More adventurous shoppers are putting the brakes on sales of Britain’s favourite hot drink.

It’s believed the idea of adding milk before pouring in the tea came about as a way to prevent delicate porcelain cups from cracking. It all sounds very quaint and British, doesn’t it?

Well, maybe it does, but times are changing. The traditionally British cuppa isn’t about to disappear from our shelves but it has certainly come under pressure in recent years from other hot drinks.

Health-conscious shoppers are buying more herbal and fruit teas; the coffee sector is expanding as shoppers look to replicate café culture in their own homes; and hot milky drinks sales are doing well, with the category now worth £119m and up 3.4% year on year (AC Nielsen September 2005).

However, with the exception of tap water, tea is still the most consumed drink in the UK (TNS National Drinks Survey September 2004). Although traditional sales may be falling, the demand for a ‘nice cup of tea’ still exists. Shoppers, though, want choice and often expect to find more than a couple of boxes of tea bags and a few jars of instant coffee in their local c-store.

Tetley customer marketing controller Simon Atfield admits that traditional tea sales have been hit by increased customer choice, but is also adamant tea is here to stay. He says: “There has definitely been a move towards more people buying fruit and herbal tea but they are both still very small sectors in the grand scheme of things. Tea is one of the biggest distress purchases and if it is merchandised correctly it can be used to increase sales of other products such as cakes or biscuits.”

Atfield adds: “The UK population are great lovers of tea. Making a cup of tea is a part of everyday life for a lot of people. It seems to be, though, that the older you are, the more that tea is part of your life. Among over-60s, more than half consume tea regularly.

A lot is down to habit. One of the challenges we face is how to make tea more accessible for more drinking occasions.”

Tetley bosses say the company has had a strong year. However, it has had to fight hard to maintain its position as the number-one tea bag brand in the UK convenience sector with a 35.8% volume and 32.9% value share (AC Nielsen, August 13, 2005). It has added to its speciality, green and fruit & herbal range, developed a new look and improved taste for Tetley Decaf, and spent £8m on advertising and marketing support for Tetley brands.

Atfield believes c-store retailers can boost sales by offering shoppers better choice. He says: “Try to provide a reasonably wide range. In tea bags, packs of 80s and 40s are very important but stock 160s alongside to encourage customers to trade up. Healthier lifestyles mean that we are seeing more interest in tea as a natural, healthy drink. Decaffeinated teas, in particular, represent a real opportunity.”

Clipper has also identified customer demand for more choice and added new variants to its speciality, herbal and fruits ranges, as well as developing its fair trade and organic teas, coffees and hot chocolates. Elsewhere, Typhoo holds a 6% share of the fruit and herb market after the launch of a 10-strong range last year and is the top-selling decaffeinated brand worth £7.7m (IRI, TNS, FFP June 2005/Premier Foods).

While the tea market has been damaged by the fall in traditional tea sales, the roast and ground coffee market is growing. The value market is up £4m (5%) year on year and increasing 3.1% in volume. The last quarter has been particularly strong with value growth of 10.1%.

Lavazza’s success is an example of this and the company increased its volume share by 4.3% year on year.

Lavazza in-home sales and marketing manager David Rogers is also chairman of the British Coffee Association. He says: “Consumers are looking for better quality all round because of increased travel and the growth of the café society. People want to be able to replicate the kind of products they get in a coffee shop in their own homes. Coffee has definitely made in-roads into tea in recent years.”

Rogers advises stocking the brand leader plus one other within each category. He believes the outlook for 2006 and beyond is promising, and expects the coffee sector to continue its growth, adding: “The big thing this year is coffee being challenged from a health perspective but the truth about coffee and health is starting to emerge. In moderation, coffee is perfectly safe. Espresso coffee is very popular at the moment. It’s very important to move with the times and c-store retailers can do well in the sector by capitalising on trends.”

Taylors of Harrogate, which most famously produces Yorkshire Tea, has extended its coffee portfolio with fair trade, Italian, Brazilian and Espresso varieties available in its new D:caff Coffee Co range.

Major manufacturers such as Nescafé are now producing more fair trade products. In October the company launched its Partners Blend - a freeze-dried instant coffee carrying the Fairtrade mark. According to the Fairtrade Foundation, Britain has overtaken Switzerland as the biggest fair trade market in the world with a retail value of more than £140m.

Specialist fair trade company Cafédirect is celebrating particular success in the convenience sector, where bosses say its sales have increased by 50%. General sales manager Siobhan Molloy comments: “Cafédirect has become a definite mainstream brand and the convenience sector is incredibly important to us. We want our products to be more visible and accessible to the convenience trade as a whole.”

Molloy believes many shoppers are passively ethical and will often opt for fair trade products if they see them on the shelves. She adds: “We are 100% committed to increasing our distribution and hence we are building a presence within cash and carries, which will mean even the smallest convenience outlet can stock our products.”

Another popular area is speciality instants. Trading up by shoppers has helped the sector grow by a huge 60.4% (IRI/Aztec, May 2005). Douwe Egberts has capitalised on both this and the health-conscious consumer with the launch of its Skinny range - speciality coffees with an average of 35 calories per drink. Nescafé has also tapped into the market, adding a decaff unsweetened cappuccino and a café Irish cream to its speciality range.

Douwe Egberts category director Grant Rosewarne explains: “With more people enjoying indulgent café-style coffees at home, the speciality instants sector has experienced massive growth. Skinny is set to be hugely popular among health-conscious consumers looking to enjoy a frothy or creamy coffee without worrying about calories.”

Sales of hot chocolate and malted drinks are also increasing. Twinings acquired the Ovaltine and Options brands earlier this year and, according to the company, Options has become the fastest growing top-10 brand in the category (AC Nielsen, September 2005).
Hot milky drinks sales have also been boosted by the performance of Horlicks. Last year the brand was given a new look and mums were targeted with a ‘Snoozoo’ children’s variant. Brand manager Rachel Ellard says: “In the past two years we have seen a turn-around in the fortunes of Horlicks. It’s not just Horlicks that’s reaping the rewards but the category, too. The rejuvenation has helped recruit younger users and boost the brand’s market share.”

With winter upon us it’s worth checking whether your hot drinks shelves have changed much in the past few years. What shoppers are demanding certainly has.
People are travelling more and want to find products they experience elsewhere on their own doorsteps. Isn’t it time you started lapping up the profits?

Merchandising Tea

Make sure tea is given a prominent position

Divide fixture into product groups

Stock the best-selling lines

Give the most space to the top-selling brands

Block vertically by brand

Keep your fixture full

Source: Unilever P4G

Hot Milky Drinks

33% of shoppers purchase both malted and hot chocolate products

72% of hot chocolate consumption is after 6pm; 88% for malted drinks

60% of sales occur between September and March

Malted buyers have a much older profile than hot chocolate shoppers with 42% of purchasers over 65 compared with 22% for chocolate

Source IRI, TNS and FFP June 2005/Premier Foods

Retailer View

Arjan Mehr, Londis, Bracknell:

“We’ve got a metre length of shelving, providing the basics such as tea bags and coffee, and then other items such as speciality teas, hot chocolate, malted drinks and sachets to make up other drinks such as cappuccinos.

“The section is fairly visible in the store and
we always place it near related items such as cakes and biscuits.

“Hot drinks sales are definitely important to us. Although tea bags and coffee account for most of our profits, it’s still vital we stock everything else. It’s important that the customer has a reasonable choice.
“I don’t have any plans to expand the section at the moment but it is worth maintaining and making sure it is up to date.

“I would say that during the winter we sell more of the speciality drinks like hot chocolate and malted drinks, whereas tea sells all year round. Because of this we carry a higher stock level and larger range during winter but keep a core range in the summer months.

“Own label products have improved a lot in recent years and have a much higher profile. I think coffee has made in-roads into the tea market but tea is always going to hold onto a large share.

“My advice for other retailers would be that they should provide a reasonably full range and to think about the size of their shop. They also need to keep an eye on the market through advertising to know what their customers are likely to be looking for.”