Our daily caffeine fix is one luxury the Brits are not willing to cut back on in times of economic strife. As we have grown accustomed to upmarket coffee chains on our high streets, our discernment has increased, and this is having a knock-on effect on the brew we choose to drink at home.
While many food and drink producers have felt the pinch as shoppers rein in their grocery budget, the premium end of the market has continued to perform strongly in the coffee sector. So, although out-of-home coffee drinking has taken a hit, in-home consumption has increased.
Between 2005 and 2009 the value of the coffee market (excluding coffee shops) grew by 17%. An increase in raw material prices has contributed to this rise, but trading up has also been a significant factor. In 2009 the market was worth £782m, according to Mintel.
Coffee shops may have ensured the cappuccino has become an established part of our food culture but, when it comes to making coffee at home, convenience wins over taste. Instant coffee accounted for 80% of value sales compared with 19% for roast or ground last year.
Nonetheless, trading up is evident even here, as premium, freeze-dried sales rose by 44% between 2005 and 2009 and speciality instant coffee grew by 17%. In comparison, sales of regular granules, seen as the value option, have been in decline; they have fallen 36% over the past five years and account for just 25% of instant-coffee sales.
Health concerns had led to more decaffeinated options but the interest has not been sustained and sales have dropped 8% in the past year.
Conversely, the trend for more ethical coffee is becoming stronger. Coffee is one of the most developed Fairtrade markets and this sub-sector was worth £41m in 2009, the equivalent of about 5% of the total market; Cafedirect is the leading brand.
A significant innovation in this sector over the past decade has been the introduction of pod/cartridge machines. The cost of the devices has fallen and unit sales have grown with market leader Nescafe Dolce Gusto, accounting for about 40% of the market.
Nestle is the leading coffee manufacturer and has invested substantially in promoting the Nescafe brand, with its 'Coffee at its brightest' positioning, particularly aimed at a younger audience. Last year it also launched Nescafe Green Blend, which contains unroasted green coffee beans, to compete with the health positioning of green tea.
The number-two producer, Kraft, has created a more robust ethical positioning for its Kenco brand to boost its premium footing. It has started to buy beans from Rainforest Alliance-certified farms with the aim of sourcing all its freeze-dried products from these suppliers; it has also introduced 'eco refill' packs to cut down on packaging.
Both the leading players are facing competition from Douwe Egberts, as it builds its premium presence in the instant market.
The taste of coffee appears to appeal to older palates and over-55s are the biggest group of coffee drinkers. While this demographic is set to grow, manufacturers need to find a way of making coffee attractive to younger drinkers - so they will make it at home and not just buy it in coffee shops - to ensure the long-term health of the market.
Penetration of coffee is high - 79% of consumers drink either instant or ground - but this is still less than tea, which is drunk by 81% of the population, according to TGI.
Mintel predicts that the growth of the coffee market will continue - by 25% over the next four years to reach £976m by 2014.