Hot drinks is expected to maintain solid retail current value growth in China in 2023, with increases across all categories. In addition, total volume consumption of hot drinks is set to continue to rise, registering low single-digit growth, with foodservice volume growth expected to be slightly higher than retail volume growth due to the continued rebound of foodservice sales following the lifting of COVID-19 lockdown measures.
One of the biggest stories in hot drinks in 2023 has remained the health and wellness trend, manifested in sugar reduction, the inclusion of functional and healthy ingredients, and category switching. For example, black coffee with no sugar is increasingly preferred by health-conscious consumers, which has been driving a fall in sales of instant coffee mixes, and growth for standard fresh ground coffee.
The competitive landscape in hot drinks in China is set to remain fragmented but relatively stable in value terms in 2023, with the smallest players, included under “others”, expected to account for more than two thirds of retail value sales. The leader, Nestlé (China) Ltd, is set to see a minor retail value share decline in 2023.
Food/drink/tobacco specialists, supermarkets, small local grocers, and other offline channels remain key for sales of hot drinks in China. However, since COVID-19, along with the gradual transfer of consumption from offline to online, retail e-commerce has increased its share of sales.
In 2023, sales through retail are expected to continue to overwhelmingly dominate total volume sales of hot drinks; set to account for the vast majority of sales. However, foodservice is anticipated to register slightly higher growth in this year, due to continued recovery from the poor performance seen in 2020 in the first year of the pandemic, after the lifting of lockdown measures at the end of 2022.
Total volume consumption of hot drinks is expected to continue to rise over the forecast period, although at a low and slowing rate, as consumer needs are relatively stable, especially for tea and coffee, which are to some extent functional in terms of boosting energy, and have high habit persistence. Key trends including health and wellness, and flavour innovation will continue to be key, and will be areas of opportunity for brands that want to buck the industry fatigue.
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This report originates from Passport, our Hot Drinks research and analysis database.
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