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Coffee - UK - April 2012

INTRODUCTION
Definition
Abbreviations
EXECUTIVE SUMMARY
The market
Figure 1: Market size and forecast for the total UK take-home coffee market, in volume sales, 2006-16
Market factors
Figure 2: Annual changes in price (in Retail Prices Index) of coffee/other hot drinks (excl. tea) and all items, Q1 2008-Q4 2011
Companies, brands and innovation
Figure 3: Market size of top five take-home instant coffee brands in 2011, by value, and value growth rate between 2009 and 2011
The consumer
Figure 4: Most important attributes when choosing to buy one in-home coffee brand over another, February 2012
Figure 5: Attitudes towards coffee, February 2012
What we think
ISSUES IN THE MARKET
How can manufacturers combat rising commodity prices?
Does instant coffee have a future with younger consumers?
Which competitors are coffee pods stealing share from?
How much impact can Starbucks make in the retail sector?
FUTURE OPPORTUNITIES
The Real Thing
Slow It All Down
INTERNAL MARKET ENVIRONMENT
Key points
Increased price volatility hits instant coffee the hardest
Figure 6: Annual changes in price (in Retail Prices Index) of coffee/other hot drinks (excl. tea) and all items, Q1 2008-Q4 2010
Premiumisation is the best strategy to counter price volatility
Figure 7: Monthly weighted average price of coffee beans on world markets, by coffee bean type, January 2010-February 2012
Gourmet coffee is now part of the national psyche
Figure 8: Visits to coffee shops in the last 12 months, 2007-11
Consumers want convenience and quality
There is not enough innovation geared to attracting younger drinkers…
Figure 9: Trends in agreement with company ethics lifestyle statements, 2007-11
…nor is the branding engaging enough
Figure 10: Proportion of 16-24-year-olds who think each retail coffee brand is ‘boring’ compared to all adults, February 2012
BROADER MARKET ENVIRONMENT
Consumer spend has been under severe pressure
Figure 11: Change in average weekly earnings compared to inflation, January 2007-January 2012*
Tentative signs that 2012 will be a more prosperous year
Figure 12: GfK NOP Consumer Confidence Index, January 2007-January 2012
Rise in ABC1s underpins the continued importance of premiumisation
Figure 13: Forecast adult population trends, by socio-economic group, 2006-16
An ageing population means instant still remains a big revenue driver
Figure 14: Forecast adult population trends, by age, 2006-16
COMPETITIVE CONTEXT
Key points
Chilled drinks are stealing share from hot beverages
Figure 15: Market value (£ millions) and share of the UK take-home non-alcoholic drinks market, chilled beverages versus hot drinks, 2000-10
Evidence that take-home coffee is stealing share from hot rivals
Figure 16: UK take-home volume sales of hot beverages, by product type, 2009-11
Coffee shops helping to drive take-home sales rather than stealing share
Figure 17: Market size and forecast of UK coffee shops, 2006-16
Coffee can be much more aggressive in challenging energy/sports drinks
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weaknesses
WHO’S INNOVATING?
Key points
Instant coffee replaces ground in the innovation stakes
Figure 18: Product launches within the UK coffee market, by main format types, 2008-11
Convenience claim as prevalent as ethical in 2011
Figure 19: Proportion of new take-home coffee product launches, by claims category, 2008-11
Flavour innovation remains the rarity when it should be the norm
Figure 20: Proportion of new take-home coffee product launches within the UK that are flavoured, 2008-11
Figure 21: Examples of flavoured new product launches within the UK coffee market, 2011
Marketing the benefits of intensity
Figure 22: Examples of new product launches within the UK coffee market which market themselves around intensity/energy
Fitness Coffee Antioxidant Blend for consumers with healthy lifestyles
MARKET SIZE AND FORECAST
Key points
The coffee market has stagnated in recent times
Coffee prices are spiralling upwards
Figure 23: Market size and forecast for the total UK take-home coffee market, in volume and value sales, 2006-16
Figure 24: Value sales and forecast for the UK take-home coffee market, 2006-16
Forecast methodology
MARKET SEGMENTATION
Key points
Premium segments are driving growth as instant clings on
Figure 25: Coffee volume and value sales and share in the take-home sector, by coffee type, 2009-11
MARKET SHARE
Key points
Nescafé successfully protects its share from Kenco
Figure 26: Top ten instant coffee brands in the take-home instant coffee sector, by value sales, 2009-11
Kenco and Nescafé increasingly focusing on two areas: youth and quality
Own-label suffers from trend towards premiumisation
COMPANIES AND PRODUCTS
Key points
Cafédirect
Costa
Douwe Egberts
Kraft Foods
Lavazza UK
Nestlé
Starbucks
BRAND RESEARCH
Brand map
Figure 27: Attitudes towards and usage of brands in the coffee sector, February 2012
Correspondence analysis
Brand attitudes
Figure 28: Attitudes, by coffee brand, February 2012
Brand personality
Figure 29: Coffee brand personality – macro image, February 2012
Figure 30: Coffee brand personality – micro image, February 2012
Brand experience
Figure 31: Coffee brand usage, February 2012
Figure 32: Satisfaction with various coffee brands, February 2012
Figure 33: Consideration of coffee brands, February 2012
Figure 34: Consumer perceptions of current coffee brand performance, February 2012
Figure 35: Coffee brand recommendation – Net Promoter Score, February 2012
Brand index
Figure 36: Coffee brand index, February 2012
Figure 37: Coffee brand index vs. recommendation, February 2012
Target group analysis
Figure 38: Target groups, February 2012
Figure 39: Coffee brand usage, by target groups, February 2012
Group One – Conformists
Group Two – Simply the Best
Group Three – Shelf Stalkers
Group Four – Habitual Shoppers
Group Five – Individualists
BRAND COMMUNICATION AND PROMOTION
Key points
Coffee sees a steady increase in investment
Figure 40: Above-the-line media advertising spend for the total coffee market, 2009-11
Nestlé and Kraft invest over £50 million in three years
Figure 41: Above-the-line media advertising spend on coffee, by advertiser, 2009-11
Brand spend reflects the fragmented nature of the market
Figure 42: Above-the-line media spend on coffee, by brand, 2009-11
CONSUMER USAGE
Key points
Premiumisation or not, the UK remains a nation of instant coffee drinkers
Figure 43: Consumption of coffee in the home over the past year, February 2012
Growth lies in the more niche coffee sectors
Figure 44: Consumption of different types of coffee in home, 2011 versus 2012, in order of the greatest change in penetration
Pods and chilled coffee are attracting a younger, richer audience
Figure 45: Index of usage for different coffee types drunk in home, by gender, age and gross annual income, February 2012
The British find instant coffee a hard habit to let go
Figure 46: Crossover in usage between instant coffee, ground/whole bean coffee and pods, February 2012
Instant loyalists tend to be ‘middle-aged’, from the North and low income
Figure 47: Solus instant coffee drinkers, by demographics, February 2012
CONSUMER – MOST IMPORTANT FACTORS WHEN BUYING IN-HOME COFFEE
Key points
Consumers put emphasis on a rich and smooth taste when buying brands
Figure 48: Most important attributes when choosing to buy one in-home coffee brand over another, February 2012
Brand loyalty remains strong
Demand for premiumisation is widespread, not particular to certain groups
Figure 49: Those for whom ‘the best-quality coffee’ is the most important attribute when choosing to buy one in-home coffee brand over another, by demographics, February 2012
Energy is a big selling point for the new generation of in-home coffee drinkers
Figure 50: Index of most important attributes when choosing to buy one in-home coffee brand over another, 16-24s versus over-55s, February 2012
Men go for quality, women for price and ethics
Figure 51: The most significant differences in the most important attributes when choosing to buy one in-home coffee brand over another, by gender, February 2012
CONSUMER – ATTITUDES TOWARDS DIFFERENT TYPES OF IN-HOME COFFEE
Key points
Premiumisation is important but convenience is still king
Awareness of pods remains low
Figure 52: Attitudes towards different coffee types that can be drunk at home, February 2012
Young consumers crave flavour and chilled coffee innovations
Figure 53: Net difference in attitudes towards different coffee types that can be drunk at home, 16-24-year-olds versus all adults, February 2012
CONSUMER – GENERAL ATTITUDES TOWARDS COFFEE
Key points
Four in five drinkers love the taste of coffee
Coffee fulfils a variety of consumer needs
Figure 54: Attitudes towards coffee, February 2012
The younger generation favour functionality over taste
Figure 55: Net difference in attitudes towards coffee, 16-24-year-olds compared to all users, February 2012
Female coffee drinkers see it as more indulgent and comforting
Figure 56: Net difference in attitudes towards coffee, by gender, February 2012
APPENDIX – MARKET SIZE AND FORECAST
Figure 57: Value sales and forecast for the UK take-home coffee market, 2006-16
Figure 58: Market size and forecast for the total UK take-home coffee market, in volume sales, 2006-16
Figure 59: Best- and worst-case scenarios for value forecast of coffee, 2011-16
Figure 60: Best- and worst-case scenarios for volume forecast of coffee, 2011-16
APPENDIX – BRAND RESEARCH
Figure 61: Brand usage, February 2012
Figure 62: Brand commitment, February 2012
Figure 63: Brand momentum, February 2012
Figure 64: Brand diversity, February 2012
Figure 65: Brand satisfaction, February 2012
Figure 66: Brand recommendation, February 2012
Figure 67: Brand attitude, February 2012
Figure 68: Brand image – macro image, February 2012
Figure 69: Brand image – micro image, February 2012
Figure 70: Profile of target groups, by demographics, February 2012
Figure 71: Psychographic segmentation, by target group, February 2012
Figure 72: Brand usage, by target groups, February 2012
Brand index
Figure 73: Brand index, February 2012
APPENDIX – BRAND COMMUNICATION AND PROMOTION
Figure 74: Above-the-line media advertising spend on coffee, 2009-11
Figure 75: Above-the-line media advertising spend on coffee, by brand, 2009-11
APPENDIX – CONSUMER USAGE
Figure 76: Most popular consumption of coffee in the past year, by demographics, February 2012
Figure 77: Next most popular consumption of coffee in the past year, by demographics, February 2012
Figure 78: Most popular consumption of coffee in the past year, by demographics, February 2012
Figure 79: Next most popular consumption of coffee in the past year, by demographics, February 2012
Figure 80: Consumption of coffee in the past year, by demographics, February 2012
APPENDIX – CONSUMER: MOST IMPORTANT FACTORS WHEN BUYING IN-HOME
Figure 81: Most popular factors when choosing to buy in-home coffee brands, by demographics, February 2012
Figure 82: Next most popular factors when choosing to buy in-home coffee brands, by demographics, February 2012
APPENDIX – CONSUMER: ATTITUDES TOWARDS DIFFERENT TYPES OF IN-HOME COFFEE
Figure 83: Most popular attitudes to different coffee types that can be drunk at home, by demographics, February 2012
Figure 84: Next most popular attitudes to different coffee types that can be drunk at home, by demographics, February 2012
APPENDIX – CONSUMER – GENERAL ATTITUDES TOWARDS COFFEE
Figure 85: Agreement with the statements ‘Coffee provides a much-needed energy boost’ and ‘Drinking coffee makes a nice break’, by demographics, February 2012
Figure 86: Agreement with the statements ‘I tend to drink coffee out of habit’ and ‘Drinking coffee is comforting’, by demographics, February 2012
Figure 87: Agreement with the statements ‘I love the taste of coffee’ and ‘Coffee helps wake me up in the morning’, by demographics, February 2012
Figure 88: Agreement with the statements ‘A coffee makes a nice treat’ and ‘Coffee goes nicely with certain foods (ie breakfast, biscuits, chocolate)’, by demographics, February 2012
Figure 89: Agreement with the statements ‘Coffee is warming in the colder months’ and ‘Coffee is one of the healthier drink options’, by demographics, February 2012
Figure 90: Agreement with the statements ‘Drinking coffee helps me not to over-eat’, by demographics, February 2012

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