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UK hot drinks market led by Nestle in 2013
Hot Drinks in the United Kingdom - a new market research report on 2014-05-01 08:29:03
Although technically returning to growth in the middle of 2013, the UK economy achieved at best no more than a 1% GDP gain but was able to narrowly avoid a triple-dip recession. The unemployment rate fell over the year, which, along with steadily rising house prices, slightly boosted consumer confidence. Hot drinks are seen as a necessity rather than a luxury and so the positive economic signs ensured the industry enjoyed a healthy increase in value sales, largely down to an encouraging uptake of premium hot beverages.

The fresh ground coffee category showed no signs of stagnating as coffee pods continued to grow exponentially. The continued importance of convenience has led new consumers to the category as the pod machine market grew substantially in 2013. Despite posting impressive value and volume sales for a number of years, the category is still developing as new entrants are launching products as Nespresso´s 20-year patent came to an end. CaféPod was one of the first start-up companies to benefit, along with more established players Mondelez International and DE Master Blenders 1753, which all launched Nespresso-compatible capsules during the last year.

Nestlé comfortably maintained its lead in 2013 thanks to the popularity of the Nescafé brand, with Dolce Gusto fresh ground coffee pods and the Azera range in instant coffee excelling. The share of private label remained flat as sales were impacted by the heavy amount of promotional activity carried out by brands. A polarisation trend has started to emerge as premium brands such as Twinings and Starbucks performed well in 2013 and economy private label lines from Lidl and Aldi gained share from rivals Tesco and Asda. Although competition is growing, especially from second-ranked Mondelez International, Nestlé is unlikely to relinquish its command of the hot drinks industry if it continues to innovate as well as its competitors.

Grocery retailers remained the dominant distribution channel for hot drinks in 2013 but non-store retailers saw an encouraging increase in their value and volume sales. Consumers are becoming more educated with regard to the origins of hot drinks and are actively searching for their favourite niche types/brands which are not widely available in grocery retailers. Therefore, the purchase of hot drinks via internet retailers is becoming more commonplace as consumers continue to discover new and exotic flavours.

The hot drinks industry can take assurance from recent sales figures as the recession did not have as long-lasting effect as expected. High levels of growth in emerging categories such as fresh ground coffee pods and green tea made up for the poor performances of certain core products like black standard tea and malt-based hot drinks. Coffee is stimulating much of the hot drinks market´s growth and although it has been suggested that increasing coffee sales are negatively impacting tea, it is more likely to be the diversity of consumers´ tastes affecting the frequency of tea purchases. Consumer interest in hot drinks is positive thanks to a range of innovative product launches and a younger demographic, particularly students, becoming increasingly open to drinking hot beverages.

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