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Coffee - UK - February 2010

With rising prices and economic downturn at play between 2008 and 2009, the coffee market has managed to weather the storm well. Between 2005 and 2009 the UK market for in-home coffee achieved 17% growth in value, and although some of this is attributed to the hike in raw coffee and production costs, trading up has still been a key feature of this market.

  • In 2007 and 2008, the rising price of coffee beans helped drive sales growth. With prices forecast to fall this year, coffee and coffee shop brands will need to cut prices or find new ways to justify higher prices.
  • Instant coffee continues to dominate the market with 90% of 27m coffee-drinking consumers having drunk some kind of instant coffee in the last year.
  • The 16-34 year old age group is almost twice as likely to make coffee at home using coffee beans as the average, highlighting both the lack of penetration among affluent older consumers and the impact that coffee bars have had in terms of promoting better quality coffee among younger drinkers.
  • Even though coffee pods account for a fifth of spend in the roast and round category, consumer data show that they are only used by 14% of consumers, reflecting the high-spending nature of the coffee pod customer.
  • Some 85% of people who drink ground coffee, beans or pods will also drink instant coffee whereas only 61% of instant coffee drinkers will drink from the ground category. Sizeable opportunities exist for suppliers who can persuade instant coffee drinkers to trade up to ground, beans or pods.
  • As Fairtrade becomes more commonplace coffee brands need to find new ways to attract ethical/green consumers. One innovative new product in this sector of the market is Nescafe Green which highlights the health and functional benefits of coffee/coffee drinking.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Definition
          • Abbreviations
          • Future Opportunities

            • Is fair-trade fair enough?
              • Are affordable luxuries really that affordable?
              • Market in Brief

                • A sought-after commodity
                  • The upturn from the downturn
                    • Ethical resilience
                      • In search of a youth market
                        • Coffee culture needs café culture
                        • Internal Market Environment

                          • Key points
                            • A question mark for the future
                              • Instant hit
                                • More solid ground
                                  • The generation game
                                    • Pricing
                                      • Downturn in finance, downturn in ethics
                                        • Figure 1: Agreement with selected lifestyle statements, 2005-09
                                      • Trademark wars
                                        • Niche appeal
                                          • Premiumisation
                                            • Machine market growth
                                              • Figure 2: UK retail sales value of domestic coffeemakers, by type and value, 2008 and 2009
                                            • Health
                                            • Broader Market Environment

                                              • Key points
                                                • Let the bad times roll
                                                  • Figure 3: UK GDP real growth, 1999-Q2 2009
                                                • The resilient bean
                                                  • Figure 4: Ever drink coffee, by quarter, Q1 2007-Q2 2009
                                                • Coffee shop cuts
                                                  • Demographic influences
                                                  • Competitive Context

                                                    • Key points
                                                      • The drinks decline
                                                        • Figure 5: Usage of competing products, 2005-09
                                                      • Coffee shop cannibalisation
                                                        • How the mighty have fallen
                                                          • The silver lining
                                                            • Figure 6: Market size and forecast of coffee shops, at current and 2008 prices, 2003-13
                                                            • Figure 7: Coffee shops visited, October 2008
                                                        • Strengths and Weaknesses in the Market

                                                          • Strengths
                                                            • Weaknesses
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • Fast and fair
                                                                  • Figure 8: UK claims, January 2008 and 2009
                                                                • Convenience innovation
                                                                  • Ethical innovation
                                                                    • Premium prospects
                                                                      • Premium innovation
                                                                        • Flavour from within
                                                                          • Flavour innovation
                                                                            • Creating standout
                                                                              • Figure 9: Launch type, January 2008 and 2009
                                                                            • Package innovation
                                                                              • Emerging avenue for health
                                                                                • Health innovation
                                                                                • Market Value and Forecast

                                                                                  • Key points
                                                                                    • Price and premiumisation on the up
                                                                                      • Figure 10: UK retail sales of coffee, by value, 2005-14
                                                                                      • Figure 11: UK retail sales of coffee, by sector, by value, 2005-09
                                                                                    • Small luxuries
                                                                                      • Factors used in the forecast
                                                                                      • Segment Performance

                                                                                        • Key points
                                                                                          • Instant coffee
                                                                                            • Figure 12: UK retail sales of instant coffee, by volume and value, 2005-09
                                                                                          • Premium driving growth
                                                                                            • Figure 13: UK retail sales of instant coffee, by sector, by value, 2005-09
                                                                                          • Niche and segmentation
                                                                                            • Premium lifts decaf
                                                                                              • Something special
                                                                                                • Powders
                                                                                                  • Starbucks are everywhere!
                                                                                                    • Roast and ground
                                                                                                      • Figure 14: UK retail sales of roast and ground coffee, by value, 2003-09
                                                                                                      • Figure 15: UK retail sales of roast and ground coffee, by sector, by value, 2007 and 2009
                                                                                                    • Bean growing
                                                                                                      • Niche convenience
                                                                                                        • The convenience king
                                                                                                          • Frothing at the machine
                                                                                                            • Flat on decaf
                                                                                                              • From ready to drink – to instant cappuccino
                                                                                                                • All about the milk
                                                                                                                  • Fair trade
                                                                                                                    • Figure 16: UK retail sales of fair trade coffee, by value, 2005-09
                                                                                                                • Market Share

                                                                                                                  • Key points
                                                                                                                    • When the going gets tough
                                                                                                                      • Figure 17: Market share of coffee, by manufacturer, by value, 2005-09
                                                                                                                    • Own-label makes its mark
                                                                                                                      • The original nose dive
                                                                                                                        • Figure 18: Market share for instant coffee, by leading brand, by value, 2006-09
                                                                                                                      • Kenco’s survival strategy
                                                                                                                        • Premium popularity
                                                                                                                          • Figure 19: Market share for ground/fresh coffee, by brand, by value, 2005-09
                                                                                                                        • Pods bring giant opportunity
                                                                                                                        • Companies and Products

                                                                                                                          • Major players
                                                                                                                            • Cafédirect UK
                                                                                                                              • Douwe Egberts
                                                                                                                                • Fine Foods International – The Coffee People
                                                                                                                                  • Food Brands Group (Percol)
                                                                                                                                    • Gala Coffee Ltd
                                                                                                                                      • Kraft Foods
                                                                                                                                        • Lavazza UK
                                                                                                                                          • Nestlé UK
                                                                                                                                          • Channels to Market

                                                                                                                                            • Key points
                                                                                                                                              • Figure 20: UK retail sales of coffee, by type of outlet, 22007 and 2009
                                                                                                                                            • Specialists holding steady
                                                                                                                                            • Brand Elements

                                                                                                                                                • Key points
                                                                                                                                                  • Brand map
                                                                                                                                                      • Figure 21: Attitudes towards and usage of coffee brands, December 2009
                                                                                                                                                    • Brand qualities of coffee brands
                                                                                                                                                      • Luxury and authenticity key drivers
                                                                                                                                                        • Figure 22: Personalities of various coffee brands, December 2009
                                                                                                                                                      • Experience of coffee brands
                                                                                                                                                        • Everyday instants dominate, niche premium brands lack awareness
                                                                                                                                                          • Figure 23: Consumer usage of various coffee brands, December 2009
                                                                                                                                                        • Brand consideration for coffee brands
                                                                                                                                                          • Premium brands hold greatest appeal
                                                                                                                                                            • Figure 24: Consideration of various coffee brands, December 2009
                                                                                                                                                          • Brand satisfaction for coffee brands
                                                                                                                                                            • Instant coffee brands best viewed
                                                                                                                                                              • Figure 25: Satisfaction with various coffee brands, December 2009
                                                                                                                                                            • Brand commitment to coffee brands
                                                                                                                                                              • Nescafé has biggest fan base
                                                                                                                                                                • Figure 26: Commitment to various coffee brands, December 2009
                                                                                                                                                              • Brand intentions for coffee brands
                                                                                                                                                                • Biggest instants have best retention
                                                                                                                                                                  • Figure 27: Future usage intentions for various coffee brands, December 2009
                                                                                                                                                                • Brand recommendation for coffee brands
                                                                                                                                                                  • Instant brands the trusted choice, but Nescafé leads the way
                                                                                                                                                                    • Figure 28: Recommendation of various coffee brands, December 2009
                                                                                                                                                                  • Kenco
                                                                                                                                                                    • What the consumer thinks
                                                                                                                                                                      • Figure 29: Attitudes towards the Kenco brand, December 2009
                                                                                                                                                                    • Cafédirect
                                                                                                                                                                      • What the consumer thinks
                                                                                                                                                                        • Figure 30: Attitudes towards the Cafédirect brand, December 2009
                                                                                                                                                                      • illy
                                                                                                                                                                        • What the consumer thinks
                                                                                                                                                                          • Figure 31: Attitudes towards the illy brand, December 2009
                                                                                                                                                                        • Starbucks
                                                                                                                                                                          • What the consumer thinks
                                                                                                                                                                            • Figure 32: Attitudes towards the Starbucks brand, December 2009
                                                                                                                                                                          • Nescafé
                                                                                                                                                                            • What the consumer thinks
                                                                                                                                                                              • Figure 33: Attitudes towards the Nescafé brand, December 2009
                                                                                                                                                                          • Brand Communication and Promotion

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Falling spend
                                                                                                                                                                                • Figure 34: Topline adspend in the coffee market, 2005-09
                                                                                                                                                                              • Ad spending continues to decline
                                                                                                                                                                                • Figure 35: Adspend of top ten advertisers in the coffee market, 2007-09
                                                                                                                                                                              • When the going gets tough…
                                                                                                                                                                                • …the tough get going
                                                                                                                                                                                  • Sustaining share
                                                                                                                                                                                      • Figure 36: Adspend of top ten brands in the coffee market, 2007-09
                                                                                                                                                                                  • The Consumer – In-home versus Out-of-home Coffee Drinking

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Places where coffee is drunk
                                                                                                                                                                                          • Figure 37: Places where coffee is drunk, December 2009
                                                                                                                                                                                        • More people drinking at home
                                                                                                                                                                                          • Men are from Mars…
                                                                                                                                                                                            • Coffee – work driver and home comfort
                                                                                                                                                                                            • The Consumer – In-home Habits

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • In-home coffee drinking habits
                                                                                                                                                                                                    • Figure 38: Types of coffee drunk at home, December 2009
                                                                                                                                                                                                  • The future’s bean
                                                                                                                                                                                                    • More pulling power for a youth audience
                                                                                                                                                                                                      • Capsule living
                                                                                                                                                                                                        • Brands beware
                                                                                                                                                                                                          • Ground vs instant
                                                                                                                                                                                                              • Figure 39: Types of Coffee Drunk at home by main preference, December 2009
                                                                                                                                                                                                          • The Consumer – Attitudes towards In-home Coffee Drinking

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • Attitudes towards in-home coffee drinking
                                                                                                                                                                                                                  • Figure 40: Attitudes towards drinking coffee in the home, December 2009
                                                                                                                                                                                                                • Delivering on taste
                                                                                                                                                                                                                  • A matter of taste
                                                                                                                                                                                                                      • Figure 41: Attitudes towards drinking coffee in the home, by types of coffee drunk at home, December 2009
                                                                                                                                                                                                                  • Attitudes towards Drinking Coffee

                                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                                      • Attitudes towards drinking coffee
                                                                                                                                                                                                                        • Figure 42: Attitudes towards drinking coffee in general, December 2009
                                                                                                                                                                                                                      • On price and premiums
                                                                                                                                                                                                                        • The budget bean
                                                                                                                                                                                                                          • Instant appeal
                                                                                                                                                                                                                            • Decaf falls down on taste and energy
                                                                                                                                                                                                                            • Targeting Opportunities

                                                                                                                                                                                                                                • Figure 43: Target groups, December 2009
                                                                                                                                                                                                                              • Steaming Hot – 18% of adults
                                                                                                                                                                                                                                • Profile
                                                                                                                                                                                                                                  • Market opportunities
                                                                                                                                                                                                                                    • Stone Cold – 22% of adults
                                                                                                                                                                                                                                      • Profile
                                                                                                                                                                                                                                        • Market opportunities
                                                                                                                                                                                                                                          • Casual Affair – 22% of adults
                                                                                                                                                                                                                                            • Profile
                                                                                                                                                                                                                                              • Market opportunities
                                                                                                                                                                                                                                                • Instant Happiness – 18% of adults
                                                                                                                                                                                                                                                  • Profile
                                                                                                                                                                                                                                                    • Health Opportunity – 20% of adults
                                                                                                                                                                                                                                                      • Profile
                                                                                                                                                                                                                                                        • Marketing opportunities
                                                                                                                                                                                                                                                        • Appendix – Internal Market Environment

                                                                                                                                                                                                                                                            • Figure 44: Instant coffee drinkers, 2005-09
                                                                                                                                                                                                                                                            • Figure 45: Frequency of drinking instant coffee, 2005-09
                                                                                                                                                                                                                                                            • Figure 46: Types of instant coffee drunk, 2005-09
                                                                                                                                                                                                                                                            • Figure 47: Varieties of instant coffee drunk, 2006-09
                                                                                                                                                                                                                                                            • Figure 48: Usage and frequency of instant coffee, by demographics, 2009
                                                                                                                                                                                                                                                            • Figure 49: Branded instant coffee drinkers, 2007-09
                                                                                                                                                                                                                                                            • Figure 50: Ground coffee drinkers, 2005-09
                                                                                                                                                                                                                                                            • Figure 51: Frequency of drinking ground coffee, 2005-09
                                                                                                                                                                                                                                                            • Figure 52: Types of ground coffee drunk, 2008-09
                                                                                                                                                                                                                                                            • Figure 53: Varieties of ground coffee drunk, 2005-09
                                                                                                                                                                                                                                                            • Figure 54: Usage and frequency of use of ground coffee, by demographics, 2009
                                                                                                                                                                                                                                                            • Figure 55: Branded ground coffee drinkers, 2007-09
                                                                                                                                                                                                                                                            • Figure 56: Instant coffee/ground coffee drinkers, 2005-09
                                                                                                                                                                                                                                                        • Appendix – Who’s Innovating?

                                                                                                                                                                                                                                                            • Figure 57: Claims, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 58: Claims category, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 59: Branded vs. own-label, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 60: Top 20 companies, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 61: Flavour component sub-group, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 62: Flavour component, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 63: Flavour, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 64: Launch type, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 65: Package type, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 66: Package material, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 67: Storage, 2008 and 2009
                                                                                                                                                                                                                                                            • Figure 68: Format type, 2008 and 2009
                                                                                                                                                                                                                                                        • Appendix – The Consumer – In-home versus Out-of-home Coffee Drinking

                                                                                                                                                                                                                                                            • Figure 69: Places where coffee is drunk, by demographics, December 2009
                                                                                                                                                                                                                                                        • Appendix – The Consumer – In-home Habits

                                                                                                                                                                                                                                                            • Figure 70: Most popular types of coffee drunk at home, by demographics, December 2009
                                                                                                                                                                                                                                                            • Figure 71: Next most popular types of coffee drunk at home, by demographics, December 2009 (continued)
                                                                                                                                                                                                                                                        • Appendix – Attitudes towards In-home Coffee Drinking

                                                                                                                                                                                                                                                            • Figure 72: Places where coffee is drunk, by types of coffee drunk at home, December 2009
                                                                                                                                                                                                                                                            • Figure 73: Most popular attitudes towards drinking coffee in the home, by demographics, December 2009
                                                                                                                                                                                                                                                            • Figure 74: Next most popular attitudes towards drinking coffee in the home, by demographics, December 2009 (continued)
                                                                                                                                                                                                                                                        • Appendix – Attitudes towards Drinking Coffee

                                                                                                                                                                                                                                                            • Figure 75: Most popular attitudes towards drinking coffee in general, by demographics, December 2009
                                                                                                                                                                                                                                                            • Figure 76: Next most popular attitudes towards drinking coffee in general, by demographics, December 2009 (continued)
                                                                                                                                                                                                                                                            • Figure 77: Attitudes towards drinking coffee in general, by types of coffee drunk at home, December 2009
                                                                                                                                                                                                                                                        • Appendix – Targeting Opportunities

                                                                                                                                                                                                                                                            • Figure 78: Places where coffee is drunk, by target groups, December 2009
                                                                                                                                                                                                                                                            • Figure 79: Types of coffee drunk at home, by target groups, December 2009
                                                                                                                                                                                                                                                            • Figure 80: Attitudes towards drinking coffee in the home, by target groups, December 2009
                                                                                                                                                                                                                                                            • Figure 81: Attitudes towards drinking coffee in general, by target groups, December 2009
                                                                                                                                                                                                                                                            • Figure 82: Target groups, by demographics, December 2009

                                                                                                                                                                                                                                                        Coffee - UK - February 2010

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