Hot favourites

In the battle for supremacy in the hot drinks stakes, tea is continuing its drive to increase sales in the face of continued competition from coffee away from home.

Speciality tea blends, up 10% year on year, are boosting tea sales, according to Tetley. "Despite the impact of the much-reported growth in coffee shops and trendy coffees, tea is still this country's favourite drink," says Mike Lawless, senior brand manager. "More people drink tea (72%) than coffee (51%)."

True, but not outside the home. Laurence Smith, tea senior brand manager at Caterplan, says tea accounts for 40% of all beverages consumed in the home but still only 17% of out-of-home consumption. And 30% of out-of-home tea drinkers are aged 66-plus (National Drinks Survey 2001).

Tea still significantly under-trades and often falls short of consumer expectations. The message to caterers is to increase tea's profile through stronger well-branded communication to reinforce the quality cuppa message, and target younger consumers.

By contrast, the rise of "café culture" in the UK has helped contribute to the fact that coffee now accounts for around 35% of everything we drink outside the home (Taylor Nelson, FPP, November 2000). As people become more discerning about coffee, so instant coffee is continuing to decline in favour of filter coffee and roast and ground.

As with cold drinks, the growth in consumer experimentation - flavours, sizes, toppings, etc - has exploded and cappuccino and latte have moved from being specialities to favourites in coffee shops. By contrast to our European counterparts, milk-based drinks are the most popular and they seem here to stay.

Better - and bigger
Consumers are not only trading up on quality, but also on size - today's average serving of 7oz is fast turning into at least 9oz, according to Douwe Egberts, and changing from cup and saucer to mugs is one way to encourage customers to "feel the weight".

Customers are also willing to pay more. Analyst Allegra says the price of a cappuccino in major coffee-focused chains has gone up by 6.5% since December 2000 and now averages £1.63 for a 12oz cup. In food-focused chains, a small cappuccino now averages £1.21, up 6.1%.

Despite its popularity, coffee alone is proving hard to make profitable. "The explosion of US-themed coffee bars was always destined to be short because it was led by marketing as opposed to quality," says Soner Yilmaz, managing director of Coffeehouse. "They do educate the public about cappuccino and latte and have made coffee more fashionable, but overall the quality is very poor. The market is already consolidating and many won't be around in two years' time, but that's not necessarily a bad thing because the remaining ones should be of higher quality."

Discerning customers George Miller, managing director First Choice Coffee, agrees. "The discerning British public are no longer impressed by leather sofas and inferior quality coffee. In our experience, hyped-up (and expensive) high-street branding or concepts may assist when trying to attract new customers, but this alone will not sustain a loyal, and increasingly discerning customer base," he says. "The only way to meet the demands of the new coffee drinker is to offer seriously good coffee, prepared and served by highly skilled and confident staff equipped with serious espresso machines."

The coffee bars that are around are increasingly diversifying, offering cold drinks and teas. "Coffee pubs are enjoying great success with one main advantage over high-street coffee names - a more rounded portfolio of products," says Martin Armitt of Douwe Egberts Coffee Systems.

Facts and figures

• 70% of UK coffee drinkers would pay more for a good cup of coffee.
• More than 40% of UK coffee drinkers regularly drink speciality coffees such as cappuccino out of home
• In the hotel and restaurant market 62% of coffee drinkers would purchase speciality coffees if they were available.

Sources: Out of Home Beverage Market Study, Research Business International, November 2001; Nestlé UK Research; AC Nielsen

Don't ignore the kids

Evidence is beginning to suggest that school-age children are moving out of the burger bars and into coffee shops. Out-of-home consumption of coffee among 11- to 16-year-olds increased by 250% between 1997 and 2000 (Douwe Egberts Coffee Systems 2001). In overall terms, this age group still consumes a very modest amount of coffee, but the signs are that we are taking to coffee at an earlier age.