Instant coffee still represents a huge portion of the UK's hot beverages market with a 44% share, but value sales dropped 0.6% last year according to TNS [w/e 17 June 2007], as consumers traded up to premium, non-instant options.
Manufacturers of mainstream instant coffee have been invigorating the category with high promotional spends and new launches. Nestlé has been investing heavily in its leading Nescafé Original brand, pledging to spend £17m this year on marketing and advertising the brand.
Its recent campaign includes new TV advertising for Nescafé Original, as well as a new website, which was launched in June. The site includes product information, prizes and offers.
Graham Walker, Nestlé's trade communications manager, describes the website as "an interactive magazine". He says: "While people are having a cup of coffee they can flick through it. Internet activity is part of the total marketing mix. It's part of our strategy to build loyalty."
While building consumer loyalty for everyday brands is key, suppliers are also aware that consumers are trading up to premium instant coffee. For Nestlé, this is reflected by the growth in its Connoisseur instant coffee range (Nescafé Alta Rica and Cap Colombie), sales of which are up 10.4% and has a 10% share of the instant coffee market. Premium (Nescafé Gold Blend) grew 8% and has 29% share of instant coffee [IRI w/e 14 July 07].
"People want to treat themselves, as we've seen in the confectionery sector," says Walker. "Premium kicks in indulgence - people want a bit more."
Kraft Foods is investing £9m in its premium Kenco brand. The range includes Kenco Fusion - a single-serve sachet of instant coffee combined with whitener (with or without sugar) in two variants: Fusion 3 in 1 with Kenco instant coffee with whitener and sugar and Fusion 2 in 1 coffee with whitener only.
"Convenience has never been more important to consumers," says Dave McNulty, convenience sales customer director for Kraft Foods. "Kenco Fusion has been designed with this trend in mind, as the convenient single serving means consumers can create a cup of Kenco coffee any time, anywhere."
Kenco Pure is another success story for Kenco. The premium range of coffee, made from single origin beans, comes in three varieties - Colombian, Costa Rican and Brazilian. They are made using Arabica beans from Rainforest Alliance-certified farms.
"Coffee drinkers are looking for more variety and higher quality, so ranges offering single origin beans, such as Kenco Pure, are becoming more popular," says McNulty.
"The super-premium coffee sector is growing at 9.4% and ethical brands play an important role in its growth. Kenco Pure is showing impressive value growth, up 32.9% [Nielsen MAT w/e 14 July 07), making it a key premium coffee for retailers to stock."
Kraft Foods has also relaunched its core Kenco premium range with a new design, renaming its Really Rich and Really Smooth products as Kenco Really Smooth Roast and Kenco Rich & Smooth Roast.
The space allocated to instant coffee has been an issue, with some manufacturers claiming there is not enough shelf space for innovation. Sainsbury's hot beverages buyer David Whiffen disagrees.
"Essentially, 80% of coffee sales come from Nescafé Original, Gold Blend and Kenco Really coffees," he says. "There is a huge tail after this and so far no supplier has developed anything to make a dent on these three powerhouses. We back NPD - Café Switch and Kenco Fusion are two examples in the past year." n