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The cold coffee revolution
The dramatic ascension of cold coffee beverages in the recent past has been unmistakable. A diverse array, spanning from cold brews, ready-to-drink concoctions, to coffee-infused cocktails, has surged in popularity.This trend is vividly mirrored in Starbucks’ financial outcomes. The CEO, Laxman Narasimhan, revealed a groundbreaking revelation: during the fiscal third quarter of 2023, cold beverages alone constituted 75% of the company’s sales in the United States, setting a new record.
Moreover, the demand for cold brew continues to climb steadily, complemented by a notable 13% year-over-year surge in sales of cold espresso beverages.
Customization has played a pivotal role in amplifying the allure of cold coffee drinks. Starbucks reported in its third-quarter financials of 2023 that over 60% of its beverages underwent customization, marking a 9% elevation since 2018. Of particular note, cold foam emerged as the fastest-growing customization option, contributing over US $1 billion to the company’s annual revenue.
The uptick in Starbucks’ cold coffee sales is part of a broader trend, observed not only within large chains but also among competitors.
For instance, Pret A Manger, a prominent UK-based coffee and food-to-go chain, announced in February 2023 its plans to significantly expand its range of iced beverages, heralding its most substantial innovation in drink offerings in over half a decade.
Randy sheds light on the multiple factors propelling the popularity of cold coffee. He notes the significant rise in ready-to-drink (RTD) coffee products during the pandemic, as stay-at-home mandates drove consumers to seek coffee shop alternatives in grocery stores. Additionally, cold brews have garnered favor particularly among the youth, while coffee serves as a healthier substitute for energy drinks, boasting the potential inclusion of functional ingredients like nootropics, probiotics, mushroom extracts, and cannabidiol (CBD).
Could a comparable transformation occur in the specialty coffee industry?
It’s hardly surprising that the rise in popularity of cold coffee beverages has been particularly pronounced within large coffee chains. These drinks not only offer a plethora of customization options but also introduce innovative flavors and ingredients, catering to a wide array of tastes.The broader trends shaping the coffee industry, like the growing preference for coffee capsules and pods, have also influenced the specialty coffee niche. Despite this, the question remains: Will the specialty coffee sector see a surge in cold coffee offerings akin to what’s been observed in larger chains?
Given the specialty coffee sector’s dedication to high-quality espresso and meticulously brewed filter coffee, including pour-overs, it seems improbable that cold coffee beverages will dominate their sales to the same extent. Yet, the recent trend of specialty coffee brands launching ready-to-drink (RTD) products suggests that cold coffee holds a significant place in this market.
Coffee shops are innovating to reduce costs, with strategies like automating the coffee brewing process. “Moreover, there’s a growing trend of offering top-notch, in-house RTD options such as bottled cold brew” Randy points out.
Noteworthy players in this space include:
- Blue Bottle Coffee, renowned for its premium canned cold brew,
- Stumptown Coffee Roasters, offering cold brew and RTD lattes, and
- La Colombe, which has gained traction in the RTD coffee market with its draft lattes, even securing a 1% market share in the US grocery sector within a year of launch.