How to cash in on hot drinks

Hot drinks is big business with coffee sales growing 6.4% and tea recovering after a difficult period. For retailers, ensuring their offering matches the demands of their customers can help make a big difference to profits.

In many stores tea is among the most frequently purchased items, but many retailers can be guilty of overlooking it when reviewing their ranges.

The sector has seen sales fall 8.9% in volume and 4.8% in value and this decline is reflected across all trading environments with an 8.8% volume decline convenience, 10.9% in independents, and 7.8% in Scotland. The main driver is the fall in everyday black tea sales, which is the biggest sector.

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According to Tetley, the restored confidence is beginning to show and is particularly reflected in the last quarter. Volume sales of green teas have increased 6.4% overall yoy, 22.4% in convenience and 6.9% in Scotland. Tetley is the dominant brand in the independent sector and in Scotland with 36.6% and 41.4% volume share with PG in second place with 31.6% and 4.9%.

Coffee in numbers

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Coffee is boosting the hot drinks category with sales up 6.4%. It is now worth £1.1bn with a 57% share of the market.

Coffee shoppers are also valuable to retailers as their average spend is £3.69 versus £2.63 spent by tea buyers.

1.35 billion coffee cups of coffee are drunk every year, and a huge 97.6% of UK households buy into the category. Within the category, instant coffee accounts for 88% of total coffee cups and £722m of sales. The Everyday segments of Regular, Decaf, Premium and Specialist coffees represent 77% value share and 87% cup share. However, the higher pence per cup segments are growing quickly, contributing an £20.8m to the category. Ground coffee, including pods, is worth £247.4m, accounts for 12% of total coffee cups and is growing at 10%. This growth is predominantly driven by the excellent performance of Pods, up 51%, and worth £90.2m.

Premium coffee accounts for 33% of cups and continues to benefit from innovation. Drawing on the strength of Nescafé Gold Blend, Nescafé Gold Blend Barista Style and Nescafé Azera, which has grown 93% and added £12.2m to the coffee category in the past year.

So, how to improve sales?

Firstly, look at the range of teas you offer. Everyday black teas remain the most popular and it’s wise to offer a variety of pack sizes; 80s and 40s are best selling packs alongside 160s.

Secondly, consider the type of teas you sell. Healthier segments like green, decaf and Redbush have real growth potential. Redbush teas and speciality teas like Earl Grey are also growing.

Thirdly, review shelf layout. Tea is a key top up item, so should be located in a heavy footfall area of the store adjacent to complimentary products.

Lastly, demonstrate Value. “With many shoppers choosing to shop more locally, location, the right range and having trusted brands at good value prices make smaller stores a viable shopping destination,” says Andrew Pearl, Director of Shopper and Customer Marketing, Tetley.

Tetley is making a significant investment in brand marketing this year including sponsorship of Channel 5’s family movie slot.

Sales within the speciality tea sub-sector have grown to over £2.2m annually with Twinings having contributed significantly to this growth delivering almost £2m in sales and growing by over 9%. Products such as Twinings Earl Grey 50’s, Twinings Lady Grey 50’s and Twinings Peppermint 20’s are popular packs in this sector. Green tea has also delivered value to the category registering over £500k in sales in the last year with Twinings securing over 50% of category sales.

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