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Overview
Discover the latest market trends and uncover sources of future market growth for the Hot Drinks industry in Australia with research from Euromonitor's team of in-country analysts.
Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.
If you're in the Hot Drinks industry in Australia, our research will save you time and money while empowering you to make informed, profitable decisions.
When you purchase this report, you also get the data and the content from these category reports in Australia for free:
The Hot Drinks in Australia market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Hot Drinks in Australia?
- What are the major brands in Australia?
- How has an increasing desire for heart healthy or fiber-added drinks affected the hot drinks industry in Australia?
- Are manufacturers changing packaging sizes and formats to fit an on-the-go lifestyle?
- How have changing demographics (for example an aging population) affected the hot drinks market in Australia?
Why buy this report?
- Gain competitive intelligence about market leaders
- Track key industry trends, opportunities and threats
- Inform your marketing, brand, strategy and market development, sales and supply functions
This industry report originates from Passport, our Hot Drinks market research database.
Sample Analysis
EXECUTIVE SUMMARY
Hot drinks continue to enjoy healthy growth in 2010
In 2010 hot drinks enjoyed healthy volume and value growth in Australia due to the accelerating recovery from the recession. Coffee in particular demonstrated strong off- and on-trade growth rates, supported by the growing café culture among consumers. This bolstered the overall performance of hot drinks. Other hot drinks categories also demonstrated strong growth, mainly due to rising sales of healthy malt-based hot drinks. Tea, however, struggled to grow due to the increasing popularity of coffee, as well as saturation.
Consumers expect more than just healthy products
The continuing health and wellness trend dramatically increased the variety of products with alleged health benefits, such as organic and gluten-free products in coffee, and naturally healthy green tea, fruit/herbal tea and chai tea. As products with claimed healthy benefits became increasingly common, consumers started to expect added value on top of health benefits when making purchasing decisions. These included fair trade certification, a high level of indulgence, premium taste, unique flavour and ingredients, and convenience. As a result manufacturers launched more than just healthy products to differentiate their offerings from those of other players. For example, fair trade-certified organic coffee and fruit-flavoured green tea launched by different manufacturers became increasingly popular.
Multinational companies continue to dominate hot drinks in Australia
Global manufacturer Nestlé Australia Ltd maintained its lead in hot drinks in 2010, supported by already well-established brand power in coffee and other hot drinks. Its extensive portfolio, including Nescafé and Milo, as well as its continuous innovation efforts, aided its successful domination in Australia. Overall, hot drinks continued to be dominated by multinational companies and globally marketed brands. Those multinational companies have huge budgets for advertising to further enhance their brands and stimulate sales, and they also started distributing products in previous niches, such as green tea, fruit/herbal tea and chai tea. This makes it difficult for small local manufacturers to survive in the already quite saturated Australian hot drinks market.
Supermarkets/hypermarkets most popular for hot drinks purchases
Large retailers such as Coles and Woolworths continued to dominate off-trade volume sales of hot drinks in 2010. Such large retailers are convenient to visit and provide a wide variety of products at competitive prices compared with small grocery shops and other retail channels. Large retailers are also the first to distribute new products by major manufacturers. Although the share is still marginal in the overall hot drink market, large retailers also exclusively distribute their own private label products. These are highly price competitive and of similar quality to global brands.
Economic uncertainty and saturation lead to slower growth
The slow economic recovery in Europe and the USA will slow growth in China, and this will transmit to the performance of the Australian economy in coming years, negatively affecting sales of hot drinks in Australia. The growing café culture will continue to stimulate coffee consumption and help maintain growth in hot drinks. However, the pace of growth will slow over the forecast period. Even off-trade coffee volume growth is predicted to slow down, underpinned by saturation.
Economic uncertainty major barrier to consumer spending
Australia experienced the least negative impact from the global economic recession among developed countries due to the continuing fast economic development in China. Growing demand for raw industrial materials in China has helped provide steady and growing foreign currency inflow to Australia. This also resulted in Australia experiencing faster recovery from the recession than European nations and the USA in 2009. 3% growth in 2010 was predicted by the IMF World Economic Outlook. Unemployment, furthermore, saw a steady decline over 2009-2010, faliin by just under one percentage point, according to the ABS (Australian Bureau of Statistics).
There are, however, several concerns in the current Australian economy. Government debt has increased from 2.7% of GDP to 4.5% of GDP, reaching A$53 billion. This is due to government stimulus spending and private borrowing to boost mining and infrastructure. Despite these efforts, Australian household debt kept rising in 2010 to over 100% of GDP due to low interest rates, making households very vulnerable to shocks such as income drops, and making the economic recovery fragile. The European region accounts for only 5% of Australian exports, and the country is not directly influenced by euro crisis. However, the euro crisis is transmitted through Asian countries, with softer commodity export prices and tighter and more expensive credit lines.
Current Impact
Unlike the slow economic recovery in European nations and the USA, Australia enjoyed a stronger recovery based on the exports of raw materials and commodities to the booming Chinese market. The Australian hot drinks market enjoyed healthy 6% off-trade value growth in 2010 to reach A$1.6 billion. This was primarily driven by the strong growth of coffee, facilitated by the increasing café culture. Other hot drinks categories also demonstrated strong growth, mainly due to growing sales of healthy malt-based hot drinks. Tea, however, struggled to grow due to the growing popularity of coffee, as well as saturation.
Outlook
According to IMF World Economic Outlook, the Australian economy is predicted to experience 3.5% growth in 2011. The unemployment rate is also predicted to continue declining. However, Australia’s net debt is predicted to peak at 6.1% of GDP over 2011-12, and foreign investors are increasingly cautious regarding investment in Australia due to the continuing high level of household debt.
Furthermore, the economic growth of Australia’s largest exporter, China, is slowing down faster than anticipated, partly caused by the euro crisis: it declined from 12% growth compared with a year earlier in the first quarter of 2010 to 10% growth compared with a year earlier in the second quarter of 2010, according to the National Bureau of Statistics. By Western standards however this still represents very strong growth. China has helped to drive a global economic recovery; however, slower growth would potentially cut down investment in factory machinery from the US and European countries, and slow down imports of industrial components from Australia. A slower-than-predicted economic recovery in the US and European countries would continue to negatively influence China’s economy, and eventually slow down Australia’s recovery.
Future Impact
The slow economic recovery in European Nations and the USA would slow the pace of growth in China, and this would transmit to the growth of the Australian economy, negatively impacting sales of hot drinks over the forecast period. However, the growing café culture will continue to facilitate coffee consumption and help to maintain growth of the hot drinks market, meaning the forecast CAGR will be marginally higher than the review period (2.8% vs. 2.2%)
Premiumisation continues in coffee
Despite uncertainty regarding the global economy there is a growing trend among consumers to adopt the idea of café culture. A growing number of consumers prefer to spend extra money on more expensive premium coffee products purchased in cafés. Café culture in Australia was originally implanted by European immigrants and has became an almost integral part of the Australian lifestyle. In recent years the trend has been particularly facilitated by young consumers, among whom it is fashionable to relax and enjoy time in a well-decorated café with friends.
Current Impact
The growing café culture has resulted in strong on-trade growth in coffee, with a 5% increase in 2010. The trend also resulted in consumers seeking to replicate at home the quality and taste of the premium coffee they purchase in specialist coffee shops. As a result, an increasing number of consumers prefer to pay more to drink more expensive fresh premium coffee. Sales of coffee and espresso machines increased rapidly in 2009, with around 30% growth in value sales.
Reflecting this trend, coffee manufacturers have gradually shifted their focus from the development of regular products to more premium offerings. With a successful advertising strategy, Nespresso coffee capsules by Nestlé Australia Ltd is currently one of the most successful fresh coffee products in Australia.
Outlook
Although the forecast economic performance is uncertainty, the café culture is predicted to accelerate. A growing number of specialist coffee shops in Australia would also facilitate this trend. Moreover, the economy is gradually picking up, and an increasing number of consumers will be able purchase more premium coffee products in coming years.
Future Impact
The growing trend among consumers would continue to lead the strong growth in sales of fresh coffee, with off- and on-trade volume CAGRs of around 4% each predicted over the forecast period. Increasing new products in fresh coffee would help maintain strong growth. The trend would continue to make consumers more taste-conscious, which would make premium products become increasingly popular even in instant coffee.
Sara Lee recently launched coffee capsules which are compatible with the Nespresso coffee machine in France. Although this product has faced legal action by Nestlé SA, if this product is distributed in Australia during the forecast period the product would be no doubt a major hit due to its lower price compared with the original Nespresso capsules. This would further accelerate the growth of fresh coffee.
Health and wellness trend continues
Health and wellness continued to be a significant trend among consumers in 2010. A growing number of people are becoming health conscious and changing to consumption of healthier alternatives from regular products.
This trend has been particularly facilitated by the ageing of the Australian population. The proportion of people over 65 years old, who are more health conscious than younger people, has steadily increased over the last two decades due to the falling fertility rate and increasing life expectancy. According to the Australian Bureau of Statistics, the proportion of the population aged 65 years and over increased from 11% to 13% from 30 June 1989 to 30 June 2009. The proportion of the population aged 15-64 years also increased from 66.9% to 67.5% over the same period. However, the proportion of the population aged under 14 years decreased from 22.2% to 19.1%.
The trend has also been facilitated by the continuing prevalence of obesity and other health problems among Australians. In 2007 the World Health Organisation reported that 67% of Australian adults were overweight, ranking 21st in the world. In 2005 the WHO reported that just over 20% of Australian adults were obese, which is predicted to rise to approximately 30% by 2010.
Current Impact
The health and wellness trend has had the greatest impact on tea among hot drinks categories. Consumers have switched from traditional black tea to other “healthier” options such as green tea, herbal tea and chai tea. The health benefits of these products have been promoted through media coverage, on television and in newspapers, for example. Green tea is claimed to contain a high level of anti-oxidants, and is also advertised as helping to prevent heart disease and some neurological diseases. Black tea saw 2% off-trade value growth in 2010. In contrast, healthy green tea and fruit/herbal tea saw strong growth, with increases of 6%, 7% in off-trade current value terms respectively in 2010.
In coffee, chemical-free organic products and gluten-free coffee increased their proportion of sales. In other hot drinks, healthy malt-based hot drinks saw a strong 6% off-trade current value terms increase in 2010. This was largely supported by the successful promotion of the health benefits of Milo by Nestlé Australia Ltd through television advertisements.
Reflecting the health and wellness trend, in competition major manufacturers have launched different new products with claimed health benefits. As the variety of healthier hot drinks has expanded, consumers have become more selective. Consumers purchase products which are not only healthy but also tasty and have unique positioning. For example, fair trade organic coffee, gluten-free coffee and fruit-flavoured green tea launched by different manufacturers became more popular.
Outlook
The number of health-conscious consumers is projected to increase dramatically over the forecast period. This will be facilitated by the further ageing of the Australian population, with a continued low fertility rate and increasing life expectancy. According to the Australian Bureau of Statistics, the proportion of the population aged 65 and over is projected to rise to 23% by 2050.
The trend would also be facilitated by the continuing prevalence of obesity and other health problems. Health education through schools and government-driven initiatives will promote healthier food and drink products. Manufacturer-driven campaigns are also likely to promote healthier products, informing consumers that they have the choice of healthier options and thus encouraging consumers to select such products.
Future Impact
The proportion of sales accounted for by products with health claims will continue to rise in the hot drinks market in coming years. Products with health positioning will become even more diverse as manufacturers try to differentiate their offerings from those of their competitors. In coffee, sales of fair trade organic products are predicted to rise dramatically over the forecast period, together with the premiumisation trend and rising environmental awareness among consumers.
In tea, the switch from consumption of traditional black tea to healthier green tea, fruit/herbal tea and chai tea is expected to accelerate, with constant value CAGRs of 3%, 4% and 9% predicted over the forecast period. In contrast, black tea is predicted to experience a slightly negative CAGR. In other hot drinks, healthy malt-based hot drinks will continue to see strong growth, with a 3% off-trade value CAGR. In contrast sales of sugar-saturated non-chocolate flavoured hot drinks, such as strawberry- and banana-flavoured products, would continue to decline, with a -4% CAGR.
Consumers continue to demand more sustainable products
As the negative impact of global warming becomes more obvious and recognised within Australian society, environmentally sustainable manufacturing of products is increasingly important. The importance of sustainability has been much emphasised by associations such as Rainforest Alliance, which takes extra steps to spread the importance of sustainable practices, ensuring that businesses do not neglect their environmental and social responsibilities.
Current Impact
Hot drinks’ manufacturers faced increasing social pressure to source their products from environmentally and socially sustainable areas. In coffee, Rainforest Alliance-certified fair trade products became more common, and such products are becoming increasingly popular as the importance of fair trade-sourcing is increasingly recognised by society.
Fair trade sourcing has already expanded into the other hot drinks category. Unilever Australia Ltd’s Lipton took a leap and committed to being the first tea brand certified by Rainforest Alliance. Other tea manufacturers are already following this step. In 2010, even price-conscious large retailers launched their own private label fair trade products.
Outlook
The element of sustainability can be costly compared with standard products, and leading manufacturers may not be willing to increase retail due to fears that a rise in end prices may result in reduced volume sales. On one side this makes manufacturers reluctant to increase the product ranges sourced through fair trade.
Despite the cost disadvantage for manufacturers, the importance of fair trade-sourced products for sustainable development of society would be, however, recognised by an increasing number of consumers. There will be a growing number of educational opportunities regarding fair trade through schools and media coverage. Organisations such as Fair Trade and Rainforest Alliance will also further promote the importance of fair trade products through advertising campaigns.
Future Impact
With increasing social recognition of the importance of fair-trade, hot drinks’ manufacturers would be almost forced to switch the source of their products to fair trade in order to maintain a positive company image. Multinational company Unilever Australia Ltd has been a leader of sourcing the gradients of products through fair trade. The company aims to have its entire range of Lipton products certified as sustainably sourced by 2015.
Fair trade products are expected to become increasingly common and consumers will eventually become more selective. On the Internet the taste of some fair trade products has been much criticised as inferior compared with standard products despite fair trade products’ higher price. Manufacturers would be required to develop fair trade products which are at least similar in quality to standard offerings. The uniqueness of fair trade products, with added benefits such as unique flavour and a high indulgence factor, would also become important for product differentiation.
The dominance of large retailers continues
Two large retailers in Australia – Woolworths Ltd and Coles Supermarkets Pty Ltd – continued to have several advantages regarding sales of hot drinks compared with smaller retailer channels in Australia. They have a large number of outlets spread throughout country with a large number of car parking spaces, making it very convenient for consumers to visit such outlets. Furthermore, the prices of hot drinks in large retailers are more reasonable compared with small independent grocery stores and convenience stores. Large outlets also carry a much wider variety of hot drinks, making them capable of meeting the needs of a diverse range of consumers. New products by major hot drinks manufacturers are usually first launched in large retailers, which is attractive for a growing number of consumers who prefer to try something new and different.
Current Impact
Off-trade value sales of hot drinks became saturated in large retailers over the review period. Supermarkets/hypermarkets’ off-trade volume share of hot drinks increased steadily over the review period to stand at 91% in 2010. Small grocery retailers accounted for only around 6% of off-trade volume sales in 2010.
The stronger presence of private label products is helping them to attract more customers. The value share of private label hot drinks remained marginal at the end of the review period and has been struggling to grow, accounting for approximately 1% of off-trade value sales in 2010. However, private label products in supermarkets/hypermarkets gained popularity over the review period. This means that although some consumers purchase private label hot drinks, customers who intend to buy private label in products other categories are attracted to large retailers, and purchase their preferred hot drinks brands, leading to an increased distribution share for large retailers.
Outlook
As an increasing number of consumers sought more premium, expensive products, lower price tags at large retailers became particularly attractive for consumers. An increasing variety of products in large retailers also aligns with the accelerating trend of consumers seeking something new and different. Hot drinks are often purchased in combination with other grocery products, also putting large retailers in a superior position compared with smaller retail channels.
To maintain the distribution volume, small grocery retailers would be required to compete with large retailers on issues other than price and variety. One of the main advantages of small grocery retailers could be their longer opening times. This is particularly advantageous for sales of other types of grocery products, such as soft drinks and snacks. People are often urged to buy these products outside the opening hours of large retailers, especially when travelling, and small grocery retailers and convenience stores with longer opening hours are often the only places that enable them to purchase such products when large retailers are closed.
Future Impact
Hot drinks’ retail volume is predicted to become even more concentrated among large retailers over the forecast period. The growing presence of private label products will continue to attract consumers to large retailers. This will result in consumers purchasing hot drinks more frequently in large retailers instead of purchasing them from smaller grocery retailers and convenience stores.
