Beginning January 18, Euromonitor International’s drinks team offers refreshed category sizes, company shares and brand shares, with current global briefings, analysis and opinion to be published in the next several weeks and months. Latest market forecasts extending to the year 2020 are also now available.
Consumers showed a growing preference for premium hot drinks and health-positioned beverages in 2015. In foodservice and retail channels, growing consumer sophistication contributed to growth in fresh coffee beans and premium tea as shoppers looked for higher-quality products and attractive environments. Many consumers are also seeking out health benefits from their beverages. Sales of tea and malt-based hot drinks grew in 2015 as producers marketed their drinks as offering antioxidant and nutritional properties. At the same time, certain shoppers are looking for convenience, aiding sales of coffee pods and instant coffee. Given the weak global economy, the global hot drinks industry did well, as it achieved a slight improvement over growth in 2014. Growth reached 7% in off-trade current value terms, with tea the fastest growing category – followed by a strong performance for other hot drinks and coffee (the overall volume leader). Off-trade volumes in hot drinks grew by 2%.
2015 was characterised by weakness in key emerging markets for consumer goods but the hot drinks industry was less impacted than other industries, as hot drinks are still viewed by many consumers as affordable necessities. Among the BRICs, India was a success story with 6% total volume growth for hot drinks in 2015, up from 4% in 2014. India’s economy and demand for hot drinks have been less impacted by the slowdown in the global economy because its GDP is less reliant on exporting of manufactured goods and raw materials than Brazil, China, or Russia. Though Brazil’s economy slowed in 2015, the country was able to achieve 3% volume growth for hot drinks in both 2014 and 2015. As one of the world’s largest producers of coffee, Brazil grows most of the coffee consumed domestically, making coffee affordable to all economic groups. Looking over the next five years, Brazil is expected to lead all nations in terms of forecast growth in absolute terms. Top line volume consumption of hot drinks is expected to remain stable over the forecast period, with a 3% CAGR expected over 2015-2020.
Coffee pod sales maturing
In total volume terms, fresh ground coffee pods was the standout category once again, achieving 13% global growth in 2015. However, the category is becoming more mature, and crowded. After 19% and 18% total volume sales growth in 2012 and 2013, sales growth of coffee pods slowed to 13% for 2014 and 2015. A desire for better tasting coffee and environmental concerns are leading some consumers away from coffee pods. The craft coffee movement popularised by “third wave” coffee shops in countries such as the US, UK, and Japan has led to higher demand for manual coffee brewing methods such as the pour over method that are viewed as producing a more flavourful cup of coffee. At the same time, growing concerns about the environmental impact of single-use, disposable coffee pods have led some consumers to go back to drip coffee makers or to use refillable K-cups in their Keurig coffee pod machines. Going forward, more coffee pod makers are expected to introduce more environmentally-friendly coffee pods that are claimed to be compostable or recyclable to meet consumers’ dual desires for convenience and environmental responsibility.
Growing demand for better tasting coffee
In 2015, fresh coffee beans benefited from growing demand for a better tasting cup of coffee, as well as for espresso-based coffee drinks, with 3% total volume growth. The growth in specialist coffee shops around the world contributed to a rise in sales of fresh coffee beans, as these establishments primarily use fresh coffee beans. Specialist coffee shops are expanding globally, as Starbucks and local players open up attractively designed shops that promote both socialising and the enjoyment of specialty coffee drinks. Coffee drinkers who patronise coffee shops could replicate their experience by buying fresh coffee beans, grinding them at home, and using one of the manual brewing methods. Additionally, espresso-based coffee drinks such as lattes and cappuccinos continue to gain popularity in cafes and the home. Western Europe, the largest market for fresh coffee beans, saw total volume sales rise from 1% in 2014 to 2% in 2015. Retail unit sales of espresso coffee machines grew by 4% in 2015 in the region, up from 3% in 2014. Expensive bean to cup espresso machines which use fresh coffee beans have become popular among affluent coffee-drinking Western Europeans.
At the other end of the convenience spectrum, instant coffee continued to do well with 3% total volume growth in 2015. Since only hot water is needed to make instant coffee, instant coffee continues to be very popular in tea-drinking markets where most consumers do not own a coffee maker. Total volume sales of instant coffee grew by 6% in Middle East and Africa. A major contributor to the region’s growth was Iran, where instant coffee volume sales grew by 16% in 2015. While the majority of Iran’s population consumes tea as their everyday hot beverage, instant coffee in a sachet format has become popular with consumers in their 20s and 30s who enjoy patronising coffee shops and view coffee drinking as a sign of a more modern lifestyle.
Tea benefits from consumer perception as a healthy beverage
Tea outperformed coffee and other hot drinks in total volume terms in 2015 with 3% growth. Volume sales of packaged tea are benefiting from a number of reasons. In developed markets such as US and Norway, tea’s perceived health benefits and the expansion of premium tea specialists are driving higher consumption. In emerging markets such as China and India, the move from buying unpackaged tea (not tracked by Euromonitor International) in local markets to purchasing packaged tea in retail outlets is driving volume growth.
Consumers increasingly view tea as a beverage with multiple health benefits as tea producers tout tea’s high levels of flavonoids, an antioxidant. Companies are now touting that theanine, an amino acid found in green tea, heightens mental alertness. As tea producers in developed countries launch more teas, they are focusing on health and wellness by introducing teas with Ayurvedic positioning, organic certification, and detox properties. The expansion of tea specialists providing a wide range of different tea products in certain countries is also boosting tea sales. In Norway, total volume sales of tea grew by 5% in 2015, the highest among the Western European countries. The growth of tea specialists such as Black Cat Kaffe og Tehus and Le Palais des Thés that target young, urban women with a selection, variety and quality that is much higher than supermarkets has generated renewed interest in tea and resulted in stronger growth for premium tea. Total volume sales of tea grew by 4% in the US in 2015 for similar reasons to Norway. Tea specialists such as Starbucks-owned Teavana, DAVIDsTEA, and Argo Tea have created attractive environments with knowledgeable staff where affluent consumers can learn more about and sample different teas. The premium nature of the teas and decoratively packaged gift boxes offered in tea specialists also allow tea to become a gift item, much like a box of chocolates.
The migration of many Asia Pacific consumers from rural to urban areas, combined with increasing incomes, has created high demand for packaged and branded teas. Fewer consumers are going to wholesale markets nowadays and instead shop in supermarkets, hypermarkets or other grocery stores where packaged tea prevails. The movement from unpackaged to packaged teas has contributed to volume growth for tea in China and India despite competition from newer beverages such as coffee and packaged juices. India saw its total volume sales of tea grow by 4% in 2015 while sales of tea grew by 2% in China.
Nutrition positioning boosts sales of malt-based hot drinks
Other hot drinks was the slowest grower among hot drinks with total volume growth of 2% in 2015. But within other hot drinks, malt-based hot drinks recorded strong 5% volume growth in 2015. Malt-based hot drinks performed better than most other hot drinks categories due to its popularity in numerous emerging markets including India. In India, the biggest market for malt-based hot drinks, total volumes grew by 11% in 2015. Unlike other hot beverages, malt-based hot drinks are being positioned as being able to supply nutritional needs though malt-based hot drinks typically contain a lower level of protein than supplement nutrition drinks (tracked in Euromonitor International’s Consumer Health database). Makers of malt-based hot drinks are targeting women, senior citizens, and pregnant to post-pregnancy mothers by marketing the drinks as delicious beverages that boost health and strength among children and women. GlaxoSmithKline relaunched Mother’s Horlicks in 2014 in India with a new taste and the tagline, “Healthy Mothers for Healthy and Smart Babies”. The website for Mother’s Horlicks states that it is “a tailor-made nutritional supplement for pregnant and breast feeding mothers” and lists 27 vital nutrients it contains including omega-3 fatty acid DHA, choline, protein, iron, folic acid, and vitamins B1, B2, B6, and B12. The relaunch of Mother’s Horlicks and other varieties combined with TV commercials and in-store promotions contributed to a 9% off-trade value sales gain for Horlicks at the global level, leading to US$668 million in sales in 2015.