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Coffee - UK - August 2013

INTRODUCTION
Definition
Abbreviations
EXECUTIVE SUMMARY
The market
The future
Figure 1: Retail sales and forecast of coffee*, UK, by value, 2008-18
Market factors
Growth in over-55s and C2s will support the market
Encouraging consumers to trade up to premium varieties will add value to the market
Coffee shop brands
Companies, brands and innovation
Nestlé leads the market
Figure 2: Leading manufacturers’ sales and shares in the UK retail coffee (excl RTD) market, by value, 2012/13*
NPD continues to focus on instant coffee
Nestlé and Mondelēz dominate adspend
The consumer
More than eight in ten adults drink coffee
Figure 3: Consumption of coffee at home, June 2013
Rich taste is the leading factor, generating majority appeal
Figure 4: Factors influencing choice of coffee, June 2013
Half see coffee as a way to start the day
Figure 5: Drivers to drinking coffee, June 2013
Quality is more important than convenience
Figure 6: Agreement with statements on coffee, June 2013
Coffee drinkers are price-conscious but show willingness to trade up
Figure 7: Attitudes towards coffee, June 2013
What we think
ISSUES IN THE MARKET
What is the potential for adding value to the instant coffee segment?
How can the market push the ritual or ‘treat’ angle of coffee drinking?
How can coffee pod manufacturers expand their target audience?
How can the coffee market engage younger users?
TREND APPLICATION
Objectify
Mood to Order
Mintel Futures: Generation Next
MARKET DRIVERS
Key points
Consumption stays the same since the 1970s
Figure 8: Index of household purchased quantities of coffee, tea and purer fruit juices, average per person, per week, 1974-2011
Prices appear to be stabilising
Figure 9: Retail Price Index for tea, coffee & other hot drinks and soft drinks, January 2006-May 2013
Figure 10: Monthly weighted average price of coffee beans on world markets, by coffee bean type, January 2010-May 2013
Coffee shops remain a popular destination
Figure 11: Market size and forecast of UK coffee shops, 2006-16
Demographic changes
Growth in number of over-55s bodes well for the market
Figure 12: Trends in the age structure of the UK population, 2008-13 and 2013-18
Decline in ABs could threaten premiumisation in the market
Figure 13: Forecast adult population trends, by socio-economic group, 2008-18
STRENGTHS AND WEAKNESSES
Strengths
Weaknesses
WHO’S INNOVATING?
Key points
Premiumisation remains a focus for instant coffee NPD
Figure 14: Product launches within the UK coffee market, by main format types, 2009-13
Ground and pods fight back
Detailed origin resonates with a niche audience of affluent buyers
RTD formats see an increase in NPD
Targeting under-25s through innovation on flavour and ‘need states’
MARKET SIZE AND FORECAST
Key points
Robust performance in value and volume sales
Figure 15: UK retail value sales of coffee*, 2008-18
The future
Figure 16: Retail sales and forecast of coffee*, UK, by value, 2008-18
Figure 17: Retail sales and forecast of coffee*, UK, by volume, 2008-18
Methodology
SEGMENT PERFORMANCE
Key points
Instant coffee continues to dominate
Figure 18: Segment performance, by coffee type (take-home), 2010-12
Ground coffee/coffee beans slowly gain market share
Coffee pods perform well
MARKET SHARE
Key points
Nestlé is the leading manufacturer in the coffee market
Figure 19: Leading manufacturers’ sales and shares in the UK retail coffee (excl RTD) market, by value and volume, 2011/12 and 2012/13
Nescafé Gold underperforms its other Nescafé stablemates
Figure 20: Leading brands’ sales and shares in the UK retail coffee (excl RTD) market, by value and volume, 2011/12 and 2012/13
Starbucks leads the RTD coffee market
Figure 21: Leading brands’ performance in the UK retail RTD chilled coffee market, by value and volume, 2011/12 and 2012/13
COMPANIES AND PRODUCTS
Cafédirect
Mondelēz International
Douwe Egberts (D.E Master Blenders)
Lavazza UK
Nestlé
 COFFEE SHOP BRANDS
Costa
Starbucks
BRAND RESEARCH
Brand map
Figure 22: Attitudes towards and usage of brands in the coffee sector, May 2013
Correspondence analysis
Brand attitudes
Figure 23: Attitudes, by coffee brand, May 2013
Brand personality
Figure 24: Coffee brand personality – macro image, May 2013
Figure 25: Coffee brand personality – micro image, May 2013
Brand experience
Figure 26: Coffee brand usage, May 2013
Figure 27: Satisfaction with various coffee brands, May 2013
Figure 28: Consideration of coffee brands, May 2013
Figure 29: Consumer perceptions of current coffee brand performance, May 2013
Figure 30: Coffee brand recommendation – Net Promoter Score, May 2013
Brand index
Figure 31: Coffee brand index, May 2013
Figure 32: Coffee brand index vs. recommendation, May 2013
Target group analysis
Figure 33: Target groups, May 2013
Figure 34: Coffee brand usage, by target groups, May 2013
Group One – Conformists
Group Two – Simply the Best
Group Three – Shelf Stalkers
Group Four – Habitual Shoppers
Group Five – Individualists
BRAND COMMUNICATION AND PROMOTION
Key points
Total adspend on coffee rises in 2012
Figure 35: Above-the-line media advertising spend for the total coffee market (inc iced coffee), 2010-13
Nestlé invests over half of category adspend to protect its market leadership
Figure 36: Above-the-line media advertising spend on coffee, by advertiser, 2010-13
Figure 37: Above-the-line media advertising spend on coffee, by top five brands, 2012
Mondelēz remains second highest advertiser, focusing on Kenco Millicano
TV spend falls in 2012, while outdoor and cinema gets a boost
Figure 38: Above-the-line media advertising spend on coffee, by media type, 2010-13*
CHANNELS TO MARKET
Key points
Supermarkets dominate distribution
Figure 39: UK retail sales of coffee, by type of outlet, 2010-12
CONSUMER – USAGE
Key points
More than eight in ten adults drink coffee
Figure 40: Consumption of coffee at home, June 2013
Potential for decaffeinated coffee to grow usage throughout the day
Three in five drink coffee at least once a day
Figure 41: Consumption of coffee, by frequency, June 2013
Usage increases in line with age
Figure 42: Consumption of coffee (any type), by frequency, by age, June 2013
16-24s opt for convenient formats
Figure 43: Consumption of instant cappuccinos/latte/mocha coffee (eg Kenco 3-in-1, Starbucks Via, etc.), chilled ready-to-drink coffee (eg Starbucks Frappuccino, Illy Iced Coffee, etc.) and coffee pods (eg Nespresso), by age June 2013
Pods and micro-ground instant coffee attract a similar (and discerning) user base
Almost half drink three types of coffee or less
Figure 44: Repertoire of types ofcoffee drunk, June 2013
CONSUMER – FACTORS INFLUENCING CHOICE
Key points
Rich taste generates majority appeal
Figure 45: Factors influencing choice of coffee, June 2013
16-24s rate flavours and ethical issues
Figure 46: Factors influencing choice of coffee, by age, June 2013
Potential for premium brands
Figure 47: Those for whom ‘a premium brand (eg Nespresso)’ is an important attribute when choosing to buy one in-home coffee brand over another, by region and gross annual household income, June 2013
Coffee deemed convenient
Figure 48: Correspondence analysis of qualities associated with selected hot drinks, February 2013
CONSUMER – DRIVERS TO DRINKING COFFEE
Key points
Half see coffee as a way to start the day
Figure 49: Drivers to drinking coffee, June 2013
‘Treat’ aspect offers a tangible marketing opportunity
Providing a pick-me-up to consumers
Figure 50: Agreement with the statements ‘Coffee helps me to stay alert’ and ‘Coffee gives me an energy boost’, by age, June 2013
Flavourings mask the bitter taste for 16-24s
Figure 51: Agreement with the statements ‘I am sometimes put off by the bitter taste of coffee’ and ‘I tend to add flavourings (eg syrup) to my coffee to disguise the bitter taste’, by age, June 2013
CONSUMER – ATTITUDES TOWARDS DRINKING COFFEE
Key points
Quality is more important than convenience
Figure 52: Agreement with statements on coffee, June 2013
Instant coffee delivers on caffeine and taste
16-24s say it’s hard to recreate coffee shop style drinks at home
Figure 53: Agreement with the statements ‘It’s hard to recreate coffee shop style drinks at home’ and ‘I would like to recreate coffee shop flavours (eg eggnog at Christmas) at home’, by age, June 2013
CONSUMER – ATTITUDES TOWARDS COFFEE
Key points
Coffee drinkers are price-conscious but show willingness to trade up
Figure 54: Attitudes towards coffee, June 2013
Social occasions pose potential for trading up
Proving taste credentials will be key to premiumisation
Figure 55: Agreement with the statement ‘I would be more likely to buy a premium version of one of my favourite brands than switch to a new premium brand’, by age, June 2013
Premium instant versions are helping to add value
Packaging should balance freshness with convenience
Little call for smaller formats
The majority remained unconvinced whether coffee pods represent value for money
APPENDIX – MARKET DRIVERS
Figure 56: GDP, PDI, consumer expenditure and savings, at current prices, 2008-18
APPENDIX –MARKET SIZE AND FORECAST
Figure 57: Best- and worst-case forecasts for retail sales of coffee, by value, 2013-18
Figure 58: Best- and worst-case forecasts for retail sales of coffee, by volume, 2013-18
APPENDIX – BRAND RESEARCH
Figure 59: Brand usage, May 2013
Figure 60: Brand commitment, May 2013
Figure 61: Brand momentum, May 2013
Figure 62: Brand diversity, May 2013
Figure 63: Brand satisfaction, May 2013
Figure 64: Brand recommendation, May 2013
Figure 65: Brand attitude, May 2013
Figure 66: Brand image – macro image, May 2013
Figure 67: Brand image – micro image, May 2013
Figure 68: Target groups, by demographics, May 2013
Figure 69: Psychographic segmentation, by target groups, May 2013
Figure 70: Brand usage, by target groups, May 2013
Brand index
Figure 71: Brand index, May 2013
APPENDIX – CONSUMER – USAGE
Figure 72: Consumption of coffee, June 2013
Figure 73: Consumption of coffee, June 2013
Figure 74: Most popular consumption of coffee-any coffee, by demographics, June 2013
Figure 75: Next most popular consumption of coffee-any coffee, by demographics, June 2013
Figure 76: Most popular consumption of coffee-any instant, by demographics, June 2013
Figure 77: Next most popular consumption of coffee-any instant, by demographics, June 2013
Figure 78: Most popular consumption of coffee-any fresh, by demographics, June 2013
Figure 79: Next most popular consumption of coffee-any fresh, by demographics, June 2013
Figure 80: Most popular consumption of coffee-standard instant coffee (eg Nescafé), by demographics, June 2013
Figure 81: Next most popular consumption of coffee-standard instant coffee (eg Nescafé), by demographics, June 2013
Figure 82: Most popular consumption of coffee-ground coffee (eg carte noire), by demographics, June 2013
Figure 83: Next most popular consumption of coffee-ground coffee (eg carte noire), by demographics, June 2013
Figure 84: Most popular consumption of coffee-instant cappuccinos/latte/mocha coffee (ie Kenco 3-in-1, Starbucks Via, etc), by demographics, June 2013
Figure 85: Next most popular consumption of coffee-instant cappuccinos/latte/mocha coffee (ie Kenco 3-in-1, Starbucks Via, etc), by demographics, June 2013
Figure 86: Most popular consumption of coffee-decaffeinated coffee (any type), by demographics, June 2013
Figure 87: Next most popular consumption of coffee-decaffeinated coffee (any type), by demographics, June 2013
Figure 88: Most popular consumption of coffee-whole bean or micro-ground instant coffee (eg Kenco Millicano, Nescafé Azera), by demographics, June 2013
Figure 89: Next most popular consumption of coffee-whole bean or micro-ground instant coffee (eg Kenco Millicano, Nescafé Azera), by demographics, June 2013
Figure 90: Most popular consumption of coffee – coffee made using whole beans that I grind at home, by demographics, June 2013
Figure 91: Next most popular consumption of coffee – coffee made using whole beans that I grind at home, by demographics, June 2013
Figure 92: Most popular consumption of coffee-chilled ready-to-drink coffee (ie Starbucks frappuccino, Illy iced coffee, etc), by demographics, June 2013
Figure 93: Next most popular consumption of coffee-chilled ready-to-drink coffee (ie Starbucks frappuccino, Iily iced coffee, etc), by demographics, June 2013
Figure 94: Most popular consumption of coffee-coffee pods (eg Nespresso), by demographics, June 2013
Figure 95: Next most popular consumption of coffee-coffee pods (eg nespresso), by demographics, June 2013
Figure 96: Most popular consumption of coffee-other coffee types (eg one-cup coffee filter bags), by demographics, June 2013
Figure 97: Next most popular consumption of coffee-other coffee types (eg one-cup coffee filter bags), by demographics, June 2013
APPENDIX – CONSUMER – FACTORS INFLUENCING CHOICE
Figure 98: Factors influencing choice of coffee, June 2013
Figure 99: Most popular factors influencing choice of coffee, by demographics, June 2013
Figure 100: Next most popular factors influencing choice of coffee, by demographics, June 2013
Figure 101: Other factors influencing choice of coffee, by demographics, June 2013
Figure 102: Words associated with coffee, tea and hot chocolate, February 2013
Figure 103: Most popular words associated with coffee, by demographics, February 2013
APPENDIX – CONSUMER – DRIVERS TO DRINKING COFFEE
Figure 104: Reasons to drink coffee, June 2013
Figure 105: Most popular reasons to drink coffee, by demographics, June 2013
Figure 106: Next most popular reasons to drink coffee, by demographics, June 2013
APPENDIX – CONSUMER – ATTITUDES TOWARDS DRINKING COFFEE
Figure 107: Agreement with statements on coffee, June 2013
Figure 108: Most popular agreement with statements on coffee, by demographics, June 2013
Figure 109: Next most popular agreement with statements on coffee, by demographics, June 2013
APPENDIX – CONSUMER – ATTITUDES TOWARDS COFFEE
Figure 110: Attitudes towards coffee, June 2013
Figure 111: Agreement with the statement ‘I would notice if the price of my favourite coffee rose’, by demographics, June 2013
Figure 112: Agreement with the statement ‘I am more likely to stock up on my favourite brand when it is on promotion’, by demographics, June 2013
Figure 113: Agreement with the statement ‘It’s only worth paying more for coffee if there is an obvious difference in taste from cheaper ones’, by demographics, June 2013
Figure 114: Agreement with the statement ‘It’s worth paying more for packaging that keeps coffee fresher for longer’, by demographics, June 2013
Figure 115: Agreement with the statement ‘I would be more willing to try a higher priced coffee if recommended to me (eg by friends/family/online)’, by demographics, June 2013
Figure 116: Agreement with the statement ‘I would be more likely to buy a premium version of one of my favourite brands than switch to a new premium brand’, by demographics, June 2013
Figure 117: Agreement with the statement ‘I am more likely to use premium coffee when drinking with others than when drinking alone’, by demographics, June 2013
Figure 118: Agreement with the statement ‘Information on product origin (eg Java Volcanic Island coffee) reassures me of high quality’, by demographics, June 2013
Figure 119: Agreement with the statement ‘Micro-ground coffee (eg Kenco Millicano) is worth paying more for than regular instant’, by demographics, June 2013
Figure 120: Agreement with the statement ‘I would be more likely to buy premium coffee if they were sold in smaller formats (eg single serve sachets, 40g jars)’, by demographics, June 2013
Figure 121: Agreement with the statement ‘Coffee pod machines/pods are worth the cost for the quality you get’, by demographics, June 2013
Figure 122: Agreement with the statement ‘Coffee-shop brands (eg Starbucks Via) make better in-home coffee than brands like Nescafé and Kenco’, by demographics, June 2013

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