Hot Drinks in Australia

COVID-19 impact on hot drinks

The emergence of the pandemic and the subsequent lockdown introduced by the Australian government in March 2020 in attempt to control the spread of the virus had a significant impact on channel shifts within hot drinks, with foodservice, which had gained the edge in distribution terms in 2019, experiencing drastic declines in volume terms. This was because foodservice was only permitted to offer takeaway or delivery services, while Australians remained at home with many employees switching to remote working wherever possible.

COVID-19 country impact

At the beginning of March 2020, Australia declared that the outbreak of COVID-19 was a pandemic, resulting in major events being cancelled. Due to the lockdown regulations, businesses were forced into temporary closures and employees were asked to switch to remote working where possible.

Company response

Nestlé Australia Ltd strengthened its overall lead of hot drinks in 2020, where its leads both other hot drinks, and coffee in value share terms, dominating the larger instant coffee and strengthening its position within the dynamic fresh coffee. The player offers its popular Nespresso fresh ground coffee pods and the popular Nescafe’s Blend 43 and Nescafé Gold Blend brands of instant coffee that have remained staples in the category as the player continued to embrace innovation and new product development.

Retailing shift

The retail distribution of hot drinks continued to be dominated by supermarkets, with grocery retailers permitted to continue trading during the lockdown due to their essential nature. However, with some consumers wary of visiting large retailers during the height of the pandemic, some shifted to traditional grocery retailers such as independent small grocers in their local neighbourhoods, whilst more price-sensitive consumers visited discounters, driven by Aldi and more affordable private label lines.

Foodservice vs retail split

2019 had seen a further shift towards foodservice in terms of demand for hot drinks in Australia. However, the lockdown and temporary closure of foodservice outlets in March 2020 due to the rapid increase in cases of COVID-19 in the country, which forced the government to take measures in an attempt to control the spread of the pandemic, resulted in a significant loss of sales for the channel.

What next for hot drinks?

As restrictions continue to be eased in Australia, the consumption of hot drinks is set to see another notable channel shift in 2021, with foodservice predicted to regain some lost ground to record double-digit volume growth compared to decline for retail as consumers, remaining at home for long periods of time, venture out due to greater freedom of movement. Nevertheless, growth for foodservice is predicted to return to greater levels of normalisation over the remainder of the forecast period; with such a drastic decline experienced by the channel in 2020, it is highly unlikely that foodservice will return to pre-pandemic levels by 2025.

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