Aussies slurped more than £1.35 billion worth of tea and coffee last year and the café culture market is growing by the month.

The biggest growth in coffee is coming from out-of-home consumption with more and more consumers adopting the idea of café culture, according to a new report by Datamonitor called ‘Hot drinks in Australia to 2013’.

Sales of hot drink products in Australia reached $1350m in 2008 and are expected to be worth $1473m in 2013, with coffee accounting for the largest share followed by tea. In the tea category, consumers are showing increasing interest towards specialty tea segments such as green tea and herbal tea due to its perceived health & wellness benefits.

Australia, unlike other Asian countries, boasts of a traditionally strong coffee culture started by European immigrants in the form of local cafés. Today, coffee drinking has become such an integral part of the Australian lifestyle that it has led to the explosion of many specialized coffee shops further fuelling the growth of the coffee sector in Australia. Indeed, there is a huge demand from the new age consumers who find sitting and sipping coffee in the well decorated cafés fashionable. According to Datamonitor, currently, for every seven cups of coffee consumed by an average Australian, one is consumed out-of-home.

In contrast to the western economies, Australians prefer their coffee with milk. So, whether it is Australians-invented flat white or other favoured coffee variants such as cappuccinos or caffe latte, milk variants are in huge demand. However, cafés are not a quick pit-stop for caffeine intake. Rather, Australians prefer to sit back and spend hours drinking coffee in a cafés making it a place for leisure and business gathering.

The unsuccessful attempt by the US coffee chain, Starbucks to replicate the US model in Australia is indicative of very specific expectations of Australian consumers, which are difficult to meet by regular western practices.

At-home coffee consumption is witnessing strong demand for high quality roast and ground coffee as consumers are seeking to replicate the quality and taste of cafés’ coffee. According to Datamonitor’s Market Data Analytics database, retail coffee sales in Australia grossed $752 million and ranked second, only behind Singapore, in per capita coffee consumption amongst the Asian economies in 2008.

Although demand for roast coffee is growing, the at-home coffee category is still dominated by instant coffee, accounting for more than 80% of the total Australian coffee sales. Nestle, Cantarella and Sara Lee, together accounts for more than two-thirds of the total coffee sales in volume. Datamonitor forecasts the at-home coffee market to reach $798 million by 2013.

In contrast, the Australian tea category was valued at $437 million in 2008 and is forecasted to reach a value of $473 million in 2013. Currently, the tea sales in Australia are driven by the at-home segment with per capita consumption of less than 0.8 kg per annum. In contrast, the per capita consumption for out-of-home tea market stands at less than 0.1 kg per annum.

Lipton brand from Unilever, followed by Dilmah and Tetley, are the favourite tea brands amongst Australians. Fruit/Herbal tea and Green tea segments are leading the growth in the tea market with around 5% growth over the past decade in comparison to negligible growth in the higher value segment such as black tea.

Consumers in Australia have now matured in their tastes and preference for hot drinks and are demanding premium products in both the coffee and tea category. To optimize returns, manufacturers are banking upon this trend and launching new products with distinctive features such as organic, antioxidants, etc. In light of all the current indications, Datamonitor predicts the Australian hot drinks market to be in the order of $ 1.5 billion over the next 5 years.