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Some Like It Hot – Hot beverage category gathers steam

Canadians drink almost 10 billion cups of tea each year — so reports the Tea Association of Canada. The association goes on to cite that Canadian grocery tea market as being worth $403 million in 2014. The four western provinces accounted for a collective $158 million of that amount. “Growing consumer interest in health and wellness has led to increasing awareness of tea’s functional benefits,” explains Louise Roberge, president, Tea Association of Canada.

According to Roberge, traditional black tea still accounts for about 45 per cent of the total market but specialty teas — like single origin, green, white, herbal and flavoured — are showing growth.

“Another driver of increased tea consumption among Canadians is our diverse population,” adds Roberge. “Many new immigrants come from Asia, which is comprised of all tea-drinking countries. These people bring their culture with them when they move here.”

Coffee is the other big winner in the hot beverage category. The Coffee Association of Canada’s (CAC) Canadian Coffee Drinking Study 2013 Highlights reports that 65 per cent of Canadians aged 18-79 drank coffee “yesterday” with 84 per cent reportedly having drank coffee in the past year.

Single-serve Satisfaction 

Of course, one of the growing areas of the coffee retail market is the singleserve format. The aforementioned CAC report suggests that Canada’s singleserve format is being used by 25 per cent of the population — compared to only 20 per cent in the United States.

Dana Somerville, director, Coffee, Kraft Canada Inc., cites Nielsen June 2015 YTD figures that show a 22.5 per cent increase in single-serve coffee in this country.

“Over the past several years, the coffee category has experienced healthy sales growth, as some consumers shift from roast and ground coffee to the relatively premium-priced single serve coffee segment,” she says. “Consumers continue to look for convenience in their lives.”

Robin White, vice-president, marketing, Single Cup Coffee, also refers to the single-serve format as a significant driver in the category.

“As more and more consumers choose to brew their hot beverages one cup at a time, the value of the category continues to grow,” he says. “With new brands, equipment and other innovation, it’s one of the most exciting consumer packaged goods categories for retailers today.”

The single-serve format is also proving to be popular in the tea category, with the Tea Association of Canada reporting that the capsule/pod represented five per cent of the market in 2014.

Industry Issues 

The increased use of the single-serve format – be it coffee or tea – has brought to the fore the issue of recyclability. According to Jean-Daniel Gervais, vice-president sales, Keurig Canada Inc., the company has stated a target to have 100 per cent of its K-Cup pods be recyclable by 2020, with an increasing number of the pods converted each year between now and then. “It’s a tough and ambitious challenge but we’re committed to solving it…” he says, adding that collected brewed K-Cup pods from customers in Canada of the Van Houtte Coffee Services Inc. branch are being used currently as alternative fuel. “Just as consumers are paying more attention to the environmental attributes of the products they purchase, they also want to know that these products are grown and sourced responsibly. We have always offered fair trade coffees as one way we can help small-scale farmers invest in the quality of their coffee and the quality of life in their communities.” Yogi also provides recyclable options. “Our single-serve cups are over 93% recyclable/compostable. The tea category and its players recognize that consumers are looking for sustainable options that meet their functional and taste preferences. As a B-Corp, Yogi is held to high standards of social and environmental performance, transparency and accountability — and we’re honoured to hold this designation,” shares Assistant Brand Manager Jenna Gavin. The issue of fair trade is also beginning to have a role in the tea market. “Fair trade is definitely a hot topic,” says Tas Cheema, COO, Original Prema Chai Inc. “People are more concerned about the impact of fair trade with coffee right now but it is starting to trickle down to tea.”

On the Lookout 

With a growing array of product coming into the market, retailers may have a hard time deciding what products to carry. Roch Cyr, national sales and marketing director, Trans-herbe Inc., suggests a number of factors to consider. “First is the quality of the product. People are willing to pay a bit more if they are getting high quality, be it fair trade or organic or whatever. Second, they need to look at where the growth is. With tea, it would be in the specialty category. Consumers are looking for something different with interesting characteristics. And third, retailers should look at novelty items, like seasonal products that have been developed for a specific period of the year.”

Kraft Canada’s Somerville suggests that retailers organize the coffee aisle according to brewing method and ensure that they have good representation of coffee across all methods of preparation.

“Recognizing brand variety is also important to consumers,” she adds. “Within the single serve category, beverage variety is also important to consumers so retailers should consider listing a range of beverages from coffee to hot chocolate, americanos and macchiato.” Innovative merchandising can also be used to make a hot category even hotter. “One of the reasons consumers have fallen in love with single-serve beverages is the ‘fun factor’, with the coffee aisle evolving into something like a grown-up candy store,” says White. “Variety and creative merchandising can enhance the shopping experience and make a retailer a destination for single serve that will increase foot traffic and drive sales store wide.” “Increasingly consumers are looking for teas that taste good and do something good for them too. They are also drinking more tea in general, throughout the day and night, so a variety of options is important: with and without caffeine, herbals and greens, spicy, sweet, earthy, fruity etc.,” Gavin says. In regards to merchandising she advises to merchandise in a way that the consumer can easily find the product, explore the category and discover new products that can positively influence sales. For cross-merchandising try immune-supporting teas in the pharmacy aisle during cold season, energy teas near breakfast items and rest and relaxation teas near sleep aids she adds.

Ted Turner, advertising manager and buyer, Fairway Markets, Victoria, B.C., admits that the hot beverage category is an increasingly tough one to sell to consumers but product innovation is helping.

“This segment of the category is not seeing the growth that the cold beverages are enjoying,” he says. “Aggressive competition continues to promote that ‘out of home’ experience that consumers enjoy being a part of. Our focus will be to continue to provide consumers with choices for home use.”

Turner adds that it is “critical” to source new innovation and stay current.

“Success may be measured by one consumer at a time,” he says.

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