Unprecedented peaks in cold coffee sales— is specialty coffee on the same track? Globally, an increasing number of consumers are gravitating towards cold coffee beverages—a trend that’s not just a seasonal fling but a year-round preference.
This shift in consumer habits is evidenced by Starbucks’ third-quarter financial report for 2023, which revealed that a striking 75% of its U.S. sales now come from cold beverages. This surge isn’t restricted to Starbucks alone; other major coffee chains are witnessing a similar upswing in their cold coffee offerings. This evolving pattern in coffee consumption suggests a lasting transformation in the landscape of coffee culture.
Yet, this begs the question: Will the specialty coffee sector mirror this cold coffee revolution? And what could be the implications for its future To delve into these questions, insights were sought from Randy Anderson, a seasoned cold brew consultant and aficionado. His expert perspective sheds light on what lies ahead for cold coffee in the realm of specialty brews.
The Cold Coffee Phenomenon
The ascension of cold coffee drinks has been nothing short of spectacular. Cold brews, ready-to-drink (RTD) offerings, and coffee-infused cocktails have captured the palates of consumers with unprecedented fervor.
Starbucks’ latest financial revelations speak volumes: CEO Laxman Narasimhan reported that a staggering three-quarters of the company’s U.S. sales in Q3 of 2023 were cold beverages—a new zenith. Not only has cold brew maintained its allure, but the demand for Starbucks’ cold espresso drinks also surged by 13% compared to the previous year.
Customization has played a pivotal role in this growth trajectory. Starbucks’ Q3 report highlighted that over 60% of its beverages were tailor-made to customer preferences, marking an impressive 9% increase since 2018. Among these, cold foam emerged as the fastest-growing addition, contributing a significant $1 billion to the company’s annual revenue.
While Starbucks has long enjoyed an upward trend in cold coffee sales, this phenomenon is not theirs alone. Other major chains are experiencing a similar boom. For instance, UK’s Pret A Manger announced in February 2023 its most significant beverage innovation in over half a decade, with an expansion of its iced beverage range.
Randy Anderson, a cold brew consultant, sheds light on the factors behind this cold coffee craze. He observes that the pandemic sparked a rise in RTD coffee as consumers, confined to their homes, sought the comfort of coffee shop-quality beverages from grocery stores.
“Cold brew is particularly resonating with the younger crowd,” Randy notes. “Moreover, coffee is being recognized as a healthier alternative to energy drinks and is increasingly infused with functional ingredients like nootropics, probiotics, mushroom extracts, and cannabidiol (CBD) to cater to health-conscious consumers.”
Potential Paradigm Shift in Specialty Coffee
The surge in cold coffee sales among large coffee chains is hardly surprising, given their penchant for offering highly customizable drinks with innovative flavors and ingredients. This trend has certainly influenced the specialty coffee sector, which is traditionally known for its devotion to high-quality espresso and meticulously crafted pour-overs. As cold coffee options expand within specialty café menus, one might wonder if they could ever rival the popularity they enjoy in larger franchises.
The specialty coffee domain, with its emphasis on the art of brewing, may not witness cold beverages dominating sales to the same extent as larger chains. Yet, the shift towards ready-to-drink (RTD) products among specialty brands signals an undeniable recognition of cold coffee’s significance in the market.
Randy sheds light on operational shifts within coffee shops: “There’s a trend towards cost-saving measures like automating the coffee extraction process. Moreover, there’s a rise in offering high-caliber in-house RTD options, such as bottled cold brews.”
Notable industry players are already making waves:
- Blue Bottle Coffee has made a name for itself with its canned cold brew.
- Stumptown Coffee Roasters is celebrated for its cold brew and RTD lattes.
- La Colombe, having recently been acquired, made a notable impact with draft lattes, seizing a 1% share of the RTD coffee market in U.S. grocery stores within a year of their launch.
Randy observes, “There’s a burgeoning trend of smaller specialty cafés and roasters venturing into creating their own RTD products. This strategic move allows them to enhance profitability by lowering the cost of goods sold.”
Driving Innovation in the Specialty Coffee Space
The cold coffee segment thrives on innovation, propelled by evolving consumer preferences. Specialty coffee businesses are poised to chart a course parallel to their larger counterparts, emphasizing the diversification of their cold beverage selections.
Failure to adapt could leave specialty coffee shops and roasters trailing in the wake of shifting consumer demands, which increasingly favor cold options. To stay competitive, specialty brands must not only keep pace with trends but also anticipate them.
Furthermore, with convenience being a perennial factor in consumer choices, tapping into the RTD cold coffee market is becoming increasingly crucial for specialty coffee enterprises to maintain relevancy and secure their market share.
The momentum behind the cold coffee movement continues unabated, and it’s imperative for the specialty coffee industry to keep a finger on the pulse of consumer preferences, adapting to meet them.
While the specialty sector might not witness a meteoric rise in cold coffee sales akin to mainstream outlets in the immediate future, the trajectory is clear—cold coffee’s presence in the market is expanding steadily.