Hot Drinks Quarterly Statement Q3 2021

Delivery

This report comes in PPT.

Key findings

Q3 revisions to hot drinks forecast are relatively small as the pandemic continues

The Delta variant of the coronavirus was already present by Q2, so as it has spread across the world in the past few months revisions to hot drinks forecasts have not been dramatic. New lockdown restrictions in much of Asia are the most notable effect. Looking ahead, much depends on the pace of global vaccination efforts and the ability of future mutations to break through the protection of vaccines.

“Breakthrough” mutations would have uneven effects on global hot drinks

The existence of a variant capable of getting through vaccine protection would lead to a new wave of consumers moving into the home. This would be a boost for retail sales of hot drinks in many areas, although in others the negative economic effects of new lockdowns would overwhelm this effect and lead to a decline in sales. Everywhere foodservice and other out-of-home sales would take a large hit, although it is extremely unlikely to the extent of 2020 given that the vaccines should still offer at least some degree of protection to even a breakthrough variant.

Unilever’s new tea operations will re-shape the nature of the global tea industry

Unilever is preparing to spin off its tea brands into a new entity known as Ekaterra, which will for now remain a semi-independent business within the parent company but will likely see an IPO or sale in the near future. Ekaterra will be the largest tea company in the world by some distance but its brands inherit many challenges from Unilever.

The new remote work force and supply-side inflation are creating challenges for the industry in Q3 and beyond

In the long term, the two effects of the pandemic that will linger will be changes in the workforce and issues from the supply side. Remote working is here to stay and the industry is aggressively trying to shuffle its offerings to reach the new class of primarily remote white-collar workers. Meanwhile, multiple factors are driving up input costs, leading to difficult decisions about how much of price increases to pass onto the consumer and/or what strategies to adopt to attempt to mitigate them.