The hot drinks industry continues to confront the challenges caused by global increases in input costs. Questions surrounding pricing strategies will be the major story of 2023 as commodity costs moderate and consumers beset by the rising cost of living seek ways to save money. The possibility of global recession looms as well but demand is likely to prove more resilient to falling GDP than it would to further price increases.
This report comes in PPT.
The hot drinks industry saw a relatively minor revision in the half-year updates to EMI’s Industry Forecast Model. Inflationary pressures proved slightly higher than anticipated, with a detrimental effect on volume sales in some markets.
Input cost pressures are coming down after the major spikes of the last few years. One possible response for hot drinks companies will be to hold course on pricing and maintain or grow margins at the risk of alienating consumers. The other option is to reduce margins with the goal of winning share. A divergence of pricing strategies is likely to be the major trend of 2023 after a 2022 in which favouring price over volume was near-universal.
Lavazza’s completion of the purchase of MaxiCoffee constitutes the only major M&A activity in the hot drinks industry so far in 2023. Since JAB Holdings shifted its expansionary focus to pet care, the torrential pace of consolidation in coffee has dramatically slowed. Tea also has seen little corporate action, with ekaterra’s decision to rename as the major story so far of 2023.
The possibility of a global recession in the latter half of 2023 is not great news for any segment of hot drinks but the threat is certainly greater in foodservice. So far largely protected by consumers willing to spend on affordable indulgences, additional economic pressure should push more consumers into less expensive retail options or to forgo some drinks entirely.
If you purchase a report that is updated in the next 60 days, we will send you the new edition and data extraction Free!