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Coffee - UK - August 2015

OVERVIEW
What you need to know
Covered in this report
EXECUTIVE SUMMARY
The market
Coffee market propped up by growth of pods
Figure 1: UK retail value sales of coffee, 2010-20
Instant coffee’s woes continue
Figure 2: UK retail sales of coffee, by coffee type, 2012-14
Companies, brands and innovation
Nescafé leads in instant coffee
Figure 3: Leading brands’ shares in the UK retail instant coffee market, by value, 2014/15*
Taylors retains the lead in ground coffee
Above-the-line advertising grew by a further 6.4% in 2014
Figure 4: Recorded above-the-line, online display and direct mail total advertising expenditure on coffee. 2012-15*
Next wave of coffee shop-to-retail product: cold brew and nitro
Pods continue to gain share of NPD
Figure 5: New product launches in the UK coffee market, by format, 2011-14
The consumer
Figure 6: Frequency of drinking coffee at home, by type, June 2015
Leading instant brands have failed to embrace the craft movement
More than a quarter express an interest in delivery coffee
Figure 7: Interest in types of coffee products and services, June 2015
Cafetière is the most widely owned coffee system, but many owners don’t use them
One in five own a coffee pod machine
Figure 8: Types of coffee system owned, June 2015
Interest in origin is significant, even in instant coffee
Coffee is ideally placed to capitalise on health concerns around CSDs
Replicating the coffee shop experience is at the centre of successful NPD
Figure 9: Attitudes towards coffee, June 2015
What we think
ISSUES AND INSIGHTS
Instant coffee set for a long, slow decline
The facts
The implications
Pod sales break through £100 million for the first time in 2014
The facts
The implications
Instant coffee with artisan credentials sparks wide interest
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Coffee market estimated at £1.1bn in 2015
Instant coffee value sales set to decline by 9.1% by 2020
Ground coffee sales expected to remain broadly similar
Pod sales forecast to reach £373 million by 2020
Ageing population is slowing the decline of instant coffee
Coffee prices enduring a sustained period of volatility
MARKET SIZE AND FORECAST
Coffee market propped up by growth of pods
Figure 10: UK retail value and volume sales of coffee, 2010-20
Figure 11: UK retail value sales of coffee, 2010-20
Instant coffee’s woes continue
Figure 12: UK retail value and volume sales of instant coffee, 2010-20
Figure 13: UK retail value and volume sales of instant coffee, 2010-20
Volume sales of ground coffee/coffee beans remain flat
Figure 14: UK retail value and volume sales of ground coffee/coffee beans, 2010-20
Figure 15: UK retail value and volume sales of ground coffee/coffee beans, 2010-20
Pods smash the £100 million mark for the first time
Figure 16: UK retail value and volume sales of coffee pods, 2010-20
Figure 17: UK retail value and volume sales of coffee pods, 2010-20
MARKET DRIVERS
Ageing population will slow instant coffee’s decline in the short term
Figure 18: Trends in the age structure of the UK population, 2010-15 and 2015-20
EFSA takes positive stance on caffeine
Coffee prices enduring a period of volatility
KEY PLAYERS – WHAT YOU NEED TO KNOW
Mondelēz and DE Merger makes JDE a serious challenger in instant coffee
Own-label continues to lose out
Nescafé Azera’s strong performance balances decline of Nescafé’s core brands
Taylors retains the lead in ground coffee
Coffee adspend rises for the fourth consecutive year
Pods accounted for 18% of new coffee product launches in 2014
Cold brew and nitro coffee set to move form high-street to retail
MARKET SHARE
Mondelēz and DE Merger makes JDE a serious challenger in instant coffee
Own-label continues to lose out
Figure 19: Leading manufacturers’ sales and shares in the UK retail instant coffee market, by value, 2013/14 and 2014/15
Figure 20: Leading manufacturers’ sales and shares in the UK retail instant coffee market, by volume, 2013/14 and 2014/15
Microground helping to slow the value decline
Figure 21: Leading brands’ sales and shares in the UK retail instant coffee market, by value, 2013/14 and 2014/15
Figure 22: Leading brands’ sales and shares in the UK retail instant coffee market, by volume, 2013/14 and 2014/15
Lavazza continues to benefit from its partnership with Wimbledon
Figure 23: Leading brands’ sales and shares in the UK retail ground coffee market, by value, 2013/14 and 2014/15
BRAND COMMUNICATION AND PROMOTION
Coffee adspend rises for the fourth consecutive year
Figure 24: Recorded above-the-line, online display and direct mail total advertising expenditure on coffee, by advertiser, 2012-15*
Nescafé Azera encourages consumers to “be their own Barista”
Kenco’s Coffee vs Gangs should hit the right note with ethically minded consumers
Figure 25: Recorded above-the-line, online display and direct mail total advertising expenditure on coffee, by highest spend, 2012-15*
LAUNCH ACTIVITY AND INNOVATION
Pods continue to account for an increasing share of innovation
Figure 26: New product launches in the UK coffee market, by format, 2011-14
Coffee shop trends continue to influence the retail offering
Next wave of coffee shop to retail: cold brew and nitro
Nitro offers a next step for cold brew
The next step for ethical coffee
Figure 27: Share of new coffee/tea/chocolate launches in the UK carrying an ethical/environmental claim, 2012-14
THE CONSUMER – WHAT YOU NEED TO KNOW
Usage of instant coffee drops
Key to short-term volume growth in ground coffee is boosting frequency
Younger consumers have extensive repertoires, while older consumers are more refined
Leading instant brands have failed to embrace the craft movement
More than a quarter express an interest in delivery coffee
Ethical claims become more targeted
Cafetière is the most widely owned, but isn’t being fully utilised
One in five own a coffee pod machine
Interest in origin is significant, even in instant coffee
Coffee is ideally place to capitalise on health concerns around CSDs
Replicating the coffee shop experience is at the centre of successful NPD
USAGE OF COFFEE
Usage of instant coffee drops
Key to short-term volume growth in ground coffee is boosting frequency
Figure 28: Types of coffee drunk at home, April 2014 and June 2015
Figure 29: Frequency of drinking coffee at home, by type, June 2015
Younger consumers have extensive repertoires
Figure 30: Repertoire of coffee usage, June 2015
INTEREST IN COFFEE PRODUCTS AND SERVICES
Leading instant brands have failed to embrace the craft movement
Figure 31: Interest in types of coffee products and services
More than a quarter express an interest in delivery coffee
Readymade coffee
Fresh coffee subscriptions
Subscription businesses will need a brick and mortar presence for scale
Ethical claims become more targeted
TYPES OF COFFEE SYSTEM OWNED
Cafetière is the most widely owned, but isn’t being fully utilised
Figure 32: Types of coffee system owned, June 2015
One in five own a coffee pod machine
Cost and lack of usage are the key reasons for not buying a coffee system
Figure 33: Reasons for not owning a coffee system, June 2015
ATTITUDES TOWARDS COFFEE
Interest in origin is significant
Figure 34: Attitudes towards coffee, June 2015
Coffee is ideally placed to capitalise on health concerns around CSDs
Replicating the coffee shop experience is at the centre of successful NPD
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Fan chart forecast
APPENDIX – MARKET SIZE AND FORECAST
Figure 35: UK retail volume sales of coffee, 2010-20
Figure 36: UK retail volume sales of instant coffee, 2010-20
Figure 37: UK retail volume sales of ground coffee/coffee beans, 2010-20
Figure 38: UK retail volume sales of coffee pods, 2010-20
Best- and worst-case forecasts
Figure 39: UK retail coffee market, value sales, best- and worst-case forecast, 2015-20
Figure 40: UK retail coffee market, volume sales, best- and worst-case forecast, 2015-20
Figure 41: UK retail instant coffee market, value sales, best- and worst-case forecast, 2015-20
Figure 42: UK retail instant coffee market, volume sales, best- and worst-case forecast, 2015-20
Figure 43: UK retail ground coffee market, value sales, best- and worst-case forecast, 2015-20
Figure 44: UK retail ground coffee market, volume sales, best- and worst-case forecast, 2015-20
Figure 45: UK retail pod coffee market, value sales, best- and worst-case forecast, 2015-20
Figure 46: UK retail pod coffee market, volume sales, best- and worst-case forecast, 2015-20

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