Where Consumers Shop for Hot Drinks

March 2021

The sharp reduction in consumption occasions in away-from-home channels has completely changed the operating landscape for hot drinks. Channel shifts, accelerated by the COVID-19 pandemic, have required significant and strategic business changes to adapt to new consumer demands. This report explores the state of play in the global hot drinks distribution environment.

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Key Findings

Closure of away-from-home channels affects the overall hot drinks industry and distribution channels

Retail hot drinks sales recorded significant growth in 2020, as a result of the Coronavirus (COVID-19) pandemic. The sharp reduction in consumption occasions in foodservice and increasing working from home completely changed the operating landscape for hot drinks.

Consumers prefer larger baskets in store-based channels, affecting informal retailers for consumers’ impulse purchases

Modern grocery retailers continue to lead the distribution landscape, holding 53% of retailing volume sales. Convenience stores and forecourt retailers, as well as food/drink/tobacco specialists, faced complicated market dynamics in 2020.

E-commerce performs well ahead of previous expectations

E-commerce in hot drinks recorded substantial growth during the pandemic. The digital shift is one of the most profound changes unfolding in commerce. As consumers continue to isolate during the COVID-19 pandemic, this period has accelerated e-commerce adoption, with many consumers experimenting with, and even becoming reliant on the digital channel.

The pandemic’s severe impact on away-from-home spending pushed foodservice players towards a digital transformation

The COVID-19 pandemic’s impact on foodservice spending was severe in 2020, with social distancing regulations closing millions of outlets globally. The pandemic has, unsurprisingly, forced many foodservice players to pivot to delivery services to stay afloat and serve consumers who were largely staying at home in 2020.

Growth in off-trade sales over the forecast period

One of the most outstanding features of the “new normal” will be an increased reliance on e-commerce. Retail consumption is expected to record growth in sales over the next five years. The evolution of delivery services, subscription models and contactless vending solutions will support this growth.

Introduction

Scope
Key findings

Industry Snapshot

Shifting drinking occasions boosts hot drinks sales in 2020
Coffee sales outperformed tea and other hot drinks
Growth opportunities in developing and emerging markets

Impact of Coronavirus

Impact on supply chain: Shortage of UTZ Certified coffee
Impact on store-based channels: Key role for discounters
Impact on non-store channels: E-commerce expansion

Channel Shifts

COVID-19 turns the spotlight on non-store retailing
Non-store retailing gains share across categories…
…with Asia Pacific leading the trend

Store-based Channels

Modern grocery remains unchallenged
Supermarkets registered the largest growth over the review period
Weak performance of tea in food/drink/tobacco specialists
Shift of foodservice sales to at-home benefits modern grocery retailers
Convenience-focused retailers lose share during lockdowns
Private label continues to record growth, led by coffee
Private label enjoys highest penetration in Western Europe
Chained supermarkets support private label in Western Europe

Non-store Channels

E-commerce dominates non-store sales, led by China
Consumers prefers contactless distribution
Vending sees investment in touchless ordering systems
Boom in online coffee sales in 2020
Rising usage of subscription services across regions
The pandemic boosts online sales in emerging markets
Chinese e-commerce giants rise up the rankings

On-trade

Severe impact from pandemic on foodservice sales of hot drinks
Starbucks continues its digital transformation in China
Dunkin’ delivery a key strategy in the US
Pret A Manger launched monthly subscription service in the UK

Future Developments

Retail hot drinks spending to increase over the forecast period
Key takeaways

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