Hot Drinks Global Industry Overview
Slowdown in growth in global hot drinks, as coffee pods matures
2016-2017 saw the slowest growth of any recent year for the hot drinks market since 2008. This was primarily caused by slowing growth in coffee. Tea increased the most in constant terms in several years, and growth in other hot drinks, while slow, exceeded that in 2015-2016. The main cause of the slowdown in coffee was fresh ground coffee pods.
In 2011-2012 pods grew by an astounding 29% globally in constant terms, but growth has fallen off sharply every year since.
Switzerland leads per capita spending on hot drinks
Switzerland led the world in per capita spending on retail hot drinks in 2017. While the Swiss do consume large amounts of hot drinks, this was in large part a reflection of high consumer prices in Switzerland (in per capita terms Switzerland ranked first in overall consumer spending among EMI researched countries in 2017).
Coffee represented the largest chunk of hot drinks spending for all of the leading markets, even for those such as the United Arab Emirates that have high rates of tea consumption.
The global hot drinks market in 2017
The world market for hot drinks reached USD$142.8 billion at retail in 2017. Well over half of those sales came from coffee, at USD$83.0 billion. In terms of consumption, however, tea easily dominates. The world drank 1.8 trillion cups of tea in 2017, versus just under a trillion cups of coffee, meaning that the average person alive today drinks 236 cups of tea a year and 132 cups of coffee (as well as 27 cups of other hot drinks).
Premiumisation reducing in importance for coffee, but rising for tea
With growth in coffee pods slowing, the key to global growth in coffee will increasingly be consumers in developing countries entering the market via standard ground or instant coffee. As a result, the role of premiumisation at a global level will gradually reduce in importance relative to population and income growth. Tea, meanwhile, has been dealing with consumers trading down to value brands because of macroeconomic problems in Egypt, Russia and Turkey.
Store-based retailing dominates, but e-commerce makes gains
Hot drinks remains a store-based category, with 97% of all sales taking place in a physical retail establishment in 2017. Supermarkets was the most important channel for the hot drinks market in 2017, accounting for just short of a third of total sales. It lost the greatest share of any channel, however, as customers migrated online or to discounters.