Get the right combination of staple products and attention-grabbing new lines and retailers are sure to create a winning brew of hot drinks, says Rich Airey
Black, herbal, green or fruit, ground or instant, Fairtrade or organic, luxury or low-fat
- when it comes to tea, coffee and hot chocolate, it's obvious that it's no longer acceptable to stock just one major brand.
However, while the demand for greater choice in hot beverages is growing all the time, there's no getting away from the fact that tea is the hot drink of choice in the UK. More than 100,000 tonnes of the stuff is sold in the UK each year and tea accounts for a massive 32% of all beverages consumed. In fact, it's the second most popular drink behind water.
The convenience sector plays a major role in the category. More than 22% of households will buy tea from a c-store throughout the year and will purchase on average four times a year. When it comes to pack sizes, 80s are the most popular choice, and everyday tea accounts for 96% of all the tea sold in smaller stores (AC Nielsen/Scantrack).
"Retailers should stock a range that caters for everyone's needs, from own label packs for the most price-conscious, to premium brands for shoppers looking for something special," says Typhoo Tea category manager Kate Carr. "It's also important that retailers make it easy for shoppers by blocking brands together and merchandising by pack size."
She adds: "Correct segmentation is the key to help shoppers find the product they want to buy. This is especially important for emerging segments such as fruit and herb, green tea and decaff. Shoppers can be kept interested with regular promotions and pricemarked packs. It's also worth stocking larger pack sizes to encourage increased basket spend."
Tetley customer marketing controller Simon Atfield agrees that a number of varieties remain must-stocks for convenience retailers. "After experiencing some decline, tea is now holding its own and is the top-selling hot drink. As it's a cheap commodity item, even 160 packs aren't a big outlay for shoppers. Packs of 40s and 80s remain the big sellers in c-stores, but there is a significant opportunity to get shoppers to trade up.
"We believe in offering pricemarked packs and extra-frees to help retailers drive sales. By providing these, retailers reassure shoppers they're not being ripped off by smaller stores."
Tetley recently re-blended its decaffeinated tea and is experiencing good sales of its extra-strong variant. Atfield explains: "We're trying to bring all tea types to a wide range of consumers. Up until a few years ago decaff was a very small sub-category, but it's now experiencing double-digit growth. We refreshed our fruit, herbal and green tea range this year and we've concentrated on having clearer communication across our whole portfolio."
He adds: "We're also the only mainstream brand with an organic offering and it's enjoying double-digit growth. Having said that, there is still room for plenty of growth. We have plans for TV advertising next year and will continue to support all our variants."
Support for its brands is a high priority for fellow tea manufacturer Unilever. Its PG Tips brand this year benefited from a £6m promotion and advertising campaign to coincide with the World Cup. The manufacturer, which also produces Lipton and the number-one brand in Ireland, Lyons, offered the chance to win seats at the new Wembley stadium for 10 years.
Business operations manager Simon Whitehead believes on-pack offers generate increased interest. He says: "Given the importance of tea to UK consumers, the category is seen by retailers as a key footfall driver. In order to ensure this remains the case, we need to create a platform for future growth by ensuring manufacturers have the resources available for genuine product innovation to attract a wider and younger audience to the market."
Speciality tea expert Twinings has upped its profile on TV this year as shoppers have become more experimental in their purchases. The company recently launched a £2.3m campaign featuring three of its most popular blends - Earl Grey, Lady Grey and Chai. The campaign continues the brand's association with comedian Stephen Fry and will be further supported with trial packs each containing 10 teabags.
Sales director Jon Jenkins says: "The growth of the speciality teas sector is fuelled by consumer demand for greater choice and better quality products. This campaign reinforces Twinings' share of the speciality sector and demonstrates our commitment to growing the category."
Coffee culture
Like tea, sales of standard coffee have levelled off, yet it remains a must-stock product for convenience stores. Nestlé's Nescafé Original is the number-one selling brand, followed by Nescafé Gold Blend (IRI September 2006).
Ground coffee is showing growth, but accounts for only a small number of the total cups consumed. Nestlé trade communications manager Graham Walker says that retailers have to retain a good focus on instant coffee and segment their offerings accordingly. "The first and most important section for retailers is instant everyday at 66% of the total and of which Nescafé has a 62% share," he says. "Other areas in the instant sector are café-style and decaff coffees, which each have a 12% share; connoisseur, which makes up 9% of sales; Fairtrade and organic; and coffee enhancers such as Coffeemate, which are worth £2m a year and growing at 2%. Any fixture must include products from each of these categories."
Nescafé used TV's Trinny and Susannah to front a TV campaign which kicked off in March this year. The pair also feature in an on-pack competition due to run until the end of June 2007.
Walker adds: "Retailers should use big brand names to signpost the category and draw shoppers to the fixture. It's worth trying to link the category to other main destination shopping products, such as bread and milk. Other cross-category promotions with products such as cakes and biscuits also work well."
Sarah Petts, channel and communications manager at Kraft Foods, which manufactures the Kenco brand, believes correct ranging is vital to the category: "Coffee can be a difficult area for shoppers to understand and can be made even more challenging by inappropriate ranging. Retailers should keep to the top-selling lines and make sure they stock the most appropriate pack size. For most c-stores we recommend 100g jars of Kenco, which feature special pricemarks. We supply all of our 100g jars in cases of six rather than 12, which means independents can benefit from a lower cash outlay when they re-stock at the cash and carry."
While standard instant jars make up a large percentage of the category's sales, another area worth keeping an eye on is instant indulgence products through which consumers look to recreate the café culture in their own homes.
Douwe Egberts responded to this trend recently with the launch of its Café Switch range. The range comes in three flavours - creamy pleasure, white innocence and true kick. The drinks are prepared by gently frothing the concentrated coffee between two chambers, then pouring into a glass and topping up with hot or cold water. The coffee has been supported by advertising on ITV.
The company has also introduced new products to the coffee machine sector this year in the form of mug-size pods and cappuccino variants for its Senseo range. The packs contain 20 and eight servings respectively.
It's a fair cup
Fairtrade products are continuing to register highly on shoppers' agendas and are expected to be worth £230m by the end of this year, according to Mintel.
Major manufacturers have been quick to recognise shoppers' demands. Nescafé refreshed its Fairtrade-certified coffee, Partners' Blend, in September. Percol also relaunched its ground coffee range in an attempt increase on-shelf visibility and customer understanding of its blends.
Specialist Fairtrade brand Cafédirect is expanding its freeze-dried coffee range with two variants - Intense and Special Selection. It is also relaunching the brand with a new corporate logo, strapline 'Bringing quality to life' and a complete redesign of its packaging.
National account manager Caroline Moriarty explains: "Fairtrade is going a long way towards driving growth in hot beverages and is up 7.6%. More and more people are thinking about where their products come from. Cafédirect deserves a prominent position on the fixture as it's a top performer in the overall category, not just in Fairtrade.
"The new launches mean we can offer more choice to a large group of consumers and the redesign is being supported by a campaign including sampling, online marketing and PR events. We're also looking at pos to help retailers promote next year's Fairtrade Fortnight."
The milky way
Hot milky drinks and hot chocolate may be small sectors, but remain popular, especially among females.
Sales are up 4% in convenience stores. A number of manufacturers have brought out lighter versions
of already popular drinks, but a demand still exists for indulgence products that can be purchased as
a treat.
At GlaxoSmithKline, the Horlicks brand has been well supported with TV and press advertising and a new variant, Horlicks Light Malt Caramel Dream, has been launched.
Senior brand manager Alex Petigrew comments: "This major overhaul rejuvenated Horlicks and provided the brand with a more contemporary feel, helping to recruit new, younger users while retaining the message that Horlicks is an ideal hot drink to help consumers get a restful night's sleep."
Elsewhere in the category, Aimia Foods launched Galaxy Hot Chocolate Bliss, a luxury drink to mix with milk. The drink contains nearly twice as much chocolate as the regular Galaxy blend.
Brand marketing manager Richard Cooper is convinced it's a winner: "The hot chocolate fixture can deliver great profit per square foot, especially during the colder months. Luxury chocolate products are resurgent due to many new additions to the sector. Within this sector, confectionery-associated brands are doing really well because the two are very closely associated in people's minds. Bliss is unashamedly an indulgence product, and as that is the key overriding trend in chocolate, we have high hopes for its success."
Nestlé has also reported positive sales of its Aero hot chocolate drink which was launched in February.
So with winter now upon us, there's no better time to run an eagle eye over your hot drinks offering. Stocking the best-sellers and keeping on top of emerging trends should ensure it's full steam ahead for hot drinks sales.
Black, herbal, green or fruit, ground or instant, Fairtrade or organic, luxury or low-fat
- when it comes to tea, coffee and hot chocolate, it's obvious that it's no longer acceptable to stock just one major brand.
However, while the demand for greater choice in hot beverages is growing all the time, there's no getting away from the fact that tea is the hot drink of choice in the UK. More than 100,000 tonnes of the stuff is sold in the UK each year and tea accounts for a massive 32% of all beverages consumed. In fact, it's the second most popular drink behind water.
The convenience sector plays a major role in the category. More than 22% of households will buy tea from a c-store throughout the year and will purchase on average four times a year. When it comes to pack sizes, 80s are the most popular choice, and everyday tea accounts for 96% of all the tea sold in smaller stores (AC Nielsen/Scantrack).
"Retailers should stock a range that caters for everyone's needs, from own label packs for the most price-conscious, to premium brands for shoppers looking for something special," says Typhoo Tea category manager Kate Carr. "It's also important that retailers make it easy for shoppers by blocking brands together and merchandising by pack size."
She adds: "Correct segmentation is the key to help shoppers find the product they want to buy. This is especially important for emerging segments such as fruit and herb, green tea and decaff. Shoppers can be kept interested with regular promotions and pricemarked packs. It's also worth stocking larger pack sizes to encourage increased basket spend."
Tetley customer marketing controller Simon Atfield agrees that a number of varieties remain must-stocks for convenience retailers. "After experiencing some decline, tea is now holding its own and is the top-selling hot drink. As it's a cheap commodity item, even 160 packs aren't a big outlay for shoppers. Packs of 40s and 80s remain the big sellers in c-stores, but there is a significant opportunity to get shoppers to trade up.
"We believe in offering pricemarked packs and extra-frees to help retailers drive sales. By providing these, retailers reassure shoppers they're not being ripped off by smaller stores."
Tetley recently re-blended its decaffeinated tea and is experiencing good sales of its extra-strong variant. Atfield explains: "We're trying to bring all tea types to a wide range of consumers. Up until a few years ago decaff was a very small sub-category, but it's now experiencing double-digit growth. We refreshed our fruit, herbal and green tea range this year and we've concentrated on having clearer communication across our whole portfolio."
He adds: "We're also the only mainstream brand with an organic offering and it's enjoying double-digit growth. Having said that, there is still room for plenty of growth. We have plans for TV advertising next year and will continue to support all our variants."
Support for its brands is a high priority for fellow tea manufacturer Unilever. Its PG Tips brand this year benefited from a £6m promotion and advertising campaign to coincide with the World Cup. The manufacturer, which also produces Lipton and the number-one brand in Ireland, Lyons, offered the chance to win seats at the new Wembley stadium for 10 years.
Business operations manager Simon Whitehead believes on-pack offers generate increased interest. He says: "Given the importance of tea to UK consumers, the category is seen by retailers as a key footfall driver. In order to ensure this remains the case, we need to create a platform for future growth by ensuring manufacturers have the resources available for genuine product innovation to attract a wider and younger audience to the market."
Speciality tea expert Twinings has upped its profile on TV this year as shoppers have become more experimental in their purchases. The company recently launched a £2.3m campaign featuring three of its most popular blends - Earl Grey, Lady Grey and Chai. The campaign continues the brand's association with comedian Stephen Fry and will be further supported with trial packs each containing 10 teabags.
Sales director Jon Jenkins says: "The growth of the speciality teas sector is fuelled by consumer demand for greater choice and better quality products. This campaign reinforces Twinings' share of the speciality sector and demonstrates our commitment to growing the category."
Coffee culture
Like tea, sales of standard coffee have levelled off, yet it remains a must-stock product for convenience stores. Nestlé's Nescafé Original is the number-one selling brand, followed by Nescafé Gold Blend (IRI September 2006).
Ground coffee is showing growth, but accounts for only a small number of the total cups consumed. Nestlé trade communications manager Graham Walker says that retailers have to retain a good focus on instant coffee and segment their offerings accordingly. "The first and most important section for retailers is instant everyday at 66% of the total and of which Nescafé has a 62% share," he says. "Other areas in the instant sector are café-style and decaff coffees, which each have a 12% share; connoisseur, which makes up 9% of sales; Fairtrade and organic; and coffee enhancers such as Coffeemate, which are worth £2m a year and growing at 2%. Any fixture must include products from each of these categories."
Nescafé used TV's Trinny and Susannah to front a TV campaign which kicked off in March this year. The pair also feature in an on-pack competition due to run until the end of June 2007.
Walker adds: "Retailers should use big brand names to signpost the category and draw shoppers to the fixture. It's worth trying to link the category to other main destination shopping products, such as bread and milk. Other cross-category promotions with products such as cakes and biscuits also work well."
Sarah Petts, channel and communications manager at Kraft Foods, which manufactures the Kenco brand, believes correct ranging is vital to the category: "Coffee can be a difficult area for shoppers to understand and can be made even more challenging by inappropriate ranging. Retailers should keep to the top-selling lines and make sure they stock the most appropriate pack size. For most c-stores we recommend 100g jars of Kenco, which feature special pricemarks. We supply all of our 100g jars in cases of six rather than 12, which means independents can benefit from a lower cash outlay when they re-stock at the cash and carry."
While standard instant jars make up a large percentage of the category's sales, another area worth keeping an eye on is instant indulgence products through which consumers look to recreate the café culture in their own homes.
Douwe Egberts responded to this trend recently with the launch of its Café Switch range. The range comes in three flavours - creamy pleasure, white innocence and true kick. The drinks are prepared by gently frothing the concentrated coffee between two chambers, then pouring into a glass and topping up with hot or cold water. The coffee has been supported by advertising on ITV.
The company has also introduced new products to the coffee machine sector this year in the form of mug-size pods and cappuccino variants for its Senseo range. The packs contain 20 and eight servings respectively.
It's a fair cup
Fairtrade products are continuing to register highly on shoppers' agendas and are expected to be worth £230m by the end of this year, according to Mintel.
Major manufacturers have been quick to recognise shoppers' demands. Nescafé refreshed its Fairtrade-certified coffee, Partners' Blend, in September. Percol also relaunched its ground coffee range in an attempt increase on-shelf visibility and customer understanding of its blends.
Specialist Fairtrade brand Cafédirect is expanding its freeze-dried coffee range with two variants - Intense and Special Selection. It is also relaunching the brand with a new corporate logo, strapline 'Bringing quality to life' and a complete redesign of its packaging.
National account manager Caroline Moriarty explains: "Fairtrade is going a long way towards driving growth in hot beverages and is up 7.6%. More and more people are thinking about where their products come from. Cafédirect deserves a prominent position on the fixture as it's a top performer in the overall category, not just in Fairtrade.
"The new launches mean we can offer more choice to a large group of consumers and the redesign is being supported by a campaign including sampling, online marketing and PR events. We're also looking at pos to help retailers promote next year's Fairtrade Fortnight."
The milky way
Hot milky drinks and hot chocolate may be small sectors, but remain popular, especially among females.
Sales are up 4% in convenience stores. A number of manufacturers have brought out lighter versions
of already popular drinks, but a demand still exists for indulgence products that can be purchased as
a treat.
At GlaxoSmithKline, the Horlicks brand has been well supported with TV and press advertising and a new variant, Horlicks Light Malt Caramel Dream, has been launched.
Senior brand manager Alex Petigrew comments: "This major overhaul rejuvenated Horlicks and provided the brand with a more contemporary feel, helping to recruit new, younger users while retaining the message that Horlicks is an ideal hot drink to help consumers get a restful night's sleep."
Elsewhere in the category, Aimia Foods launched Galaxy Hot Chocolate Bliss, a luxury drink to mix with milk. The drink contains nearly twice as much chocolate as the regular Galaxy blend.
Brand marketing manager Richard Cooper is convinced it's a winner: "The hot chocolate fixture can deliver great profit per square foot, especially during the colder months. Luxury chocolate products are resurgent due to many new additions to the sector. Within this sector, confectionery-associated brands are doing really well because the two are very closely associated in people's minds. Bliss is unashamedly an indulgence product, and as that is the key overriding trend in chocolate, we have high hopes for its success."
Nestlé has also reported positive sales of its Aero hot chocolate drink which was launched in February.
So with winter now upon us, there's no better time to run an eagle eye over your hot drinks offering. Stocking the best-sellers and keeping on top of emerging trends should ensure it's full steam ahead for hot drinks sales.
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