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Coffee - UK - August 2013

“Most pertinently for the coffee pods segment will be convincing consumers that the products deliver better quality than instant coffee. This suggests that the coffee pods segment needs to convince the wider population that the price premium of coffee pods is justified, eg through promoting the lack of wastage, increased freshness and quality taste.”

– Amy Price, Senior Food & Drink Analyst

Some questions answered in this report include:

  • What is the potential for adding value to the instant coffee segment?
  • How can the market push the ritual or ‘treat’ angle of coffee drinking?
  • How can coffee pod manufacturers expand their target audience?
  • How can the coffee market engage younger users?

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • The future
                • Figure 1: Retail sales and forecast of coffee*, UK, by value, 2008-18
              • Market factors
                • Growth in over-55s and C2s will support the market
                  • Encouraging consumers to trade up to premium varieties will add value to the market
                    • Coffee shop brands
                      • Companies, brands and innovation
                        • Nestlé leads the market
                          • Figure 2: Leading manufacturers’ sales and shares in the UK retail coffee (excl RTD) market, by value, 2012/13*
                        • NPD continues to focus on instant coffee
                          • Nestlé and Mondelēz dominate adspend
                            • The consumer
                              • More than eight in ten adults drink coffee
                                • Figure 3: Consumption of coffee at home, June 2013
                              • Rich taste is the leading factor, generating majority appeal
                                • Figure 4: Factors influencing choice of coffee, June 2013
                              • Half see coffee as a way to start the day
                                • Figure 5: Drivers to drinking coffee, June 2013
                              • Quality is more important than convenience
                                • Figure 6: Agreement with statements on coffee, June 2013
                              • Coffee drinkers are price-conscious but show willingness to trade up
                                • Figure 7: Attitudes towards coffee, June 2013
                              • What we think
                              • Issues in the Market

                                  • What is the potential for adding value to the instant coffee segment?
                                    • How can the market push the ritual or ‘treat’ angle of coffee drinking?
                                      • How can coffee pod manufacturers expand their target audience?
                                        • How can the coffee market engage younger users?
                                        • Trend Application

                                            • Objectify
                                              • Mood to Order
                                                • Mintel Futures: Generation Next
                                                • Market Drivers

                                                  • Key points
                                                    • Consumption stays the same since the 1970s
                                                      • Figure 8: Index of household purchased quantities of coffee, tea and purer fruit juices, average per person, per week, 1974-2011
                                                    • Prices appear to be stabilising
                                                      • Figure 9: Retail Price Index for tea, coffee & other hot drinks and soft drinks, January 2006-May 2013
                                                      • Figure 10: Monthly weighted average price of coffee beans on world markets, by coffee bean type, January 2010-May 2013
                                                    • Coffee shops remain a popular destination
                                                      • Figure 11: Market size and forecast of UK coffee shops, 2006-16
                                                    • Demographic changes
                                                      • Growth in number of over-55s bodes well for the market
                                                        • Figure 12: Trends in the age structure of the UK population, 2008-13 and 2013-18
                                                      • Decline in ABs could threaten premiumisation in the market
                                                        • Figure 13: Forecast adult population trends, by socio-economic group, 2008-18
                                                    • Strengths and Weaknesses

                                                      • Strengths
                                                        • Weaknesses
                                                        • Who’s Innovating?

                                                          • Key points
                                                            • Premiumisation remains a focus for instant coffee NPD
                                                              • Figure 14: Product launches within the UK coffee market, by main format types, 2009-13
                                                            • Ground and pods fight back
                                                              • Detailed origin resonates with a niche audience of affluent buyers
                                                                • RTD formats see an increase in NPD
                                                                  • Targeting under-25s through innovation on flavour and ‘need states’
                                                                  • Market Size and Forecast

                                                                    • Key points
                                                                      • Robust performance in value and volume sales
                                                                          • Figure 15: UK retail value sales of coffee*, 2008-18
                                                                        • The future
                                                                          • Figure 16: Retail sales and forecast of coffee*, UK, by value, 2008-18
                                                                          • Figure 17: Retail sales and forecast of coffee*, UK, by volume, 2008-18
                                                                        • Methodology
                                                                        • Segment Performance

                                                                          • Key points
                                                                            • Instant coffee continues to dominate
                                                                              • Figure 18: Segment performance, by coffee type (take-home), 2010-12
                                                                            • Ground coffee/coffee beans slowly gain market share
                                                                              • Coffee pods perform well
                                                                              • Market Share

                                                                                • Key points
                                                                                  • Nestlé is the leading manufacturer in the coffee market
                                                                                    • Figure 19: Leading manufacturers’ sales and shares in the UK retail coffee (excl RTD) market, by value and volume, 2011/12 and 2012/13
                                                                                  • Nescafé Gold underperforms its other Nescafé stablemates
                                                                                    • Figure 20: Leading brands’ sales and shares in the UK retail coffee (excl RTD) market, by value and volume, 2011/12 and 2012/13
                                                                                  • Starbucks leads the RTD coffee market
                                                                                    • Figure 21: Leading brands’ performance in the UK retail RTD chilled coffee market, by value and volume, 2011/12 and 2012/13
                                                                                • Companies and Products

                                                                                  • Cafédirect
                                                                                    • Mondelēz International
                                                                                      • Douwe Egberts (D.E Master Blenders)
                                                                                        • Lavazza UK
                                                                                          • Nestlé
                                                                                            • Coffee shop brands
                                                                                              • Costa
                                                                                                • Starbucks
                                                                                                • Brand Research

                                                                                                  • Brand map
                                                                                                      • Figure 22: Attitudes towards and usage of brands in the coffee sector, May 2013
                                                                                                    • Correspondence analysis
                                                                                                      • Brand attitudes
                                                                                                        • Figure 23: Attitudes, by coffee brand, May 2013
                                                                                                      • Brand personality
                                                                                                        • Figure 24: Coffee brand personality – macro image, May 2013
                                                                                                        • Figure 25: Coffee brand personality – micro image, May 2013
                                                                                                      • Brand experience
                                                                                                        • Figure 26: Coffee brand usage, May 2013
                                                                                                        • Figure 27: Satisfaction with various coffee brands, May 2013
                                                                                                        • Figure 28: Consideration of coffee brands, May 2013
                                                                                                        • Figure 29: Consumer perceptions of current coffee brand performance, May 2013
                                                                                                        • Figure 30: Coffee brand recommendation – Net Promoter Score, May 2013
                                                                                                      • Brand index
                                                                                                        • Figure 31: Coffee brand index, May 2013
                                                                                                        • Figure 32: Coffee brand index vs. recommendation, May 2013
                                                                                                      • Target group analysis
                                                                                                        • Figure 33: Target groups, May 2013
                                                                                                        • Figure 34: Coffee brand usage, by target groups, May 2013
                                                                                                      • Group One – Conformists
                                                                                                        • Group Two – Simply the Best
                                                                                                          • Group Three – Shelf Stalkers
                                                                                                            • Group Four – Habitual Shoppers
                                                                                                              • Group Five – Individualists
                                                                                                              • Brand Communication and Promotion

                                                                                                                • Key points
                                                                                                                  • Total adspend on coffee rises in 2012
                                                                                                                    • Figure 35: Above-the-line media advertising spend for the total coffee market (inc iced coffee), 2010-13
                                                                                                                  • Nestlé invests over half of category adspend to protect its market leadership
                                                                                                                    • Figure 36: Above-the-line media advertising spend on coffee, by advertiser, 2010-13
                                                                                                                    • Figure 37: Above-the-line media advertising spend on coffee, by top five brands, 2012
                                                                                                                  • Mondelēz remains second highest advertiser, focusing on Kenco Millicano
                                                                                                                    • TV spend falls in 2012, while outdoor and cinema gets a boost
                                                                                                                      • Figure 38: Above-the-line media advertising spend on coffee, by media type, 2010-13*
                                                                                                                  • Channels to Market

                                                                                                                    • Key points
                                                                                                                      • Supermarkets dominate distribution
                                                                                                                        • Figure 39: UK retail sales of coffee, by type of outlet, 2010-12
                                                                                                                    • Consumer – Usage

                                                                                                                      • Key points
                                                                                                                        • More than eight in ten adults drink coffee
                                                                                                                            • Figure 40: Consumption of coffee at home, June 2013
                                                                                                                          • Potential for decaffeinated coffee to grow usage throughout the day
                                                                                                                            • Three in five drink coffee at least once a day
                                                                                                                                • Figure 41: Consumption of coffee, by frequency, June 2013
                                                                                                                              • Usage increases in line with age
                                                                                                                                  • Figure 42: Consumption of coffee (any type), by frequency, by age, June 2013
                                                                                                                                • 16-24s opt for convenient formats
                                                                                                                                    • Figure 43: Consumption of instant cappuccinos/latte/mocha coffee (eg Kenco 3-in-1, Starbucks Via, etc.), chilled ready-to-drink coffee (eg Starbucks Frappuccino, Illy Iced Coffee, etc.) and coffee pods (eg Nespresso), by age June 2013
                                                                                                                                  • Pods and micro-ground instant coffee attract a similar (and discerning) user base
                                                                                                                                    • Almost half drink three types of coffee or less
                                                                                                                                      • Figure 44: Repertoire of types ofcoffee drunk, June 2013
                                                                                                                                  • Consumer – Factors Influencing Choice

                                                                                                                                    • Key points
                                                                                                                                      • Rich taste generates majority appeal
                                                                                                                                          • Figure 45: Factors influencing choice of coffee, June 2013
                                                                                                                                        • 16-24s rate flavours and ethical issues
                                                                                                                                          • Figure 46: Factors influencing choice of coffee, by age, June 2013
                                                                                                                                        • Potential for premium brands
                                                                                                                                          • Figure 47: Those for whom ‘a premium brand (eg Nespresso)’ is an important attribute when choosing to buy one in-home coffee brand over another, by region and gross annual household income, June 2013
                                                                                                                                        • Coffee deemed convenient
                                                                                                                                            • Figure 48: Correspondence analysis of qualities associated with selected hot drinks, February 2013
                                                                                                                                        • Consumer – Drivers to Drinking Coffee

                                                                                                                                          • Key points
                                                                                                                                            • Half see coffee as a way to start the day
                                                                                                                                                • Figure 49: Drivers to drinking coffee, June 2013
                                                                                                                                              • ‘Treat’ aspect offers a tangible marketing opportunity
                                                                                                                                                • Providing a pick-me-up to consumers
                                                                                                                                                    • Figure 50: Agreement with the statements ‘Coffee helps me to stay alert’ and ‘Coffee gives me an energy boost’, by age, June 2013
                                                                                                                                                  • Flavourings mask the bitter taste for 16-24s
                                                                                                                                                      • Figure 51: Agreement with the statements ‘I am sometimes put off by the bitter taste of coffee’ and ‘I tend to add flavourings (eg syrup) to my coffee to disguise the bitter taste’, by age, June 2013
                                                                                                                                                  • Consumer – Attitudes Towards Drinking Coffee

                                                                                                                                                    • Key points
                                                                                                                                                      • Quality is more important than convenience
                                                                                                                                                          • Figure 52: Agreement with statements on coffee, June 2013
                                                                                                                                                        • Instant coffee delivers on caffeine and taste
                                                                                                                                                          • 16-24s say it’s hard to recreate coffee shop style drinks at home
                                                                                                                                                              • Figure 53: Agreement with the statements ‘It’s hard to recreate coffee shop style drinks at home’ and ‘I would like to recreate coffee shop flavours (eg eggnog at Christmas) at home’, by age, June 2013
                                                                                                                                                          • Consumer – Attitudes Towards Coffee

                                                                                                                                                            • Key points
                                                                                                                                                              • Coffee drinkers are price-conscious but show willingness to trade up
                                                                                                                                                                  • Figure 54: Attitudes towards coffee, June 2013
                                                                                                                                                                • Social occasions pose potential for trading up
                                                                                                                                                                  • Proving taste credentials will be key to premiumisation
                                                                                                                                                                    • Figure 55: Agreement with the statement ‘I would be more likely to buy a premium version of one of my favourite brands than switch to a new premium brand’, by age, June 2013
                                                                                                                                                                  • Premium instant versions are helping to add value
                                                                                                                                                                    • Packaging should balance freshness with convenience
                                                                                                                                                                      • Little call for smaller formats
                                                                                                                                                                        • The majority remained unconvinced whether coffee pods represent value for money
                                                                                                                                                                        • Appendix – Market Drivers

                                                                                                                                                                            • Figure 56: GDP, PDI, consumer expenditure and savings, at current prices, 2008-18
                                                                                                                                                                        • Appendix –Market Size and Forecast

                                                                                                                                                                            • Figure 57: Best- and worst-case forecasts for retail sales of coffee, by value, 2013-18
                                                                                                                                                                            • Figure 58: Best- and worst-case forecasts for retail sales of coffee, by volume, 2013-18
                                                                                                                                                                        • Appendix – Brand Research

                                                                                                                                                                            • Figure 59: Brand usage, May 2013
                                                                                                                                                                            • Figure 60: Brand commitment, May 2013
                                                                                                                                                                            • Figure 61: Brand momentum, May 2013
                                                                                                                                                                            • Figure 62: Brand diversity, May 2013
                                                                                                                                                                            • Figure 63: Brand satisfaction, May 2013
                                                                                                                                                                            • Figure 64: Brand recommendation, May 2013
                                                                                                                                                                            • Figure 65: Brand attitude, May 2013
                                                                                                                                                                            • Figure 66: Brand image – macro image, May 2013
                                                                                                                                                                            • Figure 67: Brand image – micro image, May 2013
                                                                                                                                                                            • Figure 68: Target groups, by demographics, May 2013
                                                                                                                                                                            • Figure 69: Psychographic segmentation, by target groups, May 2013
                                                                                                                                                                            • Figure 70: Brand usage, by target groups, May 2013
                                                                                                                                                                          • Brand index
                                                                                                                                                                            • Figure 71: Brand index, May 2013
                                                                                                                                                                        • Appendix – Consumer – Usage

                                                                                                                                                                            • Figure 72: Consumption of coffee, June 2013
                                                                                                                                                                            • Figure 73: Consumption of coffee, June 2013
                                                                                                                                                                            • Figure 74: Most popular consumption of coffee-any coffee, by demographics, June 2013
                                                                                                                                                                            • Figure 75: Next most popular consumption of coffee-any coffee, by demographics, June 2013
                                                                                                                                                                            • Figure 76: Most popular consumption of coffee-any instant, by demographics, June 2013
                                                                                                                                                                            • Figure 77: Next most popular consumption of coffee-any instant, by demographics, June 2013
                                                                                                                                                                            • Figure 78: Most popular consumption of coffee-any fresh, by demographics, June 2013
                                                                                                                                                                            • Figure 79: Next most popular consumption of coffee-any fresh, by demographics, June 2013
                                                                                                                                                                            • Figure 80: Most popular consumption of coffee-standard instant coffee (eg Nescafé), by demographics, June 2013
                                                                                                                                                                            • Figure 81: Next most popular consumption of coffee-standard instant coffee (eg Nescafé), by demographics, June 2013
                                                                                                                                                                            • Figure 82: Most popular consumption of coffee-ground coffee (eg carte noire), by demographics, June 2013
                                                                                                                                                                            • Figure 83: Next most popular consumption of coffee-ground coffee (eg carte noire), by demographics, June 2013
                                                                                                                                                                            • Figure 84: Most popular consumption of coffee-instant cappuccinos/latte/mocha coffee (ie Kenco 3-in-1, Starbucks Via, etc), by demographics, June 2013
                                                                                                                                                                            • Figure 85: Next most popular consumption of coffee-instant cappuccinos/latte/mocha coffee (ie Kenco 3-in-1, Starbucks Via, etc), by demographics, June 2013
                                                                                                                                                                            • Figure 86: Most popular consumption of coffee-decaffeinated coffee (any type), by demographics, June 2013
                                                                                                                                                                            • Figure 87: Next most popular consumption of coffee-decaffeinated coffee (any type), by demographics, June 2013
                                                                                                                                                                            • Figure 88: Most popular consumption of coffee-whole bean or micro-ground instant coffee (eg Kenco Millicano, Nescafé Azera), by demographics, June 2013
                                                                                                                                                                            • Figure 89: Next most popular consumption of coffee-whole bean or micro-ground instant coffee (eg Kenco Millicano, Nescafé Azera), by demographics, June 2013
                                                                                                                                                                            • Figure 90: Most popular consumption of coffee – coffee made using whole beans that I grind at home, by demographics, June 2013
                                                                                                                                                                            • Figure 91: Next most popular consumption of coffee – coffee made using whole beans that I grind at home, by demographics, June 2013
                                                                                                                                                                            • Figure 92: Most popular consumption of coffee-chilled ready-to-drink coffee (ie Starbucks frappuccino, Illy iced coffee, etc), by demographics, June 2013
                                                                                                                                                                            • Figure 93: Next most popular consumption of coffee-chilled ready-to-drink coffee (ie Starbucks frappuccino, Iily iced coffee, etc), by demographics, June 2013
                                                                                                                                                                            • Figure 94: Most popular consumption of coffee-coffee pods (eg Nespresso), by demographics, June 2013
                                                                                                                                                                            • Figure 95: Next most popular consumption of coffee-coffee pods (eg nespresso), by demographics, June 2013
                                                                                                                                                                            • Figure 96: Most popular consumption of coffee-other coffee types (eg one-cup coffee filter bags), by demographics, June 2013
                                                                                                                                                                            • Figure 97: Next most popular consumption of coffee-other coffee types (eg one-cup coffee filter bags), by demographics, June 2013
                                                                                                                                                                        • Appendix – Consumer – Factors Influencing Choice

                                                                                                                                                                            • Figure 98: Factors influencing choice of coffee, June 2013
                                                                                                                                                                            • Figure 99: Most popular factors influencing choice of coffee, by demographics, June 2013
                                                                                                                                                                            • Figure 100: Next most popular factors influencing choice of coffee, by demographics, June 2013
                                                                                                                                                                            • Figure 101: Other factors influencing choice of coffee, by demographics, June 2013
                                                                                                                                                                            • Figure 102: Words associated with coffee, tea and hot chocolate, February 2013
                                                                                                                                                                            • Figure 103: Most popular words associated with coffee, by demographics, February 2013
                                                                                                                                                                        • Appendix – Consumer – Drivers to Drinking Coffee

                                                                                                                                                                            • Figure 104: Reasons to drink coffee, June 2013
                                                                                                                                                                            • Figure 105: Most popular reasons to drink coffee, by demographics, June 2013
                                                                                                                                                                            • Figure 106: Next most popular reasons to drink coffee, by demographics, June 2013
                                                                                                                                                                        • Appendix – Consumer – Attitudes Towards Drinking Coffee

                                                                                                                                                                            • Figure 107: Agreement with statements on coffee, June 2013
                                                                                                                                                                            • Figure 108: Most popular agreement with statements on coffee, by demographics, June 2013
                                                                                                                                                                            • Figure 109: Next most popular agreement with statements on coffee, by demographics, June 2013
                                                                                                                                                                        • Appendix – Consumer – Attitudes Towards Coffee

                                                                                                                                                                            • Figure 110: Attitudes towards coffee, June 2013
                                                                                                                                                                            • Figure 111: Agreement with the statement ‘I would notice if the price of my favourite coffee rose’, by demographics, June 2013
                                                                                                                                                                            • Figure 112: Agreement with the statement ‘I am more likely to stock up on my favourite brand when it is on promotion’, by demographics, June 2013
                                                                                                                                                                            • Figure 113: Agreement with the statement ‘It’s only worth paying more for coffee if there is an obvious difference in taste from cheaper ones’, by demographics, June 2013
                                                                                                                                                                            • Figure 114: Agreement with the statement ‘It’s worth paying more for packaging that keeps coffee fresher for longer’, by demographics, June 2013
                                                                                                                                                                            • Figure 115: Agreement with the statement ‘I would be more willing to try a higher priced coffee if recommended to me (eg by friends/family/online)’, by demographics, June 2013
                                                                                                                                                                            • Figure 116: Agreement with the statement ‘I would be more likely to buy a premium version of one of my favourite brands than switch to a new premium brand’, by demographics, June 2013
                                                                                                                                                                            • Figure 117: Agreement with the statement ‘I am more likely to use premium coffee when drinking with others than when drinking alone’, by demographics, June 2013
                                                                                                                                                                            • Figure 118: Agreement with the statement ‘Information on product origin (eg Java Volcanic Island coffee) reassures me of high quality’, by demographics, June 2013
                                                                                                                                                                            • Figure 119: Agreement with the statement ‘Micro-ground coffee (eg Kenco Millicano) is worth paying more for than regular instant’, by demographics, June 2013
                                                                                                                                                                            • Figure 120: Agreement with the statement ‘I would be more likely to buy premium coffee if they were sold in smaller formats (eg single serve sachets, 40g jars)’, by demographics, June 2013
                                                                                                                                                                            • Figure 121: Agreement with the statement ‘Coffee pod machines/pods are worth the cost for the quality you get’, by demographics, June 2013
                                                                                                                                                                            • Figure 122: Agreement with the statement ‘Coffee-shop brands (eg Starbucks Via) make better in-home coffee than brands like Nescafé and Kenco’, by demographics, June 2013

                                                                                                                                                                        Companies Covered

                                                                                                                                                                        • Arla Foods amba
                                                                                                                                                                        • Cafédirect Ltd
                                                                                                                                                                        • Costa
                                                                                                                                                                        • Douwe Egberts UK
                                                                                                                                                                        • Facebook, Inc.
                                                                                                                                                                        • Luigi Lavazza SpA
                                                                                                                                                                        • Mondelez International
                                                                                                                                                                        • Nestlé UK Ltd
                                                                                                                                                                        • OXFAM
                                                                                                                                                                        • Sara Lee Corporation
                                                                                                                                                                        • Seattle Coffee Company
                                                                                                                                                                        • Starbucks Coffee Company UK Ltd
                                                                                                                                                                        • The Kenco Coffee Company
                                                                                                                                                                        • Traidcraft PLC
                                                                                                                                                                        • Whitbread PLC

                                                                                                                                                                        Coffee - UK - August 2013

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