Globally, an increasing number of consumers are showing a marked preference for cold coffee drinks, a trend that not only defies traditional seasonal patterns but is also setting record highs in sales throughout the year. This shift towards cold coffee beverages is underscored by Starbucks’ announcement in its Q3 2023 financial report, which highlighted that cold beverages now make up an astonishing 75% of its sales in the US, indicating Cold coffee sales hit record highs. This phenomenon is not limited to Starbucks alone; other major coffee chains are also experiencing similar spikes in demand for cold coffee, signaling a profound and enduring transformation in coffee consumption habits.
This evolution in consumer tastes naturally raises questions about its impact on the specialty coffee market. Will we observe a comparable trend towards cold brews and iced variations within this niche sector? And what implications could this have for the future of coffee culture?
To shed light on these inquiries, I engaged with Randy Anderson, a renowned authority on cold brew coffee. Continue reading to discover his valuable insights on this evolving coffee landscape.
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.
Randy highlights, “One particularly vibrant trend is the move by smaller specialty cafes and roasters towards creating and selling their own RTD products. This strategy allows them to enhance profitability by minimizing the costs of goods sold.”
Advancing further innovation
The segment of cold coffee beverages stands out as a particularly vibrant and innovative area within the coffee industry, constantly evolving in response to a diverse array of consumer trends. This suggests that specialty coffee businesses might well mirror the growth patterns seen in larger coffee chain operations, emphasizing the importance of continuously expanding their array of cold coffee options to stay relevant.
Failure to innovate in this space could see specialty coffee shops and roasters fall behind, as the consumer appetite for chilled drinks shows no sign of diminishing. Specialty coffee brands must, therefore, keep their finger on the pulse of the market to maintain their competitive edge.
Furthermore, with convenience remaining a critical factor in consumer choices around coffee, tapping into the ready-to-drink (RTD) cold coffee market becomes crucial for specialty coffee enterprises aiming to thrive.
Amid this cold coffee trend that appears unstoppable, the specialty coffee industry must be vigilant and adaptable to the shifting demands of consumers, ensuring their offerings are aligned with these preferences.
While it might be premature to anticipate record-breaking sales in cold coffee within the specialty sector, there’s an undeniable momentum in the market. The trajectory points towards sustained growth, emphasizing the need for specialty coffee players to strategically position themselves in this evolving landscape.
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