Hot Drinks in South Africa

Marginal improvement for hot drinks but tea continues to suffer from several negative factors

Hot drinks in South Africa experienced a marginal improvement in overall retail volume sales in 2019, while current value sales continued to record impressive growth. The latter was driven by ongoing inflation, and price rises, primarily in tea, for several reasons.

Health and wellness trend continues to influence purchasing decisions of more affluent consumers

The rising health and wellness trend in South Africa continued to filter into hot drinks in 2019, with players focusing on offering reduced sugar variants for malt-based hot drinks and chocolate-based flavoured powder drinks, while demand for decaffeinated instant standard coffee also continued. Sales of perceived naturally healthier products also continued to grow, with both fruit/herbal teas and green tea recording ongoing volume growth despite their higher unit prices, as more affluent consumers remained undeterred in their quest to find more exotic flavours or products that they perceived to offer them greater specific value such as functionality.

Nestlé retains convincing lead of hot drinks supported by wide product portfolio

Nestlé South Africa (Pty) Ltd retained its convincing lead of hot drinks in 2019, despite intensifying competition towards the end of the review period as private label and smaller players looked to gain consumers’ attention with competitive prices or differentiated health-positioned products. Nestlé benefits from a wide product portfolio, strong brand equity and affordability, particularly within malt-based and flavoured powder drinks.

Players seek to address enthusiasm shown by young urban South Africans to experiment with different flavours and formats

Players are looking to address younger urban South Africans’ enthusiasm for experimenting with new or exotic flavours or different formats, a trend that is predicted to continue into the forecast period as a way to stand out from the competition and offer innovation, a key differentiation tool. Cold brew coffee is likely to be further embraced as a new coffee experience and one that offers a different brewing technique compared to iced coffee which uses an espresso shot over ice.

Stronger performance predicted for hot drinks supported by improving economy and environmental factors

Hot drinks is predicted to record a stronger performance over the forecast period compared to the review period in current value terms, and in volume terms for both retail and foodservice, with the latter supported by the rising café culture enjoyed by younger urban consumers and resulting in strong growth for fresh coffee through this channel. While the unit price of tea, in particular black tea and other tea, is predicted to continue to rise, the rate of growth will be more stable, as an improved economic performance and predicted lowering importation costs for black tea will be supported by a strengthening Rand.

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