One category bucking the trends is out of home hot beverages. Thanks to people seeing a daily cuppa as an affordable treat, coffee shops are booming. Out of home coffee, tea and hot chocolate continues to be irresistible, with the latter heralded as the ‘dark horse’ of the trio.
In March, foodservice consultancy Horizons reported in its Ones to Watch survey that emerging coffee brands had shown a 132% growth rate in the number of outlets over the past 12 months.
It says chains such as Harris+Hoole’s rising from one to 10 outlets typified this growth, as did Gregg’s Moment with five outlets and Lavazza Espression, which currently has three outlets, having plans for more than 50 sites in greater London over the next three years. SOHO Coffee has grown from 16 outlets in 2012 to 20 in 2013, while Taylor Street Baristas with its nine outlets is also on the consultancy’s Ones to Watch list.
“Buying a coffee and a snack is a way of treating yourself relatively cheaply and as consumers have become more discerning about their coffee, the artisan and specialist outlets offer something over and above that of the well-known chains,” says Horizons’ director of services Nicola Knight.
The current growth rate of coffee shops is seven to eight times that of the British economy, claims consultants Allegra Strategies. Its latest annual report, Project Café12 UK, reveals that the total UK coffee shop market grew by 7.5% in 2012 to reach £5.8bn in turnover, and it predicts it will exceed 20,000 outlets and £8bn turnover by 2017, driven by branded coffee chain expansion and non-specialist operator growth.
“The UK coffee shop market continues to astound even the most optimistic of forecasters, by growing significantly in value, in outlet numbers and also in the social psyche of the nation,” says Allegra’s managing director Jeffrey Young.
“High quality ‘artisan’ independent coffee shops are also fuelling consumer demand and driving the branded coffee shop sector to increase focus on authentic interiors, barista technique and to introduce a wider range of crafted coffee such as flat white and cortado.
“This focus on quality in all areas can only continue to drive a thriving industry over the next three to five years and beyond.”
Allegra’s report said there had been limited price increases by major chains, however, recently Pret a Manger has hiked up the price of its cappuccino by 11p, putting the blame on the cost of ingredients.
Marcus Swift, sales director at United Coffee UK & Ireland, says prices have been extremely volatile over the last decade. “At the moment we’re seeing a dip in Arabica prices while the cost of Robusta continues to rise causing a narrowing of the gap between the two beans,” he explains. “This may be the trend now but things can change quickly so it’s important to keep an eye on the market and react when things change.”
The company works with customers to help them understand the market’s ups and downs and on solutions to help fix prices on a short, medium or long-term basis. He says its “unique tool” is the ‘all about u club’ Price Watch that lets its customers have instant access to up to date prices for coffee styles, cup sizes, tea and hot chocolate. “This means they know what the market is charging and how they’re responding to fluctuating commodity prices so they can remain competitive,” he adds.
The value of the hot beverage market in foodservice in 2011 was estimated at a huge £858m, within which coffee was worth £579m, tea £230m and hot chocolate £49m, says Susan Nash, trade communications manager at Kraft Foods UK.
“Research shows there is a high incidence of food consumption with hot beverages, with 60% of caterers agreeing that when buying a drink, the majority of customers will also buy a snack,” says Nash. “Operators should make the most of this opportunity and help drive incremental sales.”
Last year the company launched Kenco Millicano Wholebean Instant in 300g vending bags into foodservice, a premium product it says revolutionised the instant coffee category in the retail sector.
According to statistics from the Fairtrade Foundation, Fairtrade coffee accounted for £194m in sales in 2011. Acquire Services says ethical sourcing has become a pre-requisite for a foodservice business, particularly for coffee, and consumers have come to expect it.
“We are past the point where operators can spotlight a product’s ethical origins as a selling point; the question now is really if it’s not ethically sourced, then why not?” says procurement manager Joanne Sexton. “Operators also need to remember that just ticking the ethical box when serving coffee is not enough; the quality has to be there too to ensure a good end product.”
Peros, which has two ranges of Fairtrade coffee – Cafédirect and its own brand Eros – sees the market growing strongly in the medium term.
“Coffee still heads the list as the hot beverage of choice, so it’s worth investing most of your time and resources to ensure coffee menus are second to none – probably around five or six standard espresso-based drinks,” says joint managing director James Roberts.
“It’s also clear that while Fairtrade products now account for around 20% of all coffee sold in the UK, this is not just down to ethical credentials. It’s also about taste and range of choice.”
The recent launch of ‘Starbucks On The Go’ in the UK highlights the rise of specialist self-service coffee to satisfy consumers’ instant demand for quality beverages, says Martin Thorpe, head of beverage solutions at Nestlé Professional.
As a direct response to growing demand for quality, customised coffee ‘wherever, whenever’, Nestlé has introduced Nescafé Milano Lounge. Described as the 1sq m coffee shop, the machine can deliver up to 400 drink varieties at the touch of a button. For the health conscious, it also offers calorie counts on drinks.
Looking ahead, Thorpe believes signature iced coffee is another trend that’s set to be big. “With sales of ‘cold hot drinks’ leaping by 45% year-on-year, operators are not yet capitalising on the iced coffee opportunity. As the trend takes hold, we expect to see further experimentation with creative flavour combinations to produce signature drinks.”
But hot chocolate seems to be the one to watch. According to Martin Sheridan, managing director at Ferns Coffee, there hasn’t been any innovation in this sector for years. But something that’s right on trend and creates a point of difference is sipping chocolate, he says.
“Giving customers a luxurious alternative to typical hot chocolate drinks they will encounter at most establishments, sipping chocolate is essentially to hot chocolate what espresso is to coffee. It’s strong, packed with flavour and depth – an experience to be savoured and enjoyed.”
Ferns, which has acquired Ciocchino, an Italian-style, luxury sipping chocolate says it can be added to coffee to create perfect mocha or to give products a twist with flavourings.
In the survey conducted by Aimia Foods in July 2012, it found that 51% of consumers bought hot chocolate on impulse when visiting a café or using a vending machine, 60% said they were more likely to choose it if a brand was on offer, and 80% said they would pay more for a brand.
The company believes product innovation is influencing these impulse buys and with this in mind its Galaxy hot chocolate recently underwent a makeover that brought it more in line with its successful confectionery brand.
In the tea category, speciality and green tea are expected to grow further this year, according to Taylors of Harrogate. “Tea drinkers are becoming adventurous in their tastes with afternoon tea growing in popularity with younger customers,” explains John Sutcliffe, out of home and convenience controller. “As a result we’ve seen speciality tea grow by 4.5% in the last 12 months. It now accounts for approximately 25% of all tea drunk and English breakfast and Earl Grey have become a big part of this movement.”
Anthony Serrano, business manager for Tetley, says tea has held its own despite the rise in popularity of other hot drinks and the increasing cost to import ingredients, and provides opportunities for cafés to capitalise on sales by offering different tea flavours to suit individual tastes.
Tetley recommends up to seven different varieties with traditional black tea, decaf, green tea, peppermint and Earl Grey as standard plus a combination of fruit and herbal infusions.
Innovation is key and new from Twinings is a ‘silky pyramid’ range to help caterers premiumise their offer and profit from the growing popularity of speciality tea. The range includes favourites English Breakfast and Earl Grey; plus red berry fool, mint humbug, honeycomb camomile and jasmine pearls.
Drury Tea & Coffee has also extended its speciality pyramids to include new varieties such as Lapsang Souchong and Ceylon Orange Pekoe. Also new is a range of supporting materials including glass dispensing jars, round-shaped caddies and a stylish presentation box.
Sexton at Acquire Services says using loose leaf tea for brewing is another fast growing trend as people enjoy the social and entertaining aspect of having a hot beverage while out with friends. “Many times loose tea will unfold once submerged in water, which is aesthetically pleasing,” she explains.