The hot drinks industry is going in very different directions. Coffee is quietening down after a wave of consolidation in recent years, while tea prepares for a massive shake-up as market leader Unilever exits. Both of the two major segments of hot drinks will confront common challenges as well, foremost being managing channel shifts as the world opens up again post-Coronavirus.
Nestlé leads global hot drinks through its strong positioning in both coffee and flavoured powder drinks. Beneath it, there is a sharp divide between the major coffee and tea companies. NestléThe other largest companies focus on just tea or, more often, coffee. and Unilever alone hold major interests in multiple hot drinks categories, and that won’t be true of Unilever for long.
The activities of JAB Holdings spurred a massive wave of M&A in the coffee industry in the last decade, but the dust has largely settled. Four large blocs exist now at the top of global coffee, each with diversified strategies that aim to reach consumers at all major coffee occasions.
Unilever’s planned exit is a sign of changing times in global tea. Forces such as the growth of herbals and high barriers to entry in Asia have made it into a more fragmented category. While the new owner of Unilever’s brands will remain the most important player in tea, it will face challenges from increasingly powerful local companies.
What good coffee looks like has become more and more similar worldwide, which has allowed companies to make serious plays at global sway in coffee. Tea, in contrast, will be much more focused on the regional level. An increasing amount of the category will be in the hands of companies with limited geographical ambitions.
Foremost among these is dealing with the effects of COVID-19, including a rapid rise in the importance of e-commerce and a devastated foodservice sector. Other non-COVID challenges include a shared need to move in a more sustainable direction. While many things divide coffee and tea, much unites them as well.
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