While the global outlook for all hot drinks remains positive, it is coffee that continues to steal the show, driving remarkable value growth through explosive growth in pod machines, continued innovation in instant coffee, and the global halo effect of the coffee shop revolution. Tea and other hot drinks, by contrast, increasingly depend on a much smaller core of key markets, demanding a more locally-focused strategy.
There has been an explosion in single-serve and instant coffee products, which offer a wide range of flavours and branding. These have brought coffee products much closer to soft drinks products in terms of branding and strategy.
Far more than coffee or other hot drinks, global tea sales are driven by demand from a select few markets, China above all. Value opportunities remain in the world’s core tea-dominant markets, as consumers continue to trade up to bagged teas, instant teas, and other value-added products.
On-trade has yet to provide the significant boost to sales for tea manufacturers that has been experienced by coffee manufacturers. Innovation has been lagging, even in markets where overall tea consumption remains high.
While young people in emerging markets are important to growth for almost any global packaged goods manufacturer, they are absolutely central in other hot drinks, and will remain so going forward.
Positioning coffee as a luxury product means manufacturers should continue to see growth. However, new product development is required to maintain that premium positioning.
As coffee-pods become mainstream, developed markets are looking for products offering the retail/foodservice luxury experience at home. While emerging market consumers demand ever-more indulgent flavours and product mixes, particularly in instant coffee.
The emergence of subscription services and on-line purchasing in coffee is likely the way forward for the entire industry, as more manufacturers look to control the consumer relationship and lock in repeat purchasing.
Specialist coffee and tea shops will be vital for educating consumer about brands and new products; their importance will only grow over 2013-2018.
Manufacturers must leverage tea’s ability to work across a range of flavours and product types in both core and non-core markets.
The highest value growth for tea manufacturers, particularly global brands, likely lies in occasions where refreshment or caffeine-free is desired, offering an alternative to coffee or traditional tea products.
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