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Hot Drinks in 2014: New Occasions, New Consumers, New Opportunities

August 2014

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.

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Versatility drives coffee forward

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.

Tea retains a value stronghold in Asia, less relevant elsewhere

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.

The “Starbucks Moment?”

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.

Emerging market youth demand key for other hot drinks

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.

Selling coffee as luxury

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.

Control online purchasing

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.

Tea must leverage versatility

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.

What this report includes

  • Top-level strategic analysis of how major consumer trends will influence global markets
  • Consumer insight
  • Impact across all relevant consumer markets
  • Unique graphics and case studies
  • Key market snapshots
  • Accompanying presentation to synthesise main findings

Why buy this report

  • Identify factors driving change now and in the future
  • Understand motivation
  • Forward-looking outlook
  • Briefings and presentation should provoke lively discussion at senior level
  • Take a step back from micro trends
  • Get up to date estimates and comment

Introduction

Scope
Key findings

Global Performance

A US$138 billion industry, yet one dwarfed by soft drinks, alcohol
Hot drinks still a major part of global drinking culture
Hot drinks value growth consistently ahead of other categories
Hot drinks’ share varies widely
The global hot drinks consumption breakdown
Strong retail performance across the board in 2013
Asia, Western Europe dominate sales with age old drinking cultures
Tea retains a value stronghold in Asia, less relevant elsewhere
Top 10 largest markets account for nearly 60% of global sales
Driving value forward

Competitive Landscape

Nestlé maintains iron grip with multi-format growth
Nescafé dominant as coffee pod brands take share
Nestlé’s multi-format, multi-segment strategy pays dividends
Mondelez/DE Master Blenders 1753 tie-up to shake up fresh coffee
Industry consolidates, yet segmentation continues

Category Highlights

What is growing?
Five markets to account for two thirds of forecast tea growth
China tea market a world unto itself
Traditional strongholds to drive black tea expansion
Fruit/herbal, green tea holds great appeal outside key tea markets
Ready-to-drink tea offers real value competition
Next steps for the world’s most-consumed hot drink
Continued demand from key markets drives coffee sales
New formats to take share in North America, Western Europe
Pods and Brazil to drive fresh coffee, while Asia demands instant
Coffee shops, cafés drive new experiences, new experimentation
Machines growth suggests long runway for premiumisation
Full speed ahead for a high-value category
Other hot drinks continue steady climb, led by chocolate drinks
Latin America, Asia point the way
Real potential for ready-to-drink, on-trade evolution
China dominates plant-based hot drinks
Light and sweet: Powder beverages lead the way

Global Prospects

Consumption projected to continue climbing
Massive tea volume expansion puts ever more occasions in play
Coffee to continue to make inroads in tea-drinking markets
Coffee shops take retail forward
New formats, new flavours crucial for global tea expansion
Coffee in the driver’s seat in a fast-changing world
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