Hot Drinks: New Products Focus on Premiumisation and Functionality
Strategy Briefing
About This Report
Oct 2016The global hot drinks industry is enjoying strong growth, as the expansion of specialist coffee shops and tea specialists familiarises consumers with premium coffee and tea offerings. Rising health consciousness is also driving growth in functional hot drinks. The report identifies some of the most notable examples of global product development in hot drinks from Euromonitor International’s latest research.
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Hot Drinks: New Products Focus on Premiumisation and Functionality
Expansion of coffee shops has created demand for better retail coffee
As specialist coffee shops, including Starbucks, Costa Coffee and others, have expanded globally, more consumers have become familiar with better quality coffee and speciality coffee drinks, such as cappuccinos and lattes. Consumers are looking for milkier products like cappuccinos and lattes they can make at home.
Consumers want to know the story behind coffee
Coffee drinkers, especially millennials, increasingly want to know how, where and by whom their coffee was produced. Shoppers are looking for more transparency and are driving growth in coffee with an ethical label, such as Fairtrade, UTZ Certified, The Rainforest Alliance, or “direct trade”, where they can be assured that workers and the environment have been treated well.
Tea specialists have inspired more premium teas and unique flavours
Similarly to how coffee shops have raised consumer expectations about retail coffee, the expansion of tea specialists, such as Davids Tea, Teavana and T2, has served to educate consumers about quality in loose leaf tea, as well inspired unique flavour blends, such as Mango Fruit Punch and Pink Flamingo. In turn, makers of packaged tea have introduced multiple flavour blends and more premium offerings
Tea makers are focusing on the health benefits of tea
Tea has been viewed as a traditional remedy for a long time. As consumer awareness of health and nutrition rises, tea makers are increasingly highlighting the inherent health benefits of tea, as well as adding functional ingredients, such as probiotics and maitake mushrooms, to market additional benefits.
Coffee and other hot drinks are boosting functionality
Consumers are looking for additional functional benefits in coffee and other hot drinks, whether that is additional caffeine or antioxidants, or the addition of probiotics for digestive and immune system health.
Introduction
Scope
Key findings
State of the Industry
Steady growth in global hot drinks
Coffee Shop Experience at Home
Coffee shops and other foodservice driving growth in coffee
Coffee shops are educating consumers about good coffee
Barista quality instant coffee to capitalise on interest in premium coffee
Coffee shop experience at home
Cappuccinos and lattes offer coffee shop experience
Coffee shop brands seek greater retail presence
Coffee shops encouraging customisation and flavour variety
Consumers will continue to want better, coffee shop quality coffee
The story behind the coffee
Coffee drinkers want responsibly produced coffee
The Story Behind the Coffee
More coffee producers touting environmentally friendly credentials
Fairtrade and UTZ certifications and “direct trade” labels reassure coffee drinkers
The “third wave” coffee shops have popularised single origin coffees
Companies linking single origin coffees with cause marketing
Coffee producers will expand efforts to tell the story about coffee
Tea Specialists Inspire
Expansion of tea specialists can raise tea’s image and value sales
Tea specialists attracting younger consumers via unique flavours
Tea specialists encourage making iced tea to capitalise on RTD tea
T ea producers are emphasising luxury in new flavour varieties
Makers of pod tea machines focus on premium experience
TEA specialists inspire
Tea producers will look to create luxury tea “experiences”
Tea Producers Focus on Health Benefits
Fruit /herbal teas to outpace other teas by emphasising health
Leveraging growing consumer health concerns to boost value sales
Green tea grows in India due to health positioning and celebrity tie-ins
Tata seeks to reach wider Indian consumer base with new green teas
Green tea makers add more functionality as health awareness rises
Tea producers add functionality through probiotics and charcoal
Tea makers incorporate unusual herbs and mushroom into drinks
Instant tea gets a health upgrade in Asia Pacific
Tea producers will continue to emphasise health benefits
Coffee and Other Hot Drinks Boosting Functionality
Functionality is key in other hot drinks but niche in instant coffee
Coffee producers outside Asia add more functional coffees
New coffees promote mental function and weight-loss benefits
New coffees compete against energy and sports drinks
Other hot drinks companies offer enhanced functionality
Nestlé continues to enhance Milo’s health benefits
Producers will add more functionality to coffee and other hot drinks
Conclusion
Key hot drinks trends to focus on
Appendix
Ethical labels database: Category definitions
Appendix: Competitor Analytics
Competitor Analytics tool
Overview
Competitors
Market Overlap
Treemap
Overlap Matrices
Appendix: Industry Forecast Model
About Euromonitor International’s Industry Forecast Model
Soft drivers and the Industry Forecast Model
Growth decomposition explained
Significance and applications for growth decomposition
Key applications for Industry Forecast Models
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