Cold Brew to the Rescue

by

By Dan Bolton

Americans like to chill. Nearly everyone is aware of ready-to-drink (RTD) coffee and one-in-four (24%) drink it regularly, according to the latest and largest national consumer survey of coffee drinkers.

Nineteen percent drink cold brew, up from virtually 0% in 2008, boosting sales during summer months and at afternoon breaks.

Annually, since 1950, the National Coffee Association (NCA) has asked thousands of consumers to describe in detail what they drank the previous day. This is the first year RTD and cold brew were added as a coffee category.

As sales of hot coffee level off, cool coffee beverages are ascendant with 42% of respondents reporting cold brew as “trendy.”

Twelve percent of coffee drinkers reported drinking cold brew within the past week while 13% said they drank a frozen blended coffee. Penetration is 5% for nitro coffee. In all, 31% of respondents say they drink RTD coffee “regularly or occasionally.”

One third (33%) of consumers have a positive purchase intent towards RTD coffee, a number that increases to 48% for those 18-24 of age. Consumers aged 25-29 are equally enthusiastic with 47% “likely to drink” coffee from a can, bottle, or carton. Half the respondents who currently drink RTD coffee purchase it at grocery with 30% buying at convenience outlets and 29% at stations and mass merchandisers (Walmart, for example). Another 5% purchase RTD online.

Cafe cold brew

Twenty-four percent of respondents currently drinking canned and bottled coffee buy their RTD at coffee shops.

Dunkin’ recently introduced eight cold beverage options including iced coffees, iced tea, cold-brew coffee, and nitro-infused cold brew coffee with iced Americano, cappuccino and a new energy cold brew with an espresso shot. These are off-peak offerings that appeal to Millennials and Gen Z.

Mintel International reports that half of Gen Z drink flavored coffee away from home. One-third have ordered iced or cold-brew coffee away from home. Mintel found seven in 10 Gen Z customers dined out for a snack in the past three months, compared to nearly six in 10 Millennials.

Rising sales at coffee shops are a strong indication of mass market appeal. Coffee houses and cafes are the fast-growth segment of fast-serve with sales up 41% to $23.4 billion from 2011-2017.

In-shop sales of cold brew increased 460% to $38.1 million last year, according to Mintel which noted a 3% slip in sales of hot coffee. Starbucks reported a 25% increase in beverage sales since adding cold brew to the menu.

Datassential MenuTrends notes that 22.4% of fast casual menus offer cold brew. He estimates 11.7% of all US restaurants will list cold brew by 2022.

Burgeoning brands

JAB Holdings has consolidated Stumptown, Peet’s, Intelligentsia, Caribou, and Keurig Dr Pepper for the largest stake in the segment followed by Nestlé’s purchase of Austin-based top-selling organic Chameleon Cold-Brew (one of the top three refrigerated US cold brew brands) along with a majority share of Blue Bottle for which it paid $425 million in 2017.

Innovation continues. Verve Roasters introduced a hot brewed, flash-chilled coffee last fall that they claim retains more of the nuanced flavors of coffee.

Demand for cold brew, which requires about twice as much coffee as hot brewing methods is largely responsible for increased US coffee imports in 2018.