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Hot Drinks in the United Kingdom

United Kingdom hot drinks market: Future growth driven by green tea & fresh ground coffee sales

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2014-02-13 12:23:01 - Hot Drinks in the United Kingdom - a new market research report on

In 2011, the United Kingdom hot drinks market saw several new products. Whilst Nestlé retained its lead due to the strong position of Nescafé in instant coffee, the environment looks set to change as consumers are becoming increasingly aware of quality and provenance and are moving from instant to fresh ground coffee as the coffee culture in the UK strengthens.

The overall hot drinks market remained fairly flat in 2012 with a decline in retail volume sales seen in coffee and tea. The market has, however, recorded healthy value growth, largely due to the increased unit prices in most of the main categories. This unit price increase was caused by a sharp spike in commodity prices in 2011/2012, which affected shelf



prices. Given that the UK was also in a recession in 2012, this did not bode well for volume sales.

The ongoing trend in the hot drinks market has been the polarisation of the market between the high and the low end, with the low end driven mainly by discounting. Discounting, however, has rather run out of steam in terms of generating growth, so it has been left to the higher end of the market to generate growth. Much new value growth has been driven by technical innovation, in particular within fresh ground coffee pods, which is performing strongly. Other higher-priced products that performed well in 2012 included all varieties of green tea, red bush tea and much of the health and wellness tea market with organic tea bucking the declining trend of most organic products across the whole food and drink market.

Supermarkets and hypermarkets remained the leading distribution channels for hot drinks in 2012 as these outlets offer a wide product range and also benefit from the use of frequent price promotions. In addition, most consumers view it as more convenient to purchase hot drinks when doing their weekly shopping. Changes in distribution towards the end of the review period mainly reflected changes in consumers´ general grocery shopping patterns and a greater shift towards convenience formats, as more of these smaller grocery formats have opened, a trend which is expected to increase in future.

Growth in hot drinks is not forecast to fall but it is going be a challenge to generate particularly impressive growth from anywhere. Hot drinks as a category is not particularly dependent on the UK economy, but it has been affected adversely by the recession and consumer behaviour during this period, and this may continue for some time to come. Nevertheless, all being well, the category should return to positive volume growth in the next few years of the forecast period, driven by niche products – with green tea, fruit/herbal tea and other tea driving the market as well as fresh ground coffee. This all remains very vulnerable, however, to currently unresolved global economic tensions.

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Mike King
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