Hot beverages - Steam clean-up

The hot beverages market is changing and retailers need to ensure their displays reflect that. Aidan Fortune gets the latest merchandising advice

Customers making a beeline to the hot beverages shelf should be a welcome sight for retailers. According to the HIM Convenience Tracking Programme, a shopper buying hot beverages will have an average of 4.6 items in their basket compared with a regular shopper’s 2.7.

Not only that, these shoppers will spend an average of £8.52 (on top of the hot beverage product) in a store, rather than the £5.31 other shoppers will spend.

While they may not be given the largest amount of space in a store, hot beverages obviously generate sales, so are retailers using their hot beverages fixtures to its full potential?

Nestlé UK trade communications manager Graham Walker thinks not and believes that there is a massive opportunity for retailers to earn more from the category. “There is great potential in hot beverages, which is growing at 1.3% in convenience stores (IRI Total Convenience 52 weeks ending March 26, 2011),” he says. “Since 17% of shoppers do not think their local store sells hot beverages (HIM research), it is particularly important that retailers are fully aware of the opportunities available to them.”

He adds that the main stumbling block preventing retailers from capitalising on the category is merchandising and placement in store. “Consumers are often confronted with a confusing hot beverages fixture, particularly in the convenience channel, and the category can be hard to find in stores, leading shoppers to perceive there to be low availability of stock,” says Walker. “The instant coffee range that is stocked is often inconsistent.”

Mahmood Anwer, who runs Kirkwood Village Store in Coatbridge, North Lanarkshire, recently overhauled his hot beverages category with some great results. “We find our customers are those who have forgotten something from their supermarket shop so they are usually in a hurry, and speed is of the essence,” he explains. “We decided to move our hot beverages next to the biscuits and made the display more eye-catching. Now our customers know exactly where to find them and we’ve seen a 5% increase in our sales as a consequence.”

Kraft Foods UK trade communications manager Susan Nash says that retailers need to re-align their hot beverages section to suit the growth areas in the market. She cites the move towards premium coffees as a good example. “Convenience retailers should align themselves with the changing shape of the coffee market, taking advantage of the growing sectors and stocking leading brands that deliver on quality and taste,” she says. “Retailers should be looking to increase the space they allocate to best-selling premium brands and make the most of this upwards trend.”

Kraft helped keep its Kenco Pure brand fresh in consumers’ minds by undergoing a redesign earlier this year. The rest of the range is due to follow suit in the coming months. It has also introduced a limited-edition £2 pricemarked jar of Kenco 100g exclusively into the independent channel. All of its initiatives are being supported by a £11m marketing investment for the year, which includes a run of TV advertising.

Nash points out that retailers should also look out for sub-categories such as decaffeinated as potential areas for growth. “Decaffeinated coffee has accounted for £2.8m of sales in the impulse sector over the past 12 months (Nielsen Impulse MAT to week ending May 21, 2011),” she says. “It can provide a real sales opportunity for retailers and, as it is one of the smaller markets, those with limited space should aim to stock well-known brands that customers recognise as good quality.”

Walker urges retailers to think carefully about their display. “Place everyday coffee lower on the fixture where you can give it more space, improving availability,” he says. “This will also encourage shoppers to browse the fixture, trial new products and expand their repertoire.”

He adds: “Ensure super-premium is visible and place café-style coffee towards the middle of the fixture, as this will encourage cross-shopping of segments. Remember, 100g jars of soluble coffee are the core packs for convenience.”

John Sutcliffe, convenience sector manager at Taylors of Harrogate, which produces the Yorkshire Tea brand, says that retailers should display with a view to encouraging shoppers to trade up. “Retailers should always offer a range of products and pricing in all categories; a good-better-best approach will assist in developing different shopper demographics, improving footfall and encouraging consumers to trade up,” he says. “In the convenience market it is key to ensure that mainstream brands are supported with adequate shelf space to maintain good supply.”

For those retailers with limited space, Nash recommends clever category management. “Try to flex your space to fit key trends for example, by allocating extra space for premium coffee but if you have limited space, stock smartly with products that tick more than one trend, such as premium and ethically sourced,” she adds. “Retailers should also look to stock pricemarked packs to help give shoppers reassurance on price and show value for money.”

Typhoo category manager Lynn Jefferies says that retailers need to break down their display to match category leaders. “In the total market both tea and instant coffee account for approximately 40% of sales each, with roast and ground coffee accounting for 11%, and hot chocolate and malted drinks accounting for the remaining 9%,” she says. “A tea display should primarily follow the current sales breakdown, but with an eye on those sectors that will drive future growth of the category. Black tea accounts for about 80% of sales in the impulse sector with a penetration of 79%, so this should dominate on shelf and be at eye level where possible.”

She adds: “While black tea will provide a destination for shoppers, when it comes to driving repertoire other segments such as decaf, green tea, fruit & herb infusions and speciality should be given space.”

She advises retailers to ensure they are always stocked up with the key brands. “The top three should be stocked, namely Tetley, PG and Typhoo,” she says. “The preferred pack size is 80s based on shelf space. However, 160s is the best-selling pack size in the market so, where possible, this should be listed for the best-selling brands.”

Tetley’s customer marketing controller Simon Attfield says that convenience store retailers need to change how shoppers view them in order to capitalise on the hot beverages category, and should be constantly reviewing local tastes. “Try not to be a distress purchase location tea drinkers are a loyal bunch and they will always look to buy their favourite brand,” he says. “They’ll only buy another brand as a last resort, but will look elsewhere next time. If you can stock the brands you know are popular with your customers, you’ll move from being a distress purchase store to a convenience location.”

Speciality tea brands
While the traditional cuppa has been the mainstay of British culture for decades, there could come a time in the not-so distant future when that won’t be the case and peppermint, blackcurrant or camomile will be the brew of choice.

According to Mintel, sales of herbal teas hit the £80m mark in 2010, up from £73m in 2009, and its market share stands at 11%. Mintel senior drinks analyst Jonny Forsyth says that a radical younger generation of tea drinkers represents a significant opportunity for store owners.

“Our consumer research identifies a younger tea drinking generation who differ markedly from previous generations of tea drinkers,” says Forsyth. “They have a much more adventurous attitude towards drinking tea, enjoying the variety of flitting between standard English breakfast, speciality and herbal tea rather than just sticking to one type; and they are keen to try new tea brands and flavours.

“What this translates to is a new generation growing up for whom the traditional cuppa is not the be all and end all,” he explains. “Their decision-making process when buying tea is much more conscious than with older generations. For example, many use different kinds of herbal tea dependent on their mood and will decide to have a cup of standard breakfast tea if in need of an energy booster.”

Unilever Partners for Growth controller Tom Hazelden agrees that retailers have to move with the times. “Tea tastes have evolved in recent years, with many people introducing fruit & herbal, specialty or green tea into their repertoire,” he says. “A successful tea fixture should reflect these changes, with the best-selling lines proportional to store size and location.”

Attfield says that speciality lines such as green tea and Redbush are areas retailers are not fully capitalising on. To help combat this, Tetley embarked on a series of initiatives including a ‘Try Me Free’ promotion on Redbush and a 20-bag pack of Lemon Green teas specifically for the convenience channel.

“We’re trying to make it as easy as possible for the convenience store retailer,” says Attfield. “Speciality teas are where we see the major growth coming from, and we’re doing all we can to help make them habitual purchases. The 20-bag pack of Lemon Green is a great way for retailers to introduce the products to their customers with relatively little risk.”

Unilever has also made recent progress in the fruit and herbal teas sub-category. Earlier this year it launched two new variants to its Lipton Fruit & Herbal Infusions range. The new flavours, Citrus & Orange Blossom and Apple & Cinnamon, were supported by a £1.5m marketing campaign which included an official partner package with ITV show Britain’s Got Talent.

Perhaps now’s the time to put the kettle on and take time out to review your hot drinks fixture.