strong challenges from up and coming players like White Café Sdn Bhd which saw fast increments in value shares over the review period, whereby the ability to localise products helped the domestic players to gain a stronger foothold towards the end of the review period.
On-trade sales impacting off-trade sales positively
Expansion of chained specialist coffee shops such as Starbucks as well as other cafes/bars such as Old Town White Coffee cafe has helped to spur off-trade sales in 2008, particularly coffee. Consumers were increasingly purchasing the products through off-trade channels so that they can enjoy it anytime and anywhere. Rapid expansion of supermarkets/hypermarkets at the end of the review period also saw retailers intensifying their efforts in private label launches, such as GCI Retail (M) Sdn Bhd tapping into the huge potential of malt-based hot drinks with First Choice ChocMalt Drink in 2008.
Hot drinks expects improved performance
Over the forecast period, hot drinks is expected to see a faster performance than it did during the review period. The increased pickup of tea because of the associated health benefits is expected to be a key driver. Improved coffee drinking culture in lieu of the proliferation of on-trade outlets will be another key growth factor. As for other hot drinks, performance is likely to be sustained by consumers’ familiarity with the product and malt-based hot drinks are already an essential drink in many consumers’ daily diets. Moving into the forecast period, players are also likely to be more intense in launching health beneficial products such as those with fortified contents. This is likely to help players stimulate new consumers’ interests and bring about new opportunities for hot drinks.
Competition heightens but key players dominate
Hot drinks in Malaysia is dominated by just a few key players, such as Nestlé (M) Bhd in coffee and Boh Plantations Sdn Bhd in tea. The longstanding presence of these two companies is the key reason behind their dominance, although Nestlé (M) Bhd also managed to sustain its performance through constant new product innovations alongside intense marketing and promotional campaigns.
Having said such, 2008 saw domestic players gaining a stronger foothold in hot drinks compared to the early review period. Affordable pricing alongside localised products were two key drivers for the increased prominence of these domestic players.
Current Impact
Though domestic brands remained small for hot drinks, their performance is definitely not to be neglected. These domestic players all started off in specific regions within Malaysia before moving nationwide. For instance, White Café Sdn Bhd was first established in Ipoh during 1999. However, it managed to rise to the number two position within hot drinks in 2008 with nationwide presence, despite lying in ninth position in 2000. The company’s strong performance was also largely attributed to its prominence in on-trade channels which had a spill over effect into off-trade sales of its instant standard coffee.
Another increasingly prominent domestic player is Aik Cheong Coffee Roaster Sdn Bhd which saw its value share increase quickly year-on-year, whilst smaller brands like Sin Sing and In-Comix were also noted to be up and coming towards the end of the review period. Though affordable pricing was one key driver behind the rise in these domestic players, their ability to localise products to better suit consumer demand was also a huge helper. Natural Bio Resources Bhd, for instance, is able to fortify its coffee products with Tongkat Ali, a key vitality booster welcomed by many consumers in Malaysia. This inevitably helped to boost the company’s profile in hot drinks during the review period.
Outlook
Over the forecast period, domestic players are unlikely to slow down in terms of their expansion rate and this will result in multinational players facing more immense challenges. Price wars may inevitably happen during the forecast period as players aim to sustain their volume shares. Aside from these, new product innovations will be another key driver for growth of the various companies as consumers are constantly growing tired of what is already on the market.
Future Impact
With the availability of a wide range of products, manufacturers are likely to constantly engage in promotions such as price discounts and quantity offers to maintain sales. To fight off competition, product innovations are also necessary. Therefore, hot drinks players have to be very resourceful not only in terms of new product developments but also to keep their manufacturing plants updated in terms of production facilities. New product innovations are likely to head in the direction of health-beneficial drinks. Though coffee saw the addition of key ingredients like Tongkat Ali, this is still lacking in tea, which thus could be one of the key focus directions for manufacturers.
Mergers and acquisitions could also happen, as room for growth is likely to tighten even more during the forecast period. Domestic players might end up acquiring each other as a bid to strengthen their force and this is highly likely in coffee, where players like White Café Sdn Bhd are exceptionally active.
Retailers are unlikely to slack in terms of private label launches, especially with their increased distribution networks and hungriness for growth. As such, private label is likely to launch fortified products to be in tandem with the branded products. Therefore, consumers are likely to be the key beneficiary, as they enjoy the price cuts and great products all at the same time. However, the economic downturn in the early forecast period might see consumers being more concerned about their spending and in turn could see them downgrading to private label or picking up fewer products, for instance, some consumers might purchase different variants but significantly cut down on these in lieu of tightening their belts.
On-trade developments benefit off-trade consumption
The hot drinks culture is quite strong in Malaysia, particularly for coffee. Coffee and tea were also seen as alternative drinks for young consumers, particularly when they hang out at coffee joints together. Besides this, soft drinks have also come under close scrutiny for health issues, particularly carbonates for its high sugar level and more. As such, the increased pastime of hanging out at on-trade outlets like chained specialist coffee shops made consumers more aware of the various products available and many are even willing to experiment with them at home.
Current Impact
During the end review period, one evident trend was popular hot drinks in on-trade channels surfacing as instant variants in the off-trade channels. For instance, teh tarik, a popular tea drink at foodservice outlets has eventually evolved to the instant premix variants whereby consumers can enjoy it anytime at their comfort. Green tea, a hot drink normally served at Japanese restaurants also made its way to various retail channels in the packaged formats.
Other than this, the development of foodservice outlets such as Old Town White Coffee cafés also saw its instant coffee variants benefitting the off-trade side as consumers want to enjoy white coffee anytime anywhere rather than having to visit the on-trade joint.
Outlook
Over the forecast period, the coffee and tea culture in Malaysia is expected to get a further boost from the rapid expansion of local and multinational foodservice outlets, for instance Old Town White Coffee café, Starbucks as well as some local chains like Kluang Station. More players are thus expected to follow in the footsteps of White Café Sdn Bhd to also launch their premix versions in the off-trade channels as a bid to increase revenue sources.
Future Impact
Consumers are expected to drink coffee or tea when socialising with friends during the forecast period as the awareness of the high calorie content of carbonates continues to catch up. The hectic lifestyles of consumers will also see them seeking products that they loved and tried at on-trade outlets through the off-trade revenues so that they can make their own drinks at their convenience. The economic recession in the early forecast period is also likely to see consumers less willing to pay double to even triple for a cup of coffee at on-trade joints but rather making it themselves at home.
Manufacturers should seize the opportunity to offer more exotic tea and coffee blends to target consumers, especially with consumers constantly seeking new products to try out. As consumers always have their first experience via the on-trade, it is thus expected that more players will follow the ways of SinSing, Old Town and Aik Cheong to build up a stronger relationship with foodservice outlets and have them recommend their brands when consumers ask about it. In addition, on-trade specialist tea and coffee players are also likely to offer carry-home-packs of their products so that consumers do not need to drop the hypermarket to get them.
Off-trade retailers are likely to be more eager to introduce their most popular brands of hot drinks into their outlets in lieu of the competitive retailing landscape. Promotions are also expected to be more regular because of the competition, be it among hot drinks brands or the retailers themselves. Consumers are thus the final beneficiaries as they can enjoy more innovative products at affordable pricing.
Packaging innovations draw consumers’ interest
Hot drinks packaging saw new innovation in terms of design, pack type and product labels so as to attract consumers, particularly to create impulse purchases among consumers with the attractive presentations. Manufacturers are also constantly introducing innovative packaging so as to attract consumers’ interest, especially the younger generation of consumers whom are usually more concerned about the packaging design. Young consumers are also the ones that are usually more excited to go for special and innovative looking things, especially if they fit their lifestyle and status needs.
Current Impact
Attractive packaging always attracts consumers’ interest and packaging of hot drinks is definitely heading in that direction in 2008. Flexible packaging for hot drinks is no longer boring as manufacturers are investing in making it look more cool and vibrant so as to enhance the product’s positioning.
Nescafé, for instance, designed its packaging for Nescafé Gold 3-in-1 in black and gold to exude a premium feel. It also repackaged its existing variants of coffee into red and green colour which are more attractive colours to the consumers. Domestic players such as Gold Roast (M) Sdn Bhd also repackaged their products to exude a more premium feel towards the end of the review period, as a bid to arouse new consumer interest. Aside from nice looking packaging, brands are also reforming the square-looking sachets to stick formats to help consumers save on storage space whilst also exuding a more premium feel.
Outlook
Further innovations in packaging design are likely to occur during the forecast period as competition intensifies. Manufacturers are not only creating demand for the basic needs but also satisfying consumer demand for enjoyment during usage. They will focus on the packaging as this helps to build brand equity and give the brand image a boost and attract trendy young consumers. As competition intensifies in hot drinks, manufacturers will be under pressure to retain their shares; hence brand building exercises such as packaging changes are also likely to increase over the forecast period.
Future Impact
Packaging is more important in off-trade sales as consumers are in direct contact with the product itself. As such, attractive packaging is likely to stimulate more impulse purchases among consumers.
Manufacturers are likely to make the packaging more attractive in order to increase in-store visibility and to retain consumers’ interest. Manufacturers which re-launch their brands should change the packaging at the same time. Apart from eye-catching appeal, manufacturers also need to pay attention to the quality of their packaging.
In addition, manufacturers are advised to launch low unit packs to penetrate the most remote areas. Higher margins are also recommended to be offered to wholesalers as they tend to be less brand-loyal and will often offer competing brands as long as they can gain better profits. More convenient packaging, such as small and easy carry packs that can ease storage, is likely to be a key direction for manufacturers.
Fortified products meant to address the growing health awareness
During 2008, the majority of Malaysians are paying more attention to the ingredients used in hot drinks, brought about by the increased emphasis from manufacturers and government. For instance, media reports stress the health benefits of tongkat ali and kacip fatimah in instant coffee and tea as well as focusing on the flavonols and polyphenols found in green tea which help to lower the risk of cancer.
Coupled with the education campaigns by the government on healthy eating and living, this further raised consumers’ health consciousness in 2008 whereby they increasingly sought health beneficial products.
Current Impact
A result of the publicity, fortified hot drinks were fast gaining prominence in 2008. During the early review period, instant 3-in-1 coffee was the only variant available but this has fast developed into instant 4-in-1, 5-in-1 and even 6-in-1 at the end of the review period as manufacturers add a slew of health beneficial ingredients.
During the end review period, players came out with innovative developments by adding contents like ginseng, tongkat ali, kacip fatimah, collagen and more which are either vitality or beauty boosters, for instance, the launch of Super Instant Teh Tarik with Tongkat Ali. Consumers continued to swarm to these products as they associate with being healthy and they can enjoy the health benefits without having to pop a separate vitamin pill.
Outlook
Fortification of products as a way to address health issues may still be the focus of players over the forecast period. However players will increasingly face the challenges of finding a new ingredient to add as time goes by. As such, players might combine a slew of health benefits such as reduced sugar along with the fortification of products so as to better attract consumers.
Future Impact
The fortified products may help to sustain the volume growth of hot drinks by allaying consumers’ health worries and value growth could also be boosted since the products are priced slightly higher than normal. Consumers are willingly to pay for these products as they are beneficial health-wise and also meet their needs for convenience.
Manufacturers could introduce healthier variants of their fortified products during the forecast period such as reduced sugar and reduced fat to go along with the fortified products, making them even more healthy. Manufacturers will also need to constantly find new ingredients to attract consumers and ones that can best fit their needs at different times. As such, research and development efforts are likely to intensify during the forecast period.
Retailers, especially the modern ones, are expected to also launch private label products with a healthier focus to compete more effectively with branded products. However, it will be a challenge for private label to gain consumers’ confidence in this respect given consumers’ ingrained perception of private label being inferior in quality compared to branded products.
Instant hot drinks sustain performance of hot drinks
Malaysia continued to experience steady progress in living standards during 2008, largely underpinned by the growing urbanisation trend. The hectic lifestyle of Malaysians, especially those in bigger cities like Kuala Lumpur, Johor Bahru and Penang continue to drive them to constantly seek convenient products. Hence, convenience in product usage and storage are becoming important factor for many consumers when picking up a product.
Current Impact
Although Malaysia was experiencing a slowing economy towards the end of 2008, the increasingly fast-paced lifestyles still continue to steer consumers towards instant hot drinks because of the convenience and hygiene offered. It is especially convenient for busy consumers who do not have the time to prepare fresh ground coffee or other similar hot drinks, and they prefer to just pour hot water into their instant standard coffee and enjoy a cup of steaming hot coffee in less than a minute.
This has also spurred manufacturers to bring a lot of favourite on-trade hot drinks in to consumers’ homes in instant variants, such as teh tarik. Once just present in coffee and tea, manufacturers have also launched instant variants of drinks like barley and ginger, and even soy drinks at the end of the review period. Direct sellers such as Cosway were also particularly active in the launch of instant hot drinks during the review period.
Outlook
The rising urbanisation among Malaysians is expected to drive the growth of hot drinks products over the forecast period, particularly with the recession setting in and consumers clocking more hours at work for fear of losing their jobs. The increasingly hectic lifestyles of modern consumers will thus make instant hot drinks a very common way of life as consumers continue to seek convenience.
Future Impact
Urbanisation and increasingly fast-paced lifestyles are resulting in consumers looking for fast and easy-to-prepare hot drinks, of course, not neglecting the health component. As such, the hectic lifestyles of consumers are likely to boost instant hot drinks, be it for coffee or niche products like barley and soy drinks.
During the early years of the forecast period, it is expected that there will be a higher proportion of health conscious Malaysians. This is because consumers will become more knowledgeable about healthy and nutritious hot drinks due to concerted marketing efforts from industry players. Hence, it is expected that major hot drinks players will continue to launch new healthier instant hot drinks products as a bid to drive up consumers’ interest.
Hot drinks players will constantly try to win consumers over with new products; as such competition is likely to intensify during the forecast period. It is thus expected that players will be forced to offer attractive prices to sustain their brand shares.
Modern retailers are also expected to develop their private label more intensively in terms of instant variants. Direct sellers are expected to be active, introducing more innovative instant hot drinks as they seek to carve out their own niche after failing to compete head-on with famous retail brands, like Nescafé.
Table of contents
HOT DRINKS IN MALAYSIA : MARKET INSIGHT
EXECUTIVE SUMMARY
Hot drinks sees stronger performance in 2008
Health consciousness spurs hot drinks’ development
Nestlé (M) Bhd remains unshakeable
On-trade sales impacting off-trade sales positively
Hot drinks expects improved performance
Competition heightens but key players dominate
On-trade developments benefit off-trade consumption
Packaging innovations draw consumers’ interest
Fortified products meant to address the growing health awareness
Instant hot drinks sustain performance of hot drinks
MARKET DATA
Table 1 Retail Vs Foodservice Sales of Hot Drinks: % Volume Breakdown 2003-2008
Table 2 Retail Vs Foodservice Sales of Hot Drinks: % Volume Growth 2003-2008
Table 3 Retail Sales of Hot Drinks by Sector: Volume 2003-2008
Table 4 Retail Sales of Hot Drinks by Sector: Value 2003-2008
Table 5 Retail Sales of Hot Drinks by Sector: % Volume Growth 2003-2008
Table 6 Retail Sales of Hot Drinks by Sector: % Value Growth 2003-2008
Table 7 Foodservice Sales of Hot Drinks by Sector: Volume 2003-2008
Table 8 Foodservice Sales of Hot Drinks by Sector: % Volume Growth 2003-2008
Table 9 Total Sales of Hot Drinks by Sector: Total Volume 2003-2008
Table 10 Total Sales of Hot Drinks by Sector: % Total Volume Growth 2003-2008
Table 11 Hot Drinks Company Shares by Value 2004-2008
Table 12 Hot Drinks Brand Shares by Value 2005-2008
Table 13 Sales of Hot Drinks by Distribution Format: % Analysis 2003-2008
Table 14 Sales of Hot Drinks by Sector and Distribution Format: % Analysis 2008
Table 15 Forecast Retail Vs Foodservice Sales of Hot Drinks: % Volume Breakdown 2008-2013
Table 16 Forecast Retail Vs Foodservice Sales of Hot Drinks: % Volume Growth 2008-2013
Table 17 Forecast Retail Sales of Hot Drinks by Sector: Volume 2008-2013
Table 18 Forecast Retail Sales of Hot Drinks by Sector: Value 2008-2013
Table 19 Forecast Retail Sales of Hot Drinks by Sector: % Volume Growth 2008-2013
Table 20 Forecast Retail Sales of Hot Drinks by Sector: % Value Growth 2008-2013
Table 21 Forecast Foodservice Sales of Hot Drinks by Sector: Volume 2008-2013
Table 22 Forecast Foodservice Sales of Hot Drinks by Sector: % Volume Growth 2008-2013
Table 23 Forecast Total Sales of Hot Drinks by Sector: Total Volume 2008-2013
Table 24 Forecast Total Sales of Hot Drinks by Sector: % Total Volume Growth 2008-2013
APPENDIX
Published Data Comparisons
Production/Import/Export Data
DEFINITIONS
Summary 1 Research Sources
LOCAL COMPANY PROFILES - MALAYSIA
AIK CHEONG COFFEE ROASTER SDN BHD - HOT DRINKS - MALAYSIA
STRATEGIC DIRECTION
KEY FACTS
Summary 2 Aik Cheong Coffee Roaster Sdn Bhd: Key Facts
COMPANY BACKGROUND
PRODUCTION
Summary 3 Aik Cheong Coffee Roaster Sdn Bhd: Production Statistics 2007
COMPETITIVE POSITIONING
Summary 4 Aik Cheong Coffee Roaster Sdn Bhd: Competitive Position 2008
BOH PLANTATIONS SDN BHD - HOT DRINKS - MALAYSIA
STRATEGIC DIRECTION
KEY FACTS
Summary 5 Boh Plantations Sdn Bhd: Key Facts
COMPANY BACKGROUND
PRODUCTION
COMPETITIVE POSITIONING
Summary 6 Boh Plantations Sdn Bhd: Competitive Position 2008
GOLD ROAST (M) SDN BHD - HOT DRINKS - MALAYSIA
STRATEGIC DIRECTION
KEY FACTS
Summary 7 Gold Roast Marketing Sdn Bhd: Key Facts
COMPANY BACKGROUND
PRODUCTION
COMPETITIVE POSITIONING
Summary 8 Gold Roast Marketing Sdn Bhd: Competitive Position 2008
WHITE CAFé SDN BHD - HOT DRINKS - MALAYSIA
STRATEGIC DIRECTION
KEY FACTS
Summary 9 White Café Sdn Bhd: Key Facts
COMPANY BACKGROUND
PRODUCTION
COMPETITIVE POSITIONING
Summary 10 White Café Sdn Bhd: Competitive Position 2008
COFFEE IN MALAYSIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 25 Coffee Machine Sales: 2002-2007
Table 26 Instant Coffee by Speciality Type 2004-2008
Table 27 Instant coffee (total) - off-trade value Rm Million
Table 28 Retail Sales of Coffee by Type: Volume 2003-2008
Table 29 Retail Sales of Coffee by Type: Value 2003-2008
Table 30 Retail Sales of Coffee by Type: % Volume Growth 2003-2008
Table 31 Retail Sales of Coffee by Type: % Value Growth 2003-2008
Table 32 Standard Vs Coffee Pods 2004-2008
Table 33 Coffee Company Shares 2004-2008
Table 34 Coffee Brand Shares 2005-2008
Table 35 Forecast Retail Sales of Coffee by Type: Volume 2008-2013
Table 36 Forecast Retail Sales of Coffee by Type: Value 2008-2013
Table 37 Forecast Retail Sales of Coffee by Type: % Volume Growth 2008-2013
Table 38 Forecast Retail Sales of Coffee by Type: % Value Growth 2008-2013
TEA IN MALAYSIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 39 Fruit/Herbal Tea by Type: % Off-trade Volume 2005-2008
Table 40 Other Tea by Type: % Off-trade Volume 2005-2008
Table 41 Retail Sales of Tea by Subsector: Volume 2003-2008
Table 42 Retail Sales of Tea by Subsector: Value 2003-2008
Table 43 Retail Sales of Tea by Subsector: % Volume Growth 2003-2008
Table 44 Retail Sales of Tea by Subsector: % Value Growth 2003-2008
Table 45 Tea Company Shares 2004-2008
Table 46 Tea Brand Shares 2005-2008
Table 47 Forecast Retail Sales of Tea by Subsector: Volume 2008-2013
Table 48 Forecast Retail Sales of Tea by Subsector: Value 2008-2013
Table 49 Forecast Retail Sales of Tea by Subsector: % Volume Growth 2008-2013
Table 50 Forecast Retail Sales of Tea by Subsector: % Value Growth 2008-2013
OTHER HOT DRINKS IN MALAYSIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 51 Retail Sales of Other Hot Drinks by Subsector: Volume 2003-2008
Table 52 Retail Sales of Other Hot Drinks by Subsector: Value 2003-2008
Table 53 Retail Sales of Other Hot Drinks by Subsector: % Volume Growth 2003-2008
Table 54 Retail Sales of Other Hot Drinks by Subsector: % Value Growth 2003-2008
Table 55 Other Hot Drinks Company Shares 2004-2008
Table 56 Other Hot Drinks Brand Shares 2005-2008
Table 57 Forecast Retail Sales of Other Hot Drinks by Subsector: Volume 2008-2013
Table 58 Forecast Retail Sales of Other Hot Drinks by Subsector: Value 2008-2013
Table 59 Forecast Retail Sales of Other Hot Drinks by Subsector: % Volume Growth 2008-2013
Table 60 Forecast Retail Sales of Other Hot Drinks by Subsector: % Value Growth 2008-2013