International brands, such as Milo, Nesquik and Cadbury Drinking Chocolate, continue to dominate Australia hot chocolate market. These global brands are already well established and are further strengthened by major advertising campaigns, making it difficult for new entrants to compete in a category that is already struggling to maintain positive growth outside of chocolate-based flavoured powder drinks.
With the growth of Australia's café culture, chocolate-based flavoured powder drinks provide a beverage option for those who do not drink tea or coffee, but still wish to engage in the café experience. Hot chocolate is a popular beverage in cafés, and represents an option for those wishing to cut out or cut down on the amount of caffeine consumed. This is a health and wellness concern that is currently impacting upon the coffee category. Industry sources indicate that already many consumers have made the transition to decaffeinated coffee, or lower-caffeine substitutes, such as black tea, herbal tea and chai latte, as a result of the over-consumption of caffeine. Hot chocolate, while associated with indulgence positioning, also has the benefit of being able to be prepared with alternatives, such as skimmed and soy milk, which are perceived as healthier than regular full-fat milk.
Other hot drinks is expected to see a contracting CAGR of 1% in constant value terms during 2012-2017, while total volume is anticipated to remain flat. This provides an indication of the level of price competition forecast for the category, particularly for the brands that appeal to children, such as Milo and Nesquik.
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