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Coffee - UK - August 2016

"Growth in the coffee market in 2015 was helped by strong sales of coffee pods, which was in contrast to a continuation of the decline seen in recent years in sales of instant coffee. Coffee pods offer further opportunities for growth, while premiumisation is helping to support sales of instant coffee.”

- Richard Caines, Senior Food & Drink Analyst

This report will cover the following areas:

  • New flavours can help bolster the appeal of instant coffee to a younger audience
  • Potential for more growth in coffee pods
  • Brands and retailers can add value through encouraging more experimentation

Greater interest in trying different types of coffee products by younger people signals scope for more product developments such as coffees with more added flavours and cold-brew coffee, both of which link to the continuing development of coffee drinks available at coffee shops and cafés.

The following broad segments make up the coffee retail market:

  • Instant coffee – this is the largest sector accounting for around 70% of the market. This is where, through various processes, the coffee is dehydrated into the form of powder or granules for sale, and prepared by adding these to hot water.
  • Roast and ground – this is when coffee is sold in the form of coffee beans or when the coffee beans are sold ready-ground.
  • Coffee pods feature pre-packaged ground beans sold in their own filter to make the coffee-making process easier. Included in this category are products for open and closed coffee systems, such as those that take a cartridge or pod.
  • Ready-to-drink coffee – this is chilled ready-to-drink (RTD) coffee drinks such as Starbucks Frappuccino. 

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Strong growth in coffee pods boosts coffee sales
              • Figure 1: UK retail value sales of coffee*, 2011-21
            • Microground helps reduce decline in instant coffee
              • Ageing population who drink more coffee made at home
                • Companies and brands
                  • Nestlé maintains big lead in instant coffee
                    • Figure 2: Leading manufacturers’ shares in the UK retail instant coffee market, by value, 2015/16
                  • Taylors and Lavazza leading brands in ground coffee
                    • Figure 3: Leading brands’ value shares in the UK ground coffee/coffee beans market*, 2015/16
                  • The consumer
                    • Nearly eight in 10 people drink coffee made at home
                      • Figure 4: Types of coffee drunk at home, overall use and at least once a day, July 2016
                    • Strong brand loyalty among coffee buyers
                      • Figure 5: Prompts that would encourage people to buy a different coffee type/brand, July 2016
                    • Room for more flavours and cold-brew coffee
                      • Figure 6: Interest in trying different coffee products, July 2016
                    • Coffee shop culture influencing consumer tastes
                      • Figure 7: Attitudes towards coffee, July 2016
                    • Room for more growth in coffee pod sales
                      • What we think
                      • Issues and Insights

                        • New flavours can help bolster the appeal of instant coffee to a younger audience
                          • The facts
                            • The implications
                              • Potential for more growth in coffee pods
                                • The facts
                                  • The implications
                                    • Brands and retailers can add value through encouraging more experimentation
                                      • The facts
                                        • The implications
                                        • The Market – What You Need to Know

                                          • Coffee sales boosted by strong growth in coffee pods
                                            • Pods and coffee shop-style drinks offer more growth potential
                                              • Microground slows decline in instant coffee sales
                                                • Coffee pod sales show strong growth
                                                  • Ageing population who are more likely to make more coffee at home
                                                    • Coffee shop competition and strong sales of coffee makers
                                                    • Market Size and Forecast

                                                      • Ground coffee and pods boost total sales
                                                        • Figure 8: UK retail value and volume sales of coffee*, 2011-21
                                                      • Room for more growth in coffee sales
                                                        • Figure 9: Best- and worst-case forecast of UK retail value sales of coffee*, 2011-21
                                                      • Forecast methodology
                                                      • Segment Performance

                                                        • Microground helps reduce rate of decline in instant coffee sales
                                                          • Figure 10: UK retail value and volume sales of instant coffee, 2011-21
                                                          • Figure 11: Best- and worst-case forecast of UK retail value sales of instant coffee, 2011-21
                                                        • Ground coffee sees small increase in sales
                                                          • Figure 12: UK retail value and volume sales of ground coffee/coffee beans, 2011-21
                                                          • Figure 13: Best- and worst-case forecast of UK retail value sales of ground coffee/coffee beans, 2011-21
                                                        • Coffee pod sales growing strongly
                                                          • Figure 14: UK retail value and volume sales of coffee pods, 2011-21
                                                          • Figure 15: Best- and worst-case forecast of UK retail value sales of coffee pods, 2011-21
                                                      • Market Drivers

                                                        • Ageing population could benefit in-home coffee consumption
                                                          • Figure 16: Trends in the age structure of the UK population, 2010-20
                                                        • Competition from coffee shops
                                                          • Coffee consumption steadily increasing
                                                            • Figure 17: UK household purchases of tea, coffee and cocoa, hot chocolate and malt drinks, 2001-14
                                                          • Strong sales of coffee makers
                                                          • Key Players – What You Need to Know

                                                            • Nestlé maintains big lead in instant coffee market
                                                              • Taylors and Lavazza leading brands in ground coffee
                                                                • Pods grow share of NPD activity
                                                                  • Nescafé launches Azera Coffee to Go
                                                                    • Tassimo launches more co-branded products
                                                                      • Increase in spending on coffee advertising
                                                                        • Nescafé most advertised and trusted coffee brand
                                                                          • Stronger association with social responsibility for Kenco
                                                                          • Market Share

                                                                            • Nestlé continues to dominate instant coffee market
                                                                              • Figure 18: Leading manufacturers’ sales and shares in the UK retail instant coffee market, by value, 2014/15 and 2015/16
                                                                              • Figure 19: Leading manufacturers’ sales and shares in the UK retail instant coffee market, by volume, 2014/15 and 2015/16
                                                                            • Azera fuels Nescafé’s sales
                                                                              • Figure 20: Leading brands’ sales and shares in the UK retail instant coffee market, by value, 2014/15 and 2015/16
                                                                              • Figure 21: Leading brands’ sales and shares in the UK retail instant coffee market, by volume, 2014/15 and 2015/16
                                                                            • Taylors and Lavazza biggest brands in ground coffee
                                                                              • Figure 22: Leading brands’ sales and shares in the UK retail ground coffee/coffee beans market (excluding coffee pods), by value, 2014/15 and 2015/16
                                                                              • Figure 23: Leading brands’ sales and shares in the UK retail ground coffee/coffee beans market (excluding coffee pods), by volume, 2014/15 and 2015/16
                                                                          • Launch Activity and Innovation

                                                                            • Pods grow share of NPD activity
                                                                              • Figure 24: New product launches in the UK coffee market, by format type, 2012-16
                                                                            • Branded launches increasingly dominant
                                                                              • Figure 25: New product launches in the UK coffee market, by branded vs. private label, 2012-16
                                                                            • Nestlé puts focus on new flavours for pods and café-style coffees
                                                                              • Figure 26: Examples of launches in the UK coffee market by Nestlé, 2016
                                                                            • Jacobs Douwe Egberts focuses on Tassimo
                                                                              • Figure 27: New product launches in the UK coffee market, by company (top 12)*, 2012-16
                                                                            • Taylors launches Nespresso-compatible pods range
                                                                              • Figure 28: Examples of launches in the UK coffee market by Taylors of Harrogate and Lavazza, 2015
                                                                            • Own-label activity focuses on coffee mixes
                                                                              • Ethical and time-saving claims on the increase
                                                                                • Limited editions taking a small but growing share of launch activity
                                                                                  • Figure 29: New product launches in the UK coffee market, by claim (top 15)*, 2012-16
                                                                              • Brand Communication and Promotion

                                                                                • Increase in 2015 advertising for coffee
                                                                                  • Figure 30: Recorded above-the-line, online display and direct mail total advertising expenditure on coffee, 2012-16
                                                                                • Nestlé top advertiser but share of spending down
                                                                                  • Figure 31: Recorded above-the-line, online display and direct mail total advertising expenditure on coffee, by advertiser, 2012-16
                                                                                • Emotive campaign for Nescafé Gold Blend
                                                                                  • Kenco message focuses on Coffee vs. Gangs project
                                                                                    • Lavazza sees big increase in advertising
                                                                                      • Figure 32: Recorded above-the-line, online display and direct mail total advertising expenditure on coffee, by 10 highest-spending brands, 2015
                                                                                    • 2016 push for new Azera Coffee to Go
                                                                                      • Nielsen Ad Intel coverage
                                                                                      • Brand Research

                                                                                          • What you need to know
                                                                                            • Brand map
                                                                                              • Figure 33: Attitudes towards and usage of selected brands, July 2016
                                                                                            • Key brand metrics
                                                                                              • Figure 34: Key metrics for selected brands, July 2016
                                                                                            • Brand attitudes: Kenco seen as most socially responsible brand
                                                                                              • Figure 35: Attitudes, by brand, July 2016
                                                                                            • Brand personality: Taylors seen as more exclusive than other brands
                                                                                              • Figure 36: Brand personality – Macro image, July 2016
                                                                                            • Nescafé seen as the most reassuring brand
                                                                                              • Figure 37: Brand personality – Micro image, July 2016
                                                                                            • Brand analysis
                                                                                              • Authenticity a key strength for Taylors of Harrogate
                                                                                                • Figure 38: User profile of Taylors of Harrogate, July 2016
                                                                                              • Lavazza seen as a vibrant, stylish and fun brand
                                                                                                • Figure 39: User profile of Lavazza, July 2016
                                                                                              • Douwe Egberts’ strengths are quality and taste
                                                                                                • Figure 40: User profile of Douwe Egberts, July 2016
                                                                                              • Nescafé the most trusted coffee brand
                                                                                                • Figure 41: User profile of Nescafé, July 2016
                                                                                              • Kenco socially responsible but needs more product differentiation
                                                                                                • Figure 42: User profile of Kenco, July 2016
                                                                                            • The Consumer – What You Need to Know

                                                                                              • Nearly eight in 10 people drink coffee made at home
                                                                                                • Strong brand loyalty among coffee buyers
                                                                                                  • Free samples most likely to encourage experimentation
                                                                                                    • Room for more added flavours and on-the-go convenience
                                                                                                      • Cold-brew coffees can go beyond being niche
                                                                                                        • Time-saving appeal of instant coffee but quality important
                                                                                                          • Coffee shop culture influencing consumer tastes
                                                                                                            • Competition from more refreshing drinks
                                                                                                              • Room for more growth in coffee pod sales
                                                                                                                • Breaking down barriers to owning pod machines
                                                                                                                • Frequency of Drinking Coffee Made at Home

                                                                                                                  • Nearly eight in 10 people drink coffee made at home
                                                                                                                    • Figure 43: Types of coffee drunk at home, overall use and at least once a day, July 2016
                                                                                                                  • Microground coffee bridging gap between instant and ground
                                                                                                                    • Three in 10 people using pods for making coffee
                                                                                                                      • Standard instant coffee drunk the most frequently
                                                                                                                        • Figure 44: Frequency of drinking coffee at home, by type, July 2016
                                                                                                                      • Younger people more likely to drink a variety of coffee types
                                                                                                                        • Figure 45: Repertoire of different types of coffee drunk in the last month, July 2016
                                                                                                                    • Factors Influencing Choice

                                                                                                                      • Most buyers of coffee are loyal to one product
                                                                                                                        • Figure 46: Buying one coffee product vs. buying different coffee products, July 2016
                                                                                                                      • Free samples can help encourage experimentation
                                                                                                                        • Getting people talking about new coffees
                                                                                                                          • Figure 47: Prompts that would encourage people to buy a different coffee type/brand, July 2016
                                                                                                                        • Promotional activity has a big influence on choice of coffee
                                                                                                                          • Figure 48: Most important factors influencing choice when buying one coffee type/brand over another, July 2016
                                                                                                                      • Interest in Trying New Product Concepts

                                                                                                                        • Room for more added flavours in instant coffee
                                                                                                                          • Figure 49: Interest in trying different coffee products, July 2016
                                                                                                                        • Concentrated products and flavours for adding to coffee appeal
                                                                                                                          • Nearly a fifth interested in on-the-go coffee mixes in a cup
                                                                                                                            • Cold-brew coffees can help brands win over 16-34s
                                                                                                                              • Functional benefits can add to the appeal of coffee
                                                                                                                              • Attitudes towards Coffee

                                                                                                                                • Instant coffee appeals when consumers are pressed for time
                                                                                                                                  • Figure 50: Attitudes towards coffee, July 2016
                                                                                                                                • Coffee shop culture influencing consumer coffee tastes
                                                                                                                                  • Coffee competes against more refreshing drinks
                                                                                                                                  • Ownership of Coffee Pod Machines and Barriers to Buying

                                                                                                                                    • Three in 10 households have a pod machine
                                                                                                                                      • Figure 51: Ownership of coffee pod machines, July 2016
                                                                                                                                    • Price of pod machines and pods still a barrier to buying
                                                                                                                                      • Figure 52: Reasons for not currently owning a coffee pod machine, July 2016
                                                                                                                                    • Persuading people to have more hot drinks
                                                                                                                                      • Convincing people of the convenience of pod machines
                                                                                                                                      • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                          • Abbreviations
                                                                                                                                            • Consumer research methodology
                                                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                                                • Figure 53: Best- and worst-case forecast of total UK retail value sales of coffee*, 2011-21
                                                                                                                                                • Figure 54: Best- and worst-case forecast of total UK retail volume sales of coffee*, 2011-21
                                                                                                                                                • Figure 55: Best- and worst-case forecast of total UK retail volume sales of coffee*, 2011-21
                                                                                                                                              • Fan chart forecast
                                                                                                                                              • Appendix – Segment Performance

                                                                                                                                                  • Figure 56: Best- and worst-case forecast of UK retail value sales of instant coffee, 2011-21
                                                                                                                                                  • Figure 57: Best- and worst-case forecast of UK retail volume sales of instant coffee, 2011-21
                                                                                                                                                  • Figure 58: Best- and worst-case forecast of UK retail volume sales of instant coffee, 2011-21
                                                                                                                                                  • Figure 59: Best- and worst-case forecast of UK retail value sales of ground coffee/coffee beans, 2011-21
                                                                                                                                                  • Figure 60: Best- and worst-case forecast of UK retail volume sales of ground coffee/coffee beans, 2011-21
                                                                                                                                                  • Figure 61: Best- and worst-case forecast of UK retail volume sales of ground coffee/coffee beans, 2011-21
                                                                                                                                                  • Figure 62: Best- and worst-case forecast of UK retail value sales of coffee pods, 2011-21
                                                                                                                                                  • Figure 63: Best- and worst-case forecast of UK retail volume sales of coffee pods, 2011-21
                                                                                                                                                  • Figure 64: Best- and worst-case forecast of UK retail volume sales of coffee pods, 2011-21
                                                                                                                                              • Appendix – Launch Activity and Innovation

                                                                                                                                                  • Figure 65: New soluble/instant coffee product launches, by branded vs. private label, 2012-16
                                                                                                                                                  • Figure 66: New ground coffee product launches, by branded vs. private label, 2012-16
                                                                                                                                                  • Figure 67: New product launches of coffee bags, pods and pre-filled filters, by branded vs. private label, 2012-16
                                                                                                                                                  • Figure 68: New coffee mixes product launches, by branded vs. private label, 2012-16

                                                                                                                                              Companies Covered

                                                                                                                                              To learn more about the companies covered in this report please contact us.

                                                                                                                                              Coffee - UK - August 2016

                                                                                                                                              £1,995.00 (Excl.Tax)