If you want to know what’s been going on in grocery this past year, take a look at the hot beverages market. It’s a microcosm of wider market trends. On one hand, you have rampant deflation and fierce promotions driving value out of everyday tea and standard instant coffee; on the other, savvy NPD is convincing a growing number of consumers that certain brews are worth paying more for.
That’s why we’ve chosen our report on hot beverages as the first of five round-ups we’re giving members exclusive access to each day this week, prior to Friday’s launch of our Top Products Survey 2015, our biggest ever-study into British grocery. The hot beverages sector has been the scene of hot innovation this past year; crucially, parts of it have defied the deflation gripping the rest of grocery.
Take coffee. Sales of roast & ground coffee have surged a whopping 13.6% to £305.5m on volumes up 8.3% this past year. Coffee drinkers have proven they’re prepared to pay more for a cup of Joe, with the average price of a kilo of roast & ground up 67p to £14.27. The boom in coffee pods from the likes of Tassimo, Costa, Dualit and Taylors of Harrogate are to thank for much of this.
Convincing consumers that a cup of coffee is worth paying up to 30p for at home is no mean feat, yet that’s what these pioneering brands have done. And this is the challenge that lies ahead for the rest of hot beverages: raising the value of the category with products that consumers view as being both high quality and good value.
Tea is case in point. Some of the big tea brands have managed to drive hefty volume gains through a combination of price promotions and, in the case of Yorkshire Tea, big marketing investment. Still, prices are still falling and volumes are down. If the market is to avoid further commoditisation, the challenge will be persuading Brits that our national drink is worth paying a little bit more for.
With PG Tips launching Nespresso-compatible green, mint and fruit tea pods last month, the brand is trying to do just that. Averaging at 27p a cup, this is a bold move by tea’s biggest brand. But the omens are good: fruit and herbal infusions and green tea are the only parts of the wider tea market in growth at present. It might well pay off.
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