Hot drinks recorded a moderate decline in retail volume terms in 2018, largely a result of the weaker performance of standard fresh ground coffee, which accounts for a large share of overall sales. The decline can be attributed to increasing cross-border trade, competition from RTD products and an exceptionally long, hot summer which dissuaded consumers from at-home consumption and hot beverages in general.
Hot drinks was negatively affected by increasing cross-border trade in 2018, primarily due to a hike in the tax on soft drinks; the tax increase and ensuing increased price disparity between Norway and Sweden triggered bargain-hunting consumers to stockpile more during their usual daytrips across the border. Hot drinks are sensitive to a general increase in cross-border trade because products are shelf stable and thus easy to store, and in many cases the same brands and products are available in both markets, setting the stage for direct price comparisons by consumers.
Hot drinks remains a consolidated market, with the top three players holding a major combined share of retail value sales. Coffee and tea are continuously challenged by new and small players, incentivising established players to innovate and launch new products frequently.
Product development characteristics vary considerably across hot drinks, given the dissimilar natures of coffee, tea and other hot drinks. In coffee, there is a clear trend towards more sophisticated consumer preferences, matched by new and premium products by producers, such as single-origin coffee and organic products.
Hot drinks is expected to record a negative performance in retail volume terms over the forecast period, primarily due to a continued decline in coffee, which due to its size has a substantial impact on overall sales. Cross-border trade in particular is expected to be a primary factor in reducing sales of standard fresh ground coffee.
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This industry report originates from Passport, our Hot Drinks market research database.