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The UK’s hot beverages market is strong and very well-established; a significant proportion of people drink at least one hot beverage every day, with some drinking several cups daily. The industry has seen fairly strong and steady value growth since 2008, although the rate of growth has slowed a little since 2010. This may be because economic crisis has pushed consumers towards products at the cheaper end of the market. It is also likely, however, that the industry has benefited from the recession, as consumers turn from expensive alcoholic drinks to cheaper options. Overall growth between 2008 and 2012 was 25.6%, with year-on-year growth of 5.9% occurring in 2012.
Tea is a particularly strong product category within the hot beverages market; it is regarded the world over as the UK’s national drink and appeals to a wide and diverse range of social demographics. If the industry has a weakness, it is its susceptibility to fluctuations in world prices, caused by political instability and natural events, such as drought, in producer countries. Despite this, such is the popularity of hot beverages and the range of choice available, that volume sales are unlikely to be damaged by price spikes. Customers may respond by buying cheaper products, but few are likely to give up their hot beverage of choice altogether. The black and green leaf teas sector — which contains the most popular types of tea in the UK — grew by 14.6% between 2008 and 2012.
Within the coffee sector, which has grown by 34.6% since 2008, ground coffee has shown the most growth, perhaps because consumers have chosen to save money by buying quality coffee to drink at home rather than in a coffee shop, thus boosting sales through retail outlets. While the hot chocolate and malted drinks market has shown more modest growth than the coffee sector, it has nevertheless expanded by 16.3% between 2008 and 2012.
Leading instant coffee brands include Nescafé and Kenco, while Taylors of Harrogate leads the ground coffee market. Leading companies in the tea sectors include Twinings, Tetley and PG Tips, while the hot chocolate and malted drinks sector is dominated by Cadbury’s. A large number of smaller brands exist, all with a relatively small but loyal and growing following. These include organic, decaffeinated and Fairtrade companies, fruit and herbal teas brands and premium ground coffee producers. The appeal of these categories lies in the health benefits they may have; their perceived higher quality; or, in the case of Fairtrade, their ethical image. The growing popularity of Fairtrade and other ethical products, despite economic crises, is a testament to their popularity. Consequently, most brands now offer decaffeinated and Fairtrade versions of their traditional products. Much of the industry’s new product development (NPD) is taking place within smaller, more niche areas.
The future looks safe for the hot beverages market; all categories are well established, particularly tea, meaning that even tough recession is unlikely to pose significant challenges to this sector. Growth is predicted in all four sectors, with overall growth of 15.3% forecast between 2013 and 2014. Coffee in particular should do well.
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