Coffee, tea and cocoa have all felt the effects of the sharp rise in commodity prices. For the moment the status quo on coffee and cocoa is that prices have stabilised and the threat of rising prices have abated. However the pundits predict the cost of tea could rise by as much as 7% next year due to a predicted drought in Kenya and increased consumption worldwide.
These forecasts, combined with the recession, have luckily not affected consumers’ habit of having their daily cuppas out of home.
Research by Keynote indicates that the current economic downturn has certainly had little effect on the coffee scene with the number of branded coffee outlets increasing since 2009 and only 30.7% of people cutting back on visiting coffee shops because of the recession.
Market analyst Allegra Strategies is also confident about growth in the sector. In its largest ever research study of its kind, Allegra surveyed more than 36,000 consumers and showed that consumers refuse to give up on their regular coffee out of home, with 39% stating they visit coffee outlets more often than 12 months ago.
There has also been a buzz about hot chocolate and more hot chocolate shops are beginning to spring up serving premium quality drinks. For example in January specialist chocolate shop Hotel Chocolat launched a concept called London Roast & Conch that offers a cup of pure hot chocolate, that has been roasted and ground like coffee straight from the beans on site.
But operators have to deliver the perfect brew to justify high prices and convince consumers they are getting value for money.
Three of Tudor Tea & Coffee’s Italian espresso products won gold stars at the 2011 Great Taste Awards and the company prides itself on the high quality it offers. Roma won two, while Milano and its Rainforest Alliance certified coffee was awarded one star.
UK sales manager Peter Fears says Roma offers value for money and has all the right attributes of a good coffee. He believes consumers don’t have to spend a fortune to get a good cup of coffee and that Tudor’s prices range from £7-£8.50 per kilo. “Our good quality coffee is £7 per kg while other brands are around £10 per kg,” he says. “The packaging is also very good.”
He says prices will go up although it’s not just about the coffee, but also the additional costs such as delivery to site and higher fuel prices. “It’s about buying right from our point view. We are coffee roasters and run a full coffee roasting plant, so it’s low cost to run in terms of staff involvement.”
He adds that there is also demand for a branded package from swing signs to cups to complement the coffee. “If you are trying to sell quality coffee you have to give quality products to go with it.”
Kraft Foods has given its Kenco Professional range a makeover and developments for operators include a new website as well as a number of new products in the year ahead. Already a 650g refill pack has been launched to give caterers premium quality coffee in a pack that has 84% less packaging weight compared to the composite tin.
“Our relaunch brings a whole range of benefits for operators, and this is just the start of what promises to be an exciting 2012,” says trade communications manager Susan Nash. “We have a number of great plans for the next 12 months to help make a real difference to businesses through excellent quality, innovation and sustainability in every hot beverage offering.”
Although the UK is playing catch up with the US when it comes to offering speciality coffee flavoured with syrups, customers are increasingly looking for more exotic versions, says Kerry Foodservice which supplies DaVinci Gourmet syrups.
Marketing manager Anthony Wilkinson says Allegra’s research says that despite consumers refusing to give up their regular out of home coffee, they are reducing their average spend per visit from the 2009 average of £3.50 to £3.18.
“Consequently, operators are looking towards beverage accompaniments that give opportunity for incremental profit by encouraging consumers to personalise their hot beverage and increase their average spend.”
He says customers are looking for something to add a twist to their drink or for a bit of indulgence that won’t cost the earth. “They are willing to pay from 25p-40p to add something extra with a shot of their favourite flavour.
“The branded coffee chains are well known for their themed and seasonal menus and one way of creating these drinks is through the addition of syrups.”
Hot chocolate comes into its own as a warming treat but it can be enhanced by the accompaniments that customers are happy to pay for with little work needed by the operator.
“Take something as simple as whipped cream,” says Simon Muschamp, head of marketing at Pritchitts. “In a perfect world we would whip our own dairy cream to order, but in reality the task is not practical or cost effective. The kitchen can prep in advance but there is a risk of the dairy cream falling flat or perishing before it is used. Using an instant whipping topping removes all prep and delivers at a push of a button making it ideal for establishments where speed of service is essential.
Pritchitts claims its Roselle Supreme instant whipping cream holds its shape for up to 15 minutes – three times longer than dairy cream, giving customers time to savour their creamy chocolate drink.
Monique Harvey, category marketing manager for PG tips at Unilever Food Solutions (UFS), says that although the hot beverages market has suffered over the last three years, tea continues to hold its own year on year, with 88% of consumers drinking at least one cup out of home in 2010.
“However, to maintain consumer appeal, it’s vital that operators continue to meet customers’ needs by ensuring tea is good quality and provides great value for money.
“Almost two thirds of consumers believe it’s important that a quality brand of tea is served out of home, and more than 70% would be willing to pay more for their favourite brew.
“But it’s important that caterers push promotions and communicate value – an influential purchasing factor for almost half of consumers. With so much fierce competition in the market, brand visibility can be crucial in helping customers make a decision. Incentives and promotions are also a great way to encourage repeat purchase from customers. Loyalty cards are popular for coffee, but not many are supplied for tea.”
UFS has included a wealth of information, including an easy-to-use tea profit calculator on its newly revamped PG tips website – www.ufs.teatips.co.uk.
Dorothy Sieber, out of home brand development manager at Tetley GB, says the first half of the year is traditionally the time when consumers embark on a health regime and generally think more about what they are eating and drinking and for the caterer this brings with it many opportunities.
“Decaf tea, for example, is already in more than 10% of households but only limited venues out of home tend to stock it, so give yourself a leap on the competition. Likewise with Redbush, now the fastest growing speciality tea, which is naturally caffeine free and as hydrating as water. Green tea too is increasing its share of the market and Tetley’s green tea with lemon is the best selling flavoured variety with broad consumer appeal.
“It is well known that customers are more likely to experiment with different blends out of home, so letting them know you have an exciting range of tea could be the difference between getting that extra sale. Your menu probably informs customers you serve different coffee, so why not inform customers you stock a green tea, redbush or a decaf?”
To maximise the profit opportunity of tea, a simple bag in a cup is no longer enough, adds Twinings customer marketing manager Jacqueline Chapman.
“Much like what we have experienced with coffee, consumers are now looking for something different and premium to what they get at home to help justify them parting with their money.
“The profitability of tea shouldn’t be underestimated as it accounts for seven out of 10 hot drinks consumed. Only 46% of tea drinkers will consume ‘normal’ tea out of home, so it’s crucial that customers are offered something different or risk missing out.”
She says that in the last 12 months the speciality tea market has grown in value by 3.9% whilst ‘commodity’ or builder’s tea continues to decline. Sales of infusions are up 7% and green tea 6.2% – an indication of just how discerning consumers have become in their tea tastes.
More companies are targeting younger tea drinkers with an offer that appeals to them in taste and sustainability. For example, following a successful national retail launch last year, Global Tea & Coffee Exchange’s Charbrew range has been launched into the foodservice sector with this objective, and includes favourites such as English breakfast, Earl Grey, green tea, camomile, chai tea and peppermint.
These are blends of the finest whole leaves, herbs and flowers, available in mesh pyramid tea bags made of specialised corn starch, which are fully biodegradable.