Analysis by Sheila Eggleston
Declining consumption and an unhealthy dose of Every Day Low Pricing has taken its toll on the hot beverages market, now worth £1.1bn, but down year on year 7% [52 w/e July 23 2000 TNS Superpanel].
"EDLP can work for high penetration categories such as coffee depending on retailers' strategies and consumer loyalty, but the waters have been muddied somewhat by promotional activity on top of EDLP," says Kraft Foods trading controller Doug McGowan.
But however much the value of the market has been hit by EDLP, the crystal ball gazers suggest that in 2001 this will level out, bringing a return to growth for coffee and a slowdown in the decline for tea [Premier Brands' Hot Beverages Report 2000].
Working on the credo that brands you stick with when you're young, stick with you forever, manufacturers are attempting to revive this flagging market by courting youth with new products and brighter, tactile packaging, hence the "iced" makeover of some leading brands (see p60).
Nestlé's latest move to reverse market decline is the creation of its Strategic Innovation Unit to look at opportunities within its beverages division. It is also sponsoring youth-get programmes such as Friends and the Wimbledon tennis championships to attract younger users. Makeovers such as its improved Gold Blend also help.
"The penetration of consumers drinking coffee aged between 16 and 20 has risen from 26% to 31% [1998-1999] reversing the declining trend of recent years," says Nestlé marketing manager Don Howat, "but part of this is due to the rise of the chic urban café society."
A total category approach is required to make fixtures more user friendly, says Howat. "There are massive educational roles to be fulfilled jointly by manufacturers and retailers to make the category more interesting and less confusing to shop. This includes understanding the different origins of coffee and the taste such products deliver."
Italian specialist Lavazza agrees that education is necessary. Using a concerted direct mail campaign and simple recipe cards in supermarkets, it hopes to inspire consumers to be more adventurous at home. It has already filled a niche with its jazzy Caffé Art tins.
"We've taken a category approach to building the Kenco brand," says Kraft Foods' McGowan, "looking beyond price, taste and quality to find out what makes consumers tick."
When it launched Kenco Rappor last year as an instant soluble coffee, some thought it was a retrograde step. But a year on, the company says, it has sold more than 10 million jars, and more 20 to 30 year olds have bought it "because it meets the needs of sociable drinkers".
Kraft recently relaunched its single origin freeze dried coffee as Kenco Purely, and introduced individual Kenco cafetière sachets for three cup and eight cup pots.
Douwe Egbert's chilled liquid coffee concentrate, Cafinesse, was discontinued in April because sales didn't meet their targets in the UK. When launched in April 1998, it was thought to be a bold move to persuade people to look for coffee in a chilled cabinet. Maybe it was a product before its time because, ironically, other companies are now going down a similar route into "ice" versions of their brands.
The roast and ground specialist recently revamped its instant freeze dried coffee range, streamlining jars and giving its after dinner variant a new name, Continental Dark, to complement its Continental Gold.
But the out of home' trend is the one all companies are attuned to. Kraft has introduced Kenco Rappor and Kenco Really Rich in new 500g tins (rsp £7.85 and £10.35) for retailers to sell to office staff of small companies which buy their workplace coffee from supermarkets. "Lots of mugs of coffee are being drunk every day in offices and factories and that makes for a growing out-of-home coffee market, and a profitable opportunity for retailers," says McGowan.
Coffee bars and teahouses have helped give these drinks an image makeover, as has a shift in people's lifestyles. A wider audience is guaranteed as more single young people are encouraged to drink there, plus deskfast' has become the norm with more people grabbing a hot drink from a café or bar to take to work.
Also encouraging this trend are the branded outlets popping up all over Café Nescafé in Croydon, Tetley's Gaffers in Manchester, Brooke Bond's Ch'a in Brighton, and Typhoo's t.fresh in the Millennium Dome.
Clipper Teas' Kate Shannon says: "It can only improve awareness of the varieties available and, with tea, promote the health benefits. Research is discovering that tea, particularly green, has a wealth of these, and consumers want to tap into them."
PB's report claims green, organic and Fairtrade are fast moving into the mainstream market.
Clipper has green standard and green organic tea. Its five single estate Specialiteas' in stylish black packs include Jade Green Misty Mountain tea. Van den Bergh Foods subsidiary Brooke Bond has just rolled out its flavoured green tea Tchaé nationally.
A boon are the people who use individual teabags for any number of cups they make, relegating the teapot defunct unless it blends with the decor.
VdBF's PG Tips pyramid teabags have been its most successful line. It claims leadership of the total tea category and has edged ahead of Tetley with a 24.6% share of the £519m tea bag sector [AC Nielsen MAT 53 weeks June 17 2000] which includes fruit and herbal.
"Both PG Tips and Scottish Blend have experienced growth since their introduction," says category controller Philippa Archer. This year a whopping £13.5m was earmarked to promote the brand.
While VdBF has worked on npd, its rival Tetley has been concentrating on the Olympic Games in Sydney and its high profile Get Britain Moving campaign backed by £10m. Tetley has also rolled out its resealable soft packs of teabags nationally.
Loose continues to decline as well as instant tea although Payne's Lift has shown growth. Marketing manager Steve Richards says: "The launch of Lift apple and Lift peach has been pivotal for the brand, driving growth in the instant fruit tea sector. It is no longer just a lemon tea."
Bucking the trend are fruit and herbal teas, buoyed by a healthy herb sector and helped by consumers' healthy perception of them.
Many companies have tweaked their ranges. Twinings has introduced a cellophane free consumer friendly pack and Premier Brands has rebranded its range as London Fruit and Herb, and rationalised the number of flavours, variety packs and flavour combinations. The Sussex Tea Company has repackaged its range of six fruit infusions. Newcomer Only Natural Products supplies Dr Stuart's Botanical Teas and its autumn blends will include organic chamomile and peppermint.
Consumers are also becoming much more aware of a product's origins. Clipper Teas claims it has increased sales by 100% year on year over the last five years, primarily due to organic and Fairtrade sales.
The Food Brand Group is firmly committed to these areas. Every 100g jar of its Percol Coffee Kids contributes 10p towards the Coffee Kids Charity. New labels giving better clarity to this cause were introduced this summer.
Nichols Foods has just launched Buendia, an ethically sourced freeze dried coffee brand owned by the Colombian Coffee Federation, in both standard and decaffeinated.
Against a decline in traditional drinking chocolate and cocoa, instant hot chocolate and malted drinks have grown but by just 1.9% year on year accounting for 66.3% value share of the market [PB Hot Beverages Report].
Novartis Consumer Health is refocusing its Ovaltine brand to draw in new users, and belie the myth it's just a bedtime drink. "Only in the UK does it have this old fashioned bedtime feeling," says director of marketing Alastair Paton. "Malt has always been part of the Ovaltine brand but no one realises it is a tremendous energy booster."
A new communications package kicks off at the end of the year to try and persuade people that Ovaltine needs to be reappraised. The company claims that Ovaltine Power, its vitamin enriched chocolate malt drink for kids, has already been widely accepted by parents.
Novartis is running a mixed case promotion Ovaltine, Ovaltine Light and Options for independents who haven't space for cases of each product.
Premier Brands says it too is dedicated to re-energising the hot chocolate market. New flavours have been added to the Cadbury's High Lights range chocolate malt and chocolate orange, while kids are being targeted with fun products such as Cadbury Land Yowie hot chocolate.
This is based on the confectionery right down to the inclusion of a capsule containing a collectable wildlife figure or limited edition Yowie pencil top.
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