Q3 saw only minor changes at the global level to EMI hot drinks forecasts, but it was an active few months for many of the large hot drinks players. JDE moved more aggressively into Nespresso-compatible pods, while Nestlé announced the expansion of Nespresso to third-party retailers. Meanwhile, Tata aims to turn Tetley into a billion dollar tea brand and Lavazza made a major purchase in Canada.
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Total revisions to EMI hot drinks forecasts for 2021 were raised about a tenth of one percent from baseline in Q3 (about USD180 million in absolute terms). Tea and coffee both saw upgrades, while other hot drinks was downgraded. In no category were the changes especially significant, however.
While GDP revisions in the world’s major economies were relatively minimal, they remained the leading source of forecast revisions in Q3. The most affected nations were Algeria and Nigeria, each of which lost about a percentage point from their forecast CAGRs due to stubbornly low oil prices hampering their economic prospects. This was outweighed in an absolute sense, however, by slight upwards revisions in the large markets of China, Germany and Brazil.
New demographic data regarding the ageing of the Baby Boomers highlights the reliance of certain categories on this large but shrinking demographic. Their decline will be especially felt in markets that are traditionally heavy consumers of tea. Younger consumers in most of these areas prefer a wider variety of beverages, rather than solely tea.
Nestlé has been challenged by loosened intellectual property protections on Nespresso for some time, but in Q3 the matter accelerated. Global rival Jacobs Douwe Egberts introduced aluminium capsules with Nespresso compatibility, while low-cost, unbranded products appeared so quickly that one major player announced it was exiting the market because it had become too crowded to be profitable. Meanwhile, Nestlé fought back by deciding to allow sales of Nespresso at limited third-party retailers.