Coffee consuming habits are changing in the United Kingdom
The British are well known as tea lovers. United Kingdom residents consumed 153 liters of brewed tea on a per capita basis in retail channels in 2014, well above the global average of 33 liters. It may come as a surprise that the UK, ranked fifth in per cap tea consumption, also drinks a lot of instant coffee. UK consumers drank 25 liters of brewed instant coffee on a per capita basis, higher than the global average of 7 liters. However, UK consumers overwhelmingly prefer to drink instant coffee instead of standard fresh ground coffee (13 brewed liters) or fresh ground coffee pods (2 brewed liters) on a per capita basis.
As tea drinkers, most UK residents own a kettle to boil water for tea and can use the same kettle to make instant coffee instead of investing in an electric coffee machine to prepare the occasional cup of coffee. The UK offers an example of how coffee producers can succeed in the world’s largest tea-drinking markets such as India, Pakistan and Turkey through instant coffee. As coffee shops expand in these countries and take share from tea, instant coffee producers can attract consumers looking for high-quality coffee by introducing more premium offerings.
Micro-Ground Instant Coffee Takes Off
Though UK consumers have grown up drinking tea, those residing in big cities have become very familiar with specialty coffee shops and their gourmet coffee drinks. These coffee shop patrons now appreciate the aroma and taste of coffee brewed with fresh coffee beans and want to drink better quality coffee at home.
However, UK residents also want to prepare their coffee quickly. Some higher income consumers are turning to fresh coffee pods, of which retail volume sales grew by 215 percent between 2009 and 2014. For the majority of UK consumers who still prefer hot tea to coffee, they do not want to buy a coffee pod or filter machine that they will use only occasionally. Premium instant coffee answers the call for better taste and richer aroma quickly and with no special equipment. The rise of super-premium instant coffee or micro-ground (that combine instant coffee and finely ground roasted coffee beans) varieties such as Nestlé SA’s Nescafé Azera Barista Style Instant Coffee, Jacobs Douwe Egberts’ Kenco Millicano WholeBean Instant and Starbucks Coffee’s Via have boosted retail volume sales and unit prices. These super-premium microground coffees can help reduce consumer migration to coffee pod machines that tout convenience and taste. Retail volume sales of instant coffee grew by 20 percent between 2009 and 2014 in the UK, while unit prices grew by 6 percent between 2009 and 2014 in constant 2014 prices. In contrast, the unit price for standard fresh ground coffee declined by 2 percent over the same time period.
Premium Instant Coffee to Boost Demand
Newer premium products such as Nescafé Original Smooth Roast, launched in August 2014, and Beanies The Flavor Co’s three flavored instant coffees in amaretto, Irish cream and cinder toffee, introduced in July 2013, are expected to continue boosting demand for instant coffee in the UK. Retailers are also recognizing the opportunity with Sainsbury’s and
The Co-op Group introducing their own private label micro-ground instant coffees in May 2014. Consumers have become more familiar with gourmet coffee drinks from specialist coffee shops and want to replicate the coffee shop quality even if they have to pay a higher price. The growing addition of premium varieties is expected to boost instant coffee’s unit prices by 9 percent over the forecast period, much higher than the projected 1 percent price gain for standard fresh ground coffee, which is not expected to see a rise in premiumization.
Though instant coffee is the largest coffee category in the UK with 2014retail value sales of USD $1.8 billion, it is still expected to grow by 24 percent in constant retail value terms and by 14 percent in retail volume terms between 2014 and 2019. Standard fresh ground coffee with 2014 retail value sales of USD $450 million is projected to show 36 percent and 34 percent constant retail value and retail volume growth, respectively, over the same time period.
Good Potential for Soluble in Other Tea-Drinking Nations
Makers of instant coffee have the opportunity to grow strongly in many markets where tea is the favored hot drink. As Starbucks and other international and local players expand the number of specialist coffee shops in tea-drinking markets, consumers, especially younger ones in urban areas, are likely to develop a taste for coffee. Higher-income consumers in tea-drinking markets will be able to purchase pod coffee or filter machines to prepare good quality coffee. Middle-income consumers are more likely to turn to instant coffee to replicate the coffee house experience at home with no investment in a coffee machine.
Morocco is an example of a tea-drinking market that has excellent opportunities for instant coffee. The expansion of small independent cafés, along with the increasing popularity of going out among Moroccans, has helped to increase the popularity of coffee in Morocco. Retail volume sales of instant coffee, the most popular coffee format by value, are expected to grow by 107 percent over 2014-2019 in Morocco, while those of standard fresh ground coffee will grow by 26 percent. Coffee culture is also growing in the tea-drinking nations of India, Pakistan and Turkey due to the growth of coffee shops.
The rising popularity of drinking coffee among younger consumers in these countries as well as the convenience offered by instant coffee is expected to benefit instant coffee, thereby growing faster than standard fresh ground coffee over 2014-2019. Premium instant coffee varieties such as Nescafé Gold Blend with golden roasted Arabica and Robusta beans are likely to do well in these tea-loving countries as they serve to appeal to consumers learning to appreciate fine coffee while still being easy to prepare at home.