Magazine article Marketing

Going for the Grind?

Magazine article Marketing

Going for the Grind?

Article excerpt

Going for the grind?

Coffee has come a long way from the early days of powder during the Second World War. Freeze dried products have powered the market's growth, but now instant coffee sales are falling. Can the coffee giants find a new trick to keep sales buoyant? Karen Hoggan reports. Coffee is having a rough ride. It's addictive and unhealthy, say health campaigners. It's been slammed by animal rights lobbyists concerned about testing on cats and mice. Even though it managed to emerge intact from the year-long probe by the Monopolies and Mergers Commission (MMC), it had to endure the scrutiny, and the accusations of price fixing. And church leaders want consumers to boycott market leader Nescafe because its parent firm has been supplying breast milk substitutes to the Third World.

Now after a decade where manufacturers successfully grew the market with product innovations like freeze dried and "lifestyle" advertising, sales are slipping. They have taken the market from powder into granules and further into freeze dried yet overall, volume sales are down 1% to 40.8m kg. For instant coffee there is a drop of 2%, while ground coffee products are up by 3%. Last year, the 180m [pounds] plus market leader Nescafe dropped from being Britain's second biggest selling brand to number three, while Maxwell House dropped from 21st to 32nd (Marketing, June 20 1991).

Could the great instant coffee story be nearing its peak? There are grounds for saying it is. Instant coffee may be convenient, but it doesn't taste as good as ground. Ground coffee no longer costs significantly more per cup than instant, and as the British open their minds to European eating habits ground or "real" coffee sales seem likely to boom (in every other European country ground is more popular). Indeed, the MMC report earlier this year even concluded that this is one area where own-label has been declining, and there is room for supermarket brands to take on the might of the big manufacturers by launching upmarket instant products.

Despite these hiccups, last year coffee sales were worth 480m [pounds] (Nielsen), making it the fourth biggest grocery market in the UK, and the manufacturers are determined not to let it slide. The battle for market share is intensifying. About 8p in every 1 [pound] of the final selling price is spent on advertising, compared to just 3p in the pound for tea and 1.2p for carbonated soft drink.

And now market leaders Nestle (with more than half the market), and cagey Philip Morris-owned Kraft General Foods (KGF) (with a fifth of sales), and Unilever-owned Brooke Bond Foods face the first new branded entrant for nearly a decade, Lyons Tetley. The battleground? An even more upmarket instant coffee, "ultra" freeze dried-proof that for the coffee giants the answer to the threat of decline is simply "more of the same".

Their logic is this: Britons are demanding ever more "premium" products. They are travelling more, drinking less milky and sugary coffee and cottoning onto the fact that technology can now produce better quality coffees.

But they won't give up instant coffees in favour of ground - not in large enough numbers anyway. After all, in 1989 the market was worth only 64m [pounds], according to researcher Euromonitor.

That is why Lyons Tetley, the new market pretender, is launching into the instant market. The Allied Lyons-owned company has long been known for its best-selling ground coffee Lyons Original and for its Tetley tea brand. Three years ago it decided to concentrate on its hot beverages.

The instant market is split into powder, granules, premium freeze-dried and the emerging super premium. Instant powder became a staple of soldiers during the Second World War. Freeze-dried products took a hold among US fighters in the Korean War.

Lyons Tetley marketing manager John Nicholas admits that the stranglehold of the two biggest instant coffee firms means "the opportunities in there are fairly few and far between". …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.