Hot Beverages: Off the boil

Who doesn’t love a cup of tea? Cure of all known ailments and the go-to response whenever there is a problem, tea is the hot beverage at the heart of the UK.

But perhaps the one problem it can’t solve is how to turn around flagging sales and expected long-term decline. According to the Mintel report Tea and other Hot Drinks, volume sales of tea dropped by 3% in 2013 and the market is forecast to see a decline of 3.6% over 2013-17.

Mintel senior food and drink analyst Amy Price says this is down to other subcategories in hot beverages taking more market share. “Tea consumption is in long-term decline, as the market faces competition from rival sectors such as coffee and soft drinks,” she says.

All is not lost, though, as Price believes there is an opportunity for brands and retailers to put tea back in the spotlight through new products, premium lines and promotions. “The onus remains on operators to support usage by reminding consumers about tea and continuing to update their proposition to meet consumers’ changing expectations,” she says. “Encouraging experimentation and trading up within the market through NPD and marketing support remains key for driving growth.”

So before you rush to throw out those packs of tea, the advice is to take a long, hard look at the types of tea you offer and what it is your shoppers want. That’s exactly what Chaz Chahal, who runs Costcutter stores in Bromsgrove and Kidderminister, did. He had begun to feel that his hot beverage offering wasn’t quite up to scratch, so decided to overhaul it with a focus on premium and variety products.

“The category wouldn’t be in my top 10 so it probably didn’t get the same care and attention that others did, but I felt it was time to examine it properly,” he explains.

“Retailers can’t just focus on value they need to look at offering something different in hot beverages.”

Trading up

The first thing Chaz did was to weed out some of the value lines that offered volume sales but very little margin, and replace them with higher-value products. “I think the hot beverages category should be treated like the wine category: with a mix of both value and premium to suit all tastes,” he advises.

He warns against delisting all the products that customers associate with the hot beverages category, though. “Retailers need to have a bit of variety that takes in new products while not overlooking the core range,” he says.

“I know that customers are varying what they purchase, but people will always want standard black tea bags and you shouldn’t ignore them. You still have to offer what customers want, and black standard is still an important distress purchase for us. That’s why I continued to stock Yorkshire Tea as it satisfies both premium and core demands.”

The overhaul also involved examining his coffee lines. “I was really missing out on premium lines so I introduced more Douwe Egberts products and some from Lavazza, which has helped to encourage retailers to trade up.”

Chaz also now stocks eco-refill packs, which he says have been popular with his customers. “They take up less space on the shelf, represent good value for shoppers and help the environment - there’s no downside to stocking them.”

He sums up: “You have to be a bit bold with the category and test these things out. If you don’t stock premium products then customers can’t buy them and the category remains static. As hot beverages have quite a long shelf-life there’s less risk you’ll suffer from waste.”

Donna Morgan of Brownlies Best One in Biggar, Edinburgh, believes she has managed to find that balance between stocking the core range and experimentation in the tea category in order to drive it forward.

“Customers want a little bit of variety when it comes to tea, and they’re prepared to pay for it,” she explains. “We have a range of flavoured teas, including limited-edition seasonal ones, which sell for about £5 for a box of 16. At that pricepoint I wasn’t sure that they would sell when we first considered stocking them, but they proved to be so popular that they more than justify the space on shelf.

“Of course, you have to stock the brands that cash-conscious shoppers want to buy,” adds Donna. “We have the Bestway own label tea for 69p, which always sells because people use it as an everyday tea. Our store’s entire range is made up of the typical products you get in a convenience store, plus some added extras that you won’t find anywhere else, and our hot beverages display is no different.”

Brewing sales

While tea is expected to be in decline over the next three years, sales of coffee are estimated to grow 22% to £1.4bn by 2018. Instant coffee accounts for 70% of sales in the sub-category in both value and volume terms, but shoppers are becoming more discerning and are looking for products that replicate that coffee shop taste at home.

Londis and Budgens retailer Binny Amin has witnessed the move to premium lines at his store in Whitstable, Kent. “In my Londis store I have a core range of teas and coffees because that’s what the customer base wants, but in my Budgens store I’ve really expanded my range, especially in coffee,” he explains.

“People are looking for alternatives and are willing to pay for them. I see more customers looking at the packs to see the strength, quality and provenance of coffee, and making decisions on that basis rather than price, or even brand. Customers are trading up and also buying more linked products such as filters and flavourings, especially at weekends. Vanilla essences have become very popular in the store.”

Binny believes that while shoppers are cutting back in some areas of their lives, they are willing to treat themselves when it comes to their hot drink of choice. “It’s not a massive expense to buy a better quality coffee, and some shoppers like to experiment with new flavours as a treat,” he says.

“Fairtrade has also become quite popular of late, so it’s worth looking at brands that have the Fairtrade logo on front of packs.”

Instant attraction

While he’s introducing more varied flavours, instant is still a strong seller in both of Binny’s stores. “It’s always been an awesome seller and you simply can’t afford to ignore it just because it doesn’t always scream premium,” says Binny.

“It’s important to remember that it’s not just their own households that people are buying for - they may want a jar of coffee to bring into work and don’t want to buy ground coffee as instant is easier and more cost-effective. Instant earns its place on the hot beverages display it’s just about varying the range to complement it and encouraging shoppers to trade up.”

One of the ways to make sure shoppers stop at the hot beverage aisle is to jazz up its merchandising, and Scotmid Barnton manager Clare Surgenor says that the coffee display provides retailers with the perfect opportunity to add a little theatre to their store.

“At our Edinburgh store we installed a coffee grinder beside our hot beverages display for customers to grind up their coffee beans and bag them themselves. It’s not in constant use, but there are regulars who use it, and it doesn’t take up too much space. It also gives us an opportunity to be a bit different. It’s all about offering a little bit of variety where you can to grow the category and set yourself apart from the competition.”

Binny also has some canny ways of exploiting the fact that customers want that premium café taste in coffee in their own homes. “In our Budgens store we have a Tassimo coffee machine that we use for hot beverage sampling, and we put a tray of coffee beans into the oven to get that roast coffee smell wafting around the store first thing in the morning,” says Binny. “The coffee smell is amazing and lingers all day customers smell it and immediately head to the hot beverages section.”