Beverage ingredients supplier Finlays expects that America's cold brew craze will spread throughout the world.
Cold brew coffee has taken the industry by storm, generating triple-digit growth in the United States and other mature markets. In developing coffee markets around the world, it's shaping up as the next big thing.
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That's the broad outline. How do prospects compare across different regions? Siân Edwards shares her perspective as global insights manager at Finlays, the B2B supplier of coffee, tea, and botanical solutions for beverage brands. She sees cold brew as a rare growth opportunity that companies should catch.
North America
Where are we today? Cold brew coffee is well established in the U.S., the world’s largest consumer and producer. It accounts for one fifth of the overall market value, according to research by Nielsen and Technomic. More than half all RTD coffee launches in retail involve cold brew.
Where it’s going next. In this mature market, we’re seeing the category continue to develop, particularly in line with major consumer trends for health and wellbeing. Interest in added functionality has increased, as consumers look for "drinks with benefits" to support their physical and mental wellbeing.
Products with specific caffeine levels (both low and high) are appealing to consumers who look for an energy boost or want to regulate their caffeine intake. Other cold brew products cater to cravings for indulgence in luscious added flavors, such as Snickers and churro, offering consumers a sense of nostalgia and escapism from busy and stressful lifestyles.
China
Where are we today? In a nation that traditionally prefers tea, coffee consumption is relatively low in China. The average Chinese consumer drinks five cups per year, according to the International Coffee Organization, less than 2% of the amount taken by Japanese or American consumers, as reported by The Economist in 2019.
However, coffee is increasingly fashionable with younger consumers, aided by the major expansion of cafe chains such as Starbucks, Luckin’, and Costa in urban centers. China is a flourishing coffee market, still in its infancy, with major growth potential.
Where it’s going next. Cold brew has a major role to play in market development in China, thanks to its appeal as a convenient, refreshing, and premium beverage. We’re seeing major players, such as Starbucks and JDE Peets, generate significant activity and drive innovation in the category. New products like sparkling cold brew and instant (soluble) cold brew are catching on. While the overall coffee market is still in a relatively early stage of growth, the impact of multinational brands is intersecting with consumer exposure to newly developed products via social media to drive demand for cold brew coffee.
Western Europe
Where are we today? Influenced by the North American market, there is growing consumer awareness of cold brew coffee in Western Europe, driving fast growth in launches and consumption. Similar to the U.S., much of this activity has been driven by major brand owners, such as Starbucks and Califia, launching products across both retail and foodservice. But, unlike the U.S., cold brew coffee is not yet firmly established in the mainstream. The category is on the cusp of a major breakthrough in Europe.
Where it’s going next. From Finlays’ proprietary study of consumers in the United Kingdom we know that people associate cold brew coffee with a smoother taste, reduced bitterness, and higher quality products, but this awareness is not widespread, and there remains some confusion about the production methodology. The opportunity for major brand owners to enter, educate, and own the European market is huge.
Middle East and Africa
Where are we today? RTD/iced coffee is just emerging in this region, totaling less than $150 million in consumer sales in 2022. This figure is expected to climb to $220 million by 2027, for growth at a more than 10% compound annual rate during this period (2022–27), according to a 2022 forecast by GlobalData Plc.
Where it’s going next. While the overall category remains in an early stage of development, there is strong growth potential, particularly when considering the high demand for premium/adult soft drinks in the region. A high proportion (38%) of consumers in the Middle East and Africa do not drink alcohol (vs. 22% global average), creating a large potential market for owners of soft beverage brands in this region.
South and Central America
Where are we today? Latin America is one of the world’s foremost coffee producing and consuming regions, led by Brazil, where coffee is consumed by 97% of the adult population. However, RTD/iced coffee has been slow to take off in the region, with consumers appearing somewhat ambivalent about the new formats and concepts, such as iced coffee and specialty coffees, that have taken hold in third-to-fifth-wave coffee markets,
Where it’s going next? Totaling $170 million in 2022, the RTD/iced coffee market remains small but is forecast to reach $225 million in 2027. Much of this growth is expected to be driven by younger consumers, who are exhibiting greater engagement with premium coffee and multinational chains, such as Starbucks, compared to older customers. International trends intersecting with a regional love for coffee makes Latin America a major opportunity market for future growth of RTD/iced coffee — and cold brew in particular.
In related coverage, read STiR's report on Finlays' cold brew manufacturing facility for the European market.