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Coffee - UK - August 2014

“While tea has long been regarded as the nation’s favourite hot drink, the UK is equally a nation of coffee drinkers. While usage remains biased towards standard instant, a greater focus on the convenience and quality of micro-ground can support trading up.”

– Douglas Faughnan, Senior Food & Drink Analyst

This report looks at the following issues:

  • The UK is a nation of coffee drinkers – The challenge is getting them to trade up
  • Falling prices should fuel growth in the coffee pod market
  • Coffee can borrow from bakery and other indulgent categories

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Table of contents

  1. Introduction

      • Definition
        • Excluded
          • Abbreviations
          • Executive Summary

              • The market
                • Figure 1: UK retail sales and forecast of coffee, by value, 2009-19
                • Figure 2: UK retail sales of coffee, by coffee type, 2011-13
              • An ageing population brings opportunities and challenges
                • Companies, brands and innovation
                  • Nestlé’s longstanding brands are struggling
                    • Figure 3: Leading brands’ sales and shares in the UK retail coffee market, by value, 2013/14*
                  • Coffee is second only to CSDs in terms of adspend among non-alcoholic drinks
                    • Private label and pods fuel coffee NPD
                      • The consumer
                        • There are now as many people drinking coffee in the UK as tea
                          • Figure 4: Frequency of drinking coffee at home, by type, April 2014
                        • Micro-ground instant is successfully carving out an image of indulgence and quality
                          • Dessert-flavoured coffee offers real potential
                            • Figure 5: Selected attitudes towards coffee, April 2014
                          • Pod machines continue to find their way into UK homes
                            • Figure 6: Ownership of coffee pod machines, April 2014
                          • For those who don’t want to buy a machine, hassle and space constraints are key reasons
                            • Figure 7: Reasons for not purchasing a coffee pod machine, April 2014
                          • What we think
                          • Issues and Insights

                              • The UK is a nation of coffee drinkers – The challenge is getting them to trade up
                                • The facts
                                  • The implications
                                    • Falling prices should fuel growth in the coffee pod market
                                      • The facts
                                        • The implications
                                          • Coffee can borrow from bakery and other indulgent categories
                                            • The facts
                                              • The implications
                                              • Trend Application

                                                  • Fauxthenticity
                                                    • Life Hacking
                                                      • Generation Next
                                                      • Market Drivers

                                                        • Key points
                                                          • The market will benefit from an ageing population, but certain formats face challenges
                                                            • Figure 8: Trends in the age structure of the UK population, 2009-14 and 2014-19
                                                          • Drought in Brazil drives wholesale price of beans up
                                                            • Figure 9: Monthly average cost of coffee beans in Europe, by bean type, January 2012-May 2014
                                                            • Figure 10: UK retail price index for tea, coffee & other hot drinks, and soft drinks, January 2009-April 2014
                                                          • Rising consumer confidence brings opportunities and challenges for coffee
                                                            • Figure 11: Financial health index, January 2009-June 2014
                                                        • Strengths and Weaknesses

                                                          • Strengths
                                                            • Weaknesses
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • New entrants set to weaken Nespresso’s grip on pods
                                                                  • Figure 12: New product launches in the UK coffee market, by format, 2011-13
                                                                • Ground coffee launches have been driven by private label
                                                                  • Figure 13: New product launches in the UK ground coffee market, by private label v branded, 2009-13
                                                                • Micro-ground offers scope to halt the decline of instant coffee
                                                                  • The UK coffee market lacks flavour innovation
                                                                    • Innovation themes from around the world
                                                                      • European retailers introduce Nespresso-compatible own-brand capsules
                                                                        • Innovative approaches to convenience in ground coffee
                                                                          • Functional coffee is niche, but it may have a role to play
                                                                          • Market Size and Forecast

                                                                            • Key points
                                                                              • Coffee market value growth is expected to slow
                                                                                • Figure 14: UK retail sales of coffee, by value and volume 2009-19
                                                                              • Volume sales set for more moderate growth than over 2009-14
                                                                                • Figure 15: UK retail sales of coffee, by value, 2009-19
                                                                                • Figure 16: UK retail sales of coffee, by volume, 2009-19
                                                                              • Forecast methodology
                                                                              • Segment Performance

                                                                                • Key points
                                                                                  • Weak performance of instant and ground segments slows overall coffee market growth in 2013
                                                                                    • Figure 17: UK retail sales of coffee, by coffee type, 2011-13
                                                                                  • Pods continue to shine, but still account for less than 10% of value sales
                                                                                    • Premium proves successful
                                                                                    • Market Share

                                                                                      • Key points
                                                                                        • Nestlé’s core brands struggle while its other brands perform well
                                                                                          • Figure 18: Leading manufacturers’ sales and shares in the UK retail coffee market, by value and volume, 2012/13 and 2013/14
                                                                                          • Figure 19: Leading brands’ sales and shares in the UK retail coffee market, by value and volume, 2012/13 and 2013/14
                                                                                        • Carte Noire helps Mondelēz avoid losing further market share
                                                                                          • Own-label is the biggest loser
                                                                                            • DE Master Blender and Mondelēz merger set to pose a serious threat to Nestlé, EU approval permitting
                                                                                            • Companies and Products

                                                                                              • Mondelēz
                                                                                                • Background
                                                                                                  • Recent activity
                                                                                                    • Product range and innovation
                                                                                                      • Marketing and promotion
                                                                                                        • Nestlé
                                                                                                          • Background
                                                                                                            • Recent activity
                                                                                                              • Product range and innovation
                                                                                                                • Marketing and promotion
                                                                                                                  • Lavazza
                                                                                                                    • Background
                                                                                                                      • Recent activity
                                                                                                                        • Product range and innovation
                                                                                                                          • Marketing and promotion
                                                                                                                            • Douwe Egberts (DE Master Blenders)
                                                                                                                              • Background
                                                                                                                                • Product range and innovation
                                                                                                                                  • Marketing and promotion
                                                                                                                                    • Taylors of Harrogate
                                                                                                                                      • Background
                                                                                                                                        • Product range and innovation
                                                                                                                                          • Marketing and promotion
                                                                                                                                          • Brand Advertising, Perceptions and Social Media

                                                                                                                                            • Key points
                                                                                                                                              • Coffee adspend bucks the trend in the wider non-alcoholic drinks market
                                                                                                                                                • Campaigns from Douwe Egberts and Taylors of Harrogate in 2014 are reducing market’s reliance on Nestlé and Mondelēz
                                                                                                                                                  • Figure 20: Above-the-line advertising spend on coffee, by advertiser, 2011-14
                                                                                                                                                • Nestlé and Mondelēz continued their head to head in micro-ground instant
                                                                                                                                                  • Figure 21: Above-the-line advertising spend on coffee, by brand, 2011-14
                                                                                                                                                • Brand perceptions
                                                                                                                                                  • Key brand metrics
                                                                                                                                                    • Figure 22: Key brand metrics, May 2014
                                                                                                                                                  • Brand map
                                                                                                                                                      • Figure 23: Attitudes towards and usage of brands in the coffee sector, May 2014
                                                                                                                                                    • Correspondence analysis
                                                                                                                                                      • Brand attitudes
                                                                                                                                                        • Figure 24: Attitudes, by coffee brand, May 2014
                                                                                                                                                      • Brand personality
                                                                                                                                                        • Figure 25: Coffee brand personality – Macro image, May 2014
                                                                                                                                                        • Figure 26: Coffee brand personality – Micro image, May 2014
                                                                                                                                                      • Brand usage
                                                                                                                                                        • Figure 27: Coffee brand usage, May 2014
                                                                                                                                                      • Brand experience
                                                                                                                                                        • Figure 28: Coffee brand experience, May 2014
                                                                                                                                                      • Social media and online buzz
                                                                                                                                                        • Social media metrics
                                                                                                                                                          • Figure 29: Social media metrics of selected coffee brands, July 2014
                                                                                                                                                        • Coffee brand mentions are low
                                                                                                                                                          • General coffee discussion is significantly higher
                                                                                                                                                            • Online giveaways are important
                                                                                                                                                              • Online mentions
                                                                                                                                                                • Figure 30: Share of conversation of selected coffee brands, by week, 30 June 2013-28 June 2014
                                                                                                                                                              • Online giveaways make impact
                                                                                                                                                                • Nescafé’s wider usage inspires greater natural conversation
                                                                                                                                                                  • Topics of discussion
                                                                                                                                                                    • Figure 31: Topics of discussion around coffee, 30 June 2013-28 June 2014
                                                                                                                                                                  • Different topics spoken about in different places
                                                                                                                                                                    • Type of coffee is most spoken about topic
                                                                                                                                                                      • Figure 32: Share of conversation, by type of coffee, 30 June 2013-28 June 2014
                                                                                                                                                                    • Brazil is most spoken about country of origin
                                                                                                                                                                      • Figure 33: Top five countries spoken about in reference to coffee origin, 30 June 2013-28 June 2014
                                                                                                                                                                    • Conversation proportion remains static
                                                                                                                                                                      • Figure 34: Percentage of coffee conversation around selected topics, by week, 30 June 2013-28 June 2014
                                                                                                                                                                    • Where people talk about coffee
                                                                                                                                                                      • Figure 35: Where generic coffee conversation happens, by type of website, 30 June 2013-28 June 2014
                                                                                                                                                                      • Figure 36: Percentage of brand conversation on different categories of internet site, 30 June 2013-28 June 2014
                                                                                                                                                                    • Analysis by brand
                                                                                                                                                                      • Carte Noire
                                                                                                                                                                        • Figure 37: Topic cloud around mentions of Carte Noire, 30 June 2013-28 June 2014
                                                                                                                                                                      • Nescafé
                                                                                                                                                                        • Figure 38: Topic cloud around mentions of Nescafé, 30 June 2013-28 June 2014
                                                                                                                                                                        • Figure 39: Online mentions, discounting competitions and giveaways, 30 June 2013-28 June 2014
                                                                                                                                                                      • Kenco
                                                                                                                                                                        • Figure 40: Topic cloud around mentions of Kenco, 30 June 2013-28 June 2014
                                                                                                                                                                      • Douwe Egberts
                                                                                                                                                                        • Figure 41: Topic cloud around mentions of Douwe Egberts, 30 June 2013-28 June 2014
                                                                                                                                                                      • Nescafé Azera
                                                                                                                                                                      • The Consumer – Usage of Coffee

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Coffee becomes the UK’s hot drink of choice
                                                                                                                                                                            • Figure 42: Frequency of drinking coffee at home, by type, April 2014
                                                                                                                                                                          • Micro-ground is appealing to both standard instant drinkers and those drinking more expensive coffee types
                                                                                                                                                                            • While usage of coffee pods is increasing, they remain far from an everyday choice
                                                                                                                                                                            • The Consumer – Perceptions of Different Types of Coffee

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Quality and indulgence are key attributes seen to differentiate micro-ground from standard instant
                                                                                                                                                                                  • Figure 43: Qualities associated with different types of coffee, April 2014
                                                                                                                                                                                • Perceived lack of convenience may be hampering micro-ground and pods
                                                                                                                                                                                  • Coffee beans/ground coffee has succeeded in becoming the ‘aspirational’ format
                                                                                                                                                                                  • The Consumer – Attitudes Towards Coffee

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • The ‘Waffogato’ may be a novelty, but dessert-inspired coffee sparks real interest
                                                                                                                                                                                        • Figure 44: Attitudes towards coffee, April 2014
                                                                                                                                                                                      • The UK may be a nation of coffee drinkers, but few come across as connoisseurs
                                                                                                                                                                                        • The coffee shop experience built the Starbucks and Costa brands, but that doesn’t automatically translate to packaged coffee
                                                                                                                                                                                        • The Consumer – Ownership of Coffee Pod Machines

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • Almost half of coffee drinkers have or are interested in a coffee pod machine
                                                                                                                                                                                              • Figure 45: Ownership of coffee pod machines, April 2014
                                                                                                                                                                                            • Cost of pods is a barrier at all income levels, but cost of machines matters less for high earners
                                                                                                                                                                                              • Figure 46: Reasons for not purchasing a coffee pod machine, April 2014
                                                                                                                                                                                            • Perceived lack of convenience is a key barrier for marketers to address
                                                                                                                                                                                              • Figure 47: Reasons for lack of interest in coffee pod machines, April 2014
                                                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                                                              • Figure 48: Best- and worst-case forecasts for retail sales of coffee, by value, 2014-19
                                                                                                                                                                                              • Figure 49: Best- and worst-case forecasts for retail sales of coffee, by volume, 2014-19
                                                                                                                                                                                          • Appendix – Brand Advertising, Perceptions and Social Media

                                                                                                                                                                                              • Figure 50: Brand usage, May 2014
                                                                                                                                                                                              • Figure 51: Brand commitment, May 2014
                                                                                                                                                                                              • Figure 52: Brand diversity, May 2014
                                                                                                                                                                                              • Figure 53: Brand satisfaction, May 2014
                                                                                                                                                                                              • Figure 54: Brand recommendation, May 2014
                                                                                                                                                                                              • Figure 55: Brand attitude, May 2014
                                                                                                                                                                                              • Figure 56: Brand image – Macro image, May 2014
                                                                                                                                                                                              • Figure 57: Brand image – Micro image, May 2014
                                                                                                                                                                                              • Figure 58: Share of conversation of selected coffee brands, by week, 30 June 2013-28 June 2014
                                                                                                                                                                                              • Figure 59: Topics of discussion around generic coffee, 30 June 2013-28 June 2014
                                                                                                                                                                                          • Appendix – The Consumer – Usage of Coffee

                                                                                                                                                                                              • Figure 60: Type of coffee drunk at home, by frequency, April 2014
                                                                                                                                                                                              • Figure 61: Frequency of drinking standard instant coffee at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 62: Frequency of drinking ground coffee at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 63: Frequency of drinking coffee made using whole beans that I grind at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 64: Frequency of drinking coffee made with coffee pods at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 65: Frequency of drinking chilled ready-to-drink coffee at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 66: Frequency of drinking decaffeinated coffee at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 67: Frequency of drinking instant cappuccinos/latte/mocha coffee at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 68: Frequency of drinking micro-ground instant coffee at home, by demographics, April 2014
                                                                                                                                                                                              • Figure 69: Frequency of drinking other coffee types at home, by demographics, April 2014
                                                                                                                                                                                          • Appendix – The Consumer – Attributes Associated with Different Types of Coffee

                                                                                                                                                                                              • Figure 70: Attributes associated with different types of coffee, April 2014
                                                                                                                                                                                              • Figure 71: Most popular attributes associated with standard instant coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 72: Next most popular attributes associated with standard instant coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 73: Other attributes associated with standard instant coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 74: Most popular attributes associated with micro-ground instant coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 75: Next most popular attributes associated with micro-ground instant coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 76: Other attributes associated with micro-ground instant coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 77: Most popular attributes associated with coffee beans/ground coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 78: Next most popular attributes associated with coffee beans/ground coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 79: Other attributes associated with coffee beans/ground coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 80: Most popular attributes associated with coffee pods for machines, by demographics, April 2014
                                                                                                                                                                                              • Figure 81: Next most popular attributes associated with coffee pods for machines, by demographics, April 2014
                                                                                                                                                                                              • Figure 82: Other attributes associated with coffee pods for machines, by demographics, April 2014
                                                                                                                                                                                              • Figure 83: Most popular attributes associated with ready-to-drink coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 84: Next most popular attributes associated with ready-to-drink coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 85: Other attributes associated with ready-to-drink coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 86: Attributes associated with different types of coffee, by type of coffee drunk at home – Any coffee usage, April 2014
                                                                                                                                                                                              • Figure 87: Attributes associated with different types of coffee, by type of coffee drunk at home – Standard instant coffee, April 2014
                                                                                                                                                                                              • Figure 88: Attributes associated with different types of coffee, by type of coffee drunk at home – Ground coffee, April 2014
                                                                                                                                                                                              • Figure 89: Attributes associated with different types of coffee, by type of coffee drunk at home – Coffee made using whole beans that I grind at home, April 2014
                                                                                                                                                                                              • Figure 90: Attributes associated with different types of coffee, by type of coffee drunk at home – Coffee pods, April 2014
                                                                                                                                                                                              • Figure 91: Attributes associated with different types of coffee, by type of coffee drunk at home – Chilled ready-to-drink coffee, April 2014
                                                                                                                                                                                              • Figure 92: Attributes associated with different types of coffee, by type of coffee drunk at home – Decaffeinated coffee, April 2014
                                                                                                                                                                                              • Figure 93: Attributes associated with different types of coffee, by type of coffee drunk at home – Instant cappuccinos/latte/mocha coffee, April 2014
                                                                                                                                                                                              • Figure 94: Attributes associated with different types of coffee, by type of coffee drunk at home – Micro-ground instant coffee, April 2014
                                                                                                                                                                                              • Figure 95: Attributes associated with different types of coffee, by type of coffee drunk at home – Other coffee types, April 2014
                                                                                                                                                                                          • Appendix – The Consumer – Attitudes Towards Coffee

                                                                                                                                                                                              • Figure 96: Consumer attitudes towards coffee, April 2014
                                                                                                                                                                                              • Figure 97: Most popular consumer attitudes towards coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 98: Next most popular consumer attitudes towards coffee, by demographics, April 2014
                                                                                                                                                                                              • Figure 99: Other consumer attitudes towards coffee, by demographics, April 2014
                                                                                                                                                                                          • Appendix – The Consumer – Ownership of Coffee Pod Machines

                                                                                                                                                                                              • Figure 100: Ownership of coffee pod machines, April 2014
                                                                                                                                                                                              • Figure 101: Ownership of coffee pod machines, by demographics, April 2014
                                                                                                                                                                                              • Figure 102: Reasons for lack of interest in coffee pod machines, April 2014
                                                                                                                                                                                              • Figure 103: Most popular reasons for lack of interest in coffee pod machines, by demographics, April 2014
                                                                                                                                                                                              • Figure 104: Next most popular reasons for lack of interest in coffee pod machines, by demographics, April 2014
                                                                                                                                                                                              • Figure 105: Other reasons for lack of interest in coffee pod machines, by demographics, April 2014
                                                                                                                                                                                              • Figure 106: Reasons for not purchasing a coffee pod machine, April 2014
                                                                                                                                                                                              • Figure 107: Most popular reasons for not purchasing a coffee pod machine, by demographics, April 2014
                                                                                                                                                                                              • Figure 108: Next most popular reasons for not purchasing a coffee pod machine, by demographics, April 2014

                                                                                                                                                                                          Companies Covered

                                                                                                                                                                                          • Channel 4
                                                                                                                                                                                          • Douwe Egberts UK
                                                                                                                                                                                          • Green Mountain Coffee Roasters, Inc.
                                                                                                                                                                                          • Luigi Lavazza SpA
                                                                                                                                                                                          • Nestlé UK Ltd
                                                                                                                                                                                          • The Kenco Coffee Company
                                                                                                                                                                                          • Twitter, Inc.
                                                                                                                                                                                          • YouTube, Inc.

                                                                                                                                                                                          Coffee - UK - August 2014

                                                                                                                                                                                          £1,995.00 (Excl.Tax)