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Hot Drinks Quarterly Briefing Q4 2017

November 2017

Q4 was a positive one for the global hot drinks industry, with positive revisions of USD420 million over the 2021 baseline, thanks to improving economic forecasts in key markets like China and Brazil. It was also a busy quarter for acquisitions, with Nestlé taking control of Blue Bottle, and Unilever buying Pukka Herbs, signifying the growing importance of ethically-sourced products to the global hot drinks market.

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Minor revisions to 2021 baseline for global hot drinks industry in Q4

The global hot drinks industry saw an improved outlook in Q4, with positive forecast revisions amounting to USD420 million over the 2021 baseline. This was primarily due to revised GDP forecasts in major emerging markets, especially China, Brazil and Russia. In the overall context of the global hot drinks market, however, the scale of this revision was small, and only amounts to roughly a third of a per cent of the global retail market.

China leads revisions, showing the growing importance of China to the global hot drinks market

China saw a small revision in Q4 ,with a rise in forecast CAGR over the next few years of around a 10th of a percentage point. Because of the size of the Chinese market though, this tiny change was still enough to make it the single largest source of absolute revisions to the global market this quarter. This is reflective of China’s major role in global hot drinks, which has grown considerably in recent years, as large numbers of Chinese consumers have switched from loose teas to packaged, branded products.

String of ethically-focused acquisitions among major players in Q4

Global tea leader Unilever purchased Pukka Herbs ,and global coffee leader Nestlé took a controlling stake in Blue Bottle in Q4, both examples of major global players absorbing small, ethically-focused premium brands. The purchases, along with other similar ones that have occurred in the recent past (notably, Lavazza’s purchase of organic Canadian coffee brand Kicking Horse) show that sustainable and ethical products are growing in importance to the major players in global hot drinks.

Other growth strategies include focusing on pods and developing markets

Other notable moves in Q4 include Massimo Zanetti’s purchase of a coffee roaster in Indonesia and JDE’s decision to expand its L’Or line of pods into Brazil. These actions show that pods and developing markets are viewed as promising targets for growth in global hot drinks.



Q4 Macro Updates

Executive summary
GDP forecasts: Revisions over last quarter
Global risk scenarios
Major macro risks for the global hot drinks industry

Q4 in Hot Drinks

Key findings
Q4 sees only minor revisions to global hot drinks forecasts
GDP revisions dominate changes from baseline in Q4
Positive revisions in China are the leading source of change in Q4
Q4 highlights China’s growing importance to global hot drinks
Continued income growth is essential to category expansion in China
The global tea companies have a low level of China exposure
Conclusions: Q4 revisions
Major growth strategies in Q4
Unilever expands in organic tea with Pukka acquisition
Pukka is part of long-term shift for Unilever in tea
Organic brands are becoming highly important to the big players
Organic products are a cornerstone of developed world growth
Nestlé makes two major coffee plays in North America
Nestlé shores up traditional weakness in North American coffee
In the long term, Nestlé positioning in Asia may be strengthened
Pods are another way to grow in mature markets
Lavazza expands pod role at home in Italy
JDE launches L’Or Espresso into Brazil
Brazil is growing in importance to the major global coffee players
Massimo Zanetti expands in Indonesia
Increasing demand for quality coffee in Indonesia
Developing world coffee growth is moving much faster
Focus areas for global hot drinks companies


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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