Hot Drinks in Estonia

Consumers’ rising disposable incomes support growing premiumisation and higher value growth

Hot drinks in Estonia is mature with low retail volume growth recorded in 2019, as per capita consumption continued to reach high levels. However, current value sales recorded higher growth due to rising unit prices, a trend that is predicted to continue into the forecast period.

Ongoing stronger performance for foodservice, allowing consumers to indulge and experiment

With increasing disposable incomes due to a rise in the average income, Estonians are gradually gaining greater confidence in spending on non-essential products and activities. This includes indulging in visiting foodservice establishments such as cafés and coffee specialists to enjoy premium quality hot drinks prepared by baristas, who can offer them advice on specific types and flavours, allowing consumers to further experiment.

Multinationals have budgets to develop new products and support with strong advertising but smaller brands gain share

Multinational players and foreign brands such as Jacobs Douwe Egberts, Nestlé SA and Unilever continued to dominate hot drinks in Estonia in 2019, benefiting from being trusted names, and appreciated for their quality amongst local consumers. Despite the increasing presence of smaller brands at the end of the review period, local production of hot drinks remains low.

Consistent new product development and launches will lead to intense competition with brands requiring consistent marketing support to remain top of mind

With increasing disposable incomes and greater interest in trying new products, particularly those offering superior quality or that tap into the health trend, producers need to continue to capitalise on this positive environment to drive the market forward and their profit margins up. Therefore, innovative or exotic flavours of tea from both well-known brands such as Lipton Green Tea with Matcha, which highlights its use of Japanese Matcha on its packaging, or from smaller dynamic brands such as Basilur and Hyleys which both offer high quality black and green tea, will continue to attract local consumers over the forecast period.

Maturity will limit stronger demand overall, but further interest in premium quality products will support current value growth over the forecast period

While hot drinks is a mature market in Estonia, offering limited potential for strong volume growth over the forecast period, its performance will be increasingly dependent on social factors including lack of growth linked to a stagnating population. However, due to increasing disposable incomes, Estonians will continue to indulge in higher quality products which they perceive to offer greater specific value, further supporting the premiumisation trend as they continue to experiment with different types and flavours of hot drinks, particularly for coffee and tea through foodservice.

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