Fill up the cooler with cold-coffee brews
Companies are betting big on canned and bottled java “Maybe you want to have a six-pack for your picnic”
America’s seemingly insatiable thirst for a good hot cup of joe has helped coffee shops grow into a $21.2 billion industry and turned java joints like Starbucks into societal fixtures. Now coffee makers are betting U.S. grocery shoppers will embrace an even cooler way of getting their caffeine jolt: chilled bottled and canned coffee.
Global giants such as Illycaffè and upstarts such as High Brew Coffee and Chameleon Cold-Brew are rushing to put their products on ice. Coca-Cola, Dr Pepper Snapple Group, and other beverage makers are jumping in. And a StarbucksPepsiCo partnership, which has long dominated packaged cold coffee, is introducing new chilled brews.
While sugary iced-coffee concoctions, like Starbucks’s Frappuccinos, have been popular for years, baristas and tony coffee bars are seeing an increasing demand for more sophisticated iced espressos and lattes. Some say they serve more cold coffee than hot—even during winter. For the fourth quarter of 2015, Starbucks reported a 20 percent increase in iced drink sales nationwide following its introduction of cold-brew coffee in its retail stores. Unlike iced coffee, such drinks are brewed cold, taking 12 hours. Now coffee makers are pressing to get more of those high-end, lower-calorie and less-sugary cold brews and lattes on the shelves of stores such as Walmart, Kroger, and Costco.
“When given a choice, people tend to make the healthier, better-for-you choice as long as it’s within a reasonable cost premium,” says Chris Campbell, co-founder of Chameleon, where sales are growing at triple-digit annual rates.
The U.S. market for canned or bottled ready-to-drink coffee has been growing by double digits annually since 2011, and Euromonitor International expects the market to reach close to $3.6 billion by 2020—up sixfold since 2001. The global market for such drinks was $18 billion in 2015.
Michael Butterworth, cocreator of the Coffee Compass blog, says the cold coffees on U.S. grocery shelves “have a long way to go” in terms of quality and taste. “But there’s a proven market for these products, and you’re going to see more and more of them,” he says. One of the promises of canned and bottled coffees, which are portable and durable, is that they’ll open up the universe of high-end coffee to folks who may not live around the corner from a hipster cafe, says Chermelle Edwards, creator of a blog called Coffeetographer. “Maybe you want to have a six-pack for your picnic,” she says. “You don’t go to a coffee shop and buy 10 coffees for your party, but you’ll buy cold-brew. It’s like beer, like craft beer.”
executives hope that ready-to-drink cold coffee in the U.S. could someday rival the brew’s popularity in Japan. That’s the largest such market in the world, according to Andrea Illy, chief executive officer of Illycaffè. CocaCola, which partners with Illy in the U.S. and other countries, sells more bottles and cans of coffee than anyone else globally, largely because of sales in Japan.
The Starbucks-PepsiCo venture is introducing sweetened and unsweetened bottled black coffee and cold brews this summer. Peet’s Coffee & Tea, owned by JAB Holding, got into cold-brew canned coffee when it agreed to acquire Stumptown Coffee last fall. La Colombe, backed with funding from Chobani yogurt founder Hamdi Ulukaya, will release its canned latte later this year in grocery stores around the country. The drink, which foams like a hot latte when poured, sold 10,000 cans in its first hour when it was offered online in March.
In April, Dr Pepper Snapple entered into a distribution deal with High Brew Coffee, an independent company started by David Smith. For Smith, who’s counting on Dr Pepper for its “merchandising muscle,” coffee is a second act. He co-founded Sweet Leaf Tea, which was sold to Nestlé Waters North America in 2011. While on a seven-month sailing trip with his family, often island-hopping at night, he found standard coffee wasn’t giving him the jolt he needed to stay alert. So while at sea he made his own coldbrew, which carries twice the caffeine punch of brewed coffee. “A lightbulb went off,” Smith says. “If somebody came up with a ready-to-drink, shelf-stable, coldbrew coffee that was conveniently packaged, it would really be a great addition to what is available to consumers out there today.” The resulting product, High Brew Coffee, hit grocery stores in 2014. Sales grew 270 percent in 2015, says Smith, who declines to provide dollar figures.
The bottom line Sales of ready-to-serve canned and bottled coffee could approach $3.6 billion in the U.S. in 2020, up sixfold from 2001.