Growth Opportunities for Packaged Hot Drinks in Africa

May 2015

Africa represents the fastest growing global market for retail hot drinks. This report explores the drivers of rapidly growing consumer demand for coffee, tea and other hot drinks, with a focus on key categories of growth over 2014-2019. It analyses the varied consumer preferences of African markets, with profiles of selected new products and specific future category opportunities.

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Africa is the fastest growing hot drinks region

Africa was the fastest growing global region for retail sales of hot drinks in value terms between 2009-2014. The majority of volume and value is consolidated in relatively stable, high-value markets of North Africa, East African coffee and tea producing countries (Ethiopia, Uganda and Kenya) and South Africa.

Encouraging hot drinks demand drivers

GDP and income growth drove retail sales of hot drinks during the review period, with strong prospects over the forecast period. A young population and increasing urbanisation also accelerated the adoption of retail, packaged hot drinks and on-trade consumption, creating opportunities for hot drinks brands that are properly segmented in terms of price/package mix.

Established regional preferences in coffee and tea

Leading markets in Africa demonstrate clear, historic preferences for either tea or coffee, with an established base of low-priced domestic brands in leadership positions. However, the continent’s young population may shift preferences towards new tea blends and coffee.

Vast differences in retail distribution

Retail distribution of hot drinks in Africa is extremely varied, ranging from 88% of retail value through traditional channels in Nigeria to 80% of value through modern channels in South Africa. Channel distribution format shapes new brand opportunities.

New category opportunities for packaged tea and coffee brands

High value, convenient instant coffee represents a strong growth opportunity for multinational brands in Africa, with fruit/herbal and green teas also showing signs of growth among affluent consumers. Additionally, the region’s young population creates opportunities in flavoured/functional powdered beverages.

Introduction

Scope
Hot drinks in Africa: Euromonitor International market coverage
Key findings

Hot Drinks and the African Economy

Africa in context: Fastest HD growth, from a small overall base
Africa leads in hot drinks value growth through development
Africa’s hot drinks industry gains momentum
How the African hot drinks market breaks down regionally
Top 10 African hot drinks markets by retail value
Spending per capita is still far behind other global regions
Tea or coffee? Top African hot drinks markets by HD category
Tea or coffee? Category preferences in context
Particularly strong HD spend in North Africa relative to SD
Modern versus traditional retailing distribution
Three key questions for hot drinks brands to consider:

Development Drivers

Hot drinks in Africa: Development drivers in depth
Growing African economies will secure HD opportunities
Income and price are still the determining factors
Africa’s emerging consumer class?
Case study: Ethiopia in 2020
Case study: Tomoca (Ethiopia) profile
Urban household growth versus rural household growth
Urban/rural gap means African cities are the opportunity for brands
Modern vs traditional retail distribution
Nescafé in African modern retail channels
In Tunisia traditional retail leads despite urbanisation
Coffee producing countries seek to promote local consumption
Educating the consumer through on-trade promotions
Traditional preferences shift, causing category switching
Africa in 2019: A promising region for hot drinks

African Consumer Forecast: Three Category Opportunities

The market entry challenge for multinational brands
Segmenting the African hot drinks consumer in 2015
Modern retailing and growth in private expenditure 2009-2014
Three opportunity areas for multinational brands
Instant coffee opportunity: Accelerating retail volume growth
Instant coffee: Adding value in developing African markets
Instant coffee opportunity: Premium, affordable and convenient
Healthier teas to generate value in African tea
Marketing new tea blends and imports to millennials
Lipton share gains across Africa
Young population drives other hot drinks
Youthful population drives opportunities in other hot drinks
Four areas to watch in African hot drinks
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