Product Innovation in Hot Drinks

June 2024

Consumers are stressed by the state of the world in 2024 and hot drinks companies are responding in different ways. Functional ingredients, fun and light-hearted branding, and positioning of their products as treats that are moments of joy in a world that feels increasingly chaotic.

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This report comes in PPT.

Key Findings

The number of product launches in hot drinks is slowing down and increasingly moving beyond the traditional category boundaries

The number of tracked hot drinks product launches, whether new brands or brand extensions, has declined every year since 2021. 2024 is so far on pace to continue this trend, with early-year launches behind those of 2023. This suggests that higher interest rates, SKU rationalisation and consumer pullback admit inflation has diminished the industry’s enthusiasm for new products, though some of this is also a greater interest in products that are tracked as soft drinks given the vibrancy of RTD formats in many markets.

Functionality is a major component of innovation as wellness holds up as a spending priority for consumers in difficult economic times

Consumers globally have signalled wellness spending as a top priority in 2024 even as they cut back in many other areas, and hot drinks companies are responding. SKUs with claims in virtually all functional spaces (with the notable exception of weight management) outpace category growth overall and continue to drive many new product launches. Energy, mental health and gut health are especially active.

Branding and marketing has become more cheerful in a world that feels more anxiety-inducing

Rising rates of consumer anxiety have of course had impacts in the functional space (the share gain of herbal teas such as camellia sinensis in most Western markets for example, is in part due to this) but they have also had a secondary effect. Brands are increasingly moving away from serious, detail-orientated positioning to a greater emphasis on fun and light-heartedness to appeal to consumers for whom grocery shopping has become a very stressful experience.

Summary 1 innovation in hot drinks
Passport Innovation: What's covered?
Key findings
Hot drinks innovation overview by country
Hot drinks innovation overview by category
Hot drinks innovation overview by retailer
Leading supplier profiles: Nestlé and Twinings
The narrowing window for premiumisation in a cost-of-living crisis
Three key innovation trends in hot drinks for 2024
Trend #1: Forwards through functionality
Functional benefits surge in popularity, but not at equal rates
Innovation examples in “Forwards through functionality”
A caffeine arms race in the niche ultra-caffeinated segment
As caffeinated beverages become more potent, so too do sleep-promoting ones
The Ozempic era and the decline of weight loss-positioned hot drinks
Trend #2: Fun branding in stressful times
Hot drinks try to be an oasis of calm in a turbulent world
Innovation examples in “Fun branding in stressful times”
Chamberlain Coffee expands to match its Gen Z consumer base
Trend #3: Cold-first innovation
Changing consumption habits are moving more consumers towards cold coffee and tea
Innovation examples in “Cold-first innovation”
Cold trends run into the exploding alcoholic RTD segment
Key takeaways: New directions in hot drinks innovation


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