ICE ON FIRE

Sales of cold-brewed drinks are pos­i­tively siz­zling,

Toronto Star - - GTA & BUSINESS - LISA WRIGHT BUSI­NESS RE­PORTER

Doug Fisher is a tra­di­tion­al­ist who loves his morn­ing cup of joe pip­ing-hot and wouldn’t think of buy­ing a fancy chilled ver­sion.

“If I wanted my cof­fee cold I could just let it sit on the counter,” he jokes. “But I’m older.”

How­ever, the long­time food-ser­vice in­dus­try an­a­lyst knows that the reg­u­lar cof­fee mar­ket is al­ready sat­u­rated in Canada, and that a cold front is mov­ing into the mar­ket thanks to younger con­sumers.

In fact, cold drinks are the hottest thing out there now for the big play­ers.

“There’s no real growth in hot cof­fee. It’s all been done, so the cold-bev­er­age mar­ket is the evo­lu­tion for th­ese chains,” Fisher notes.

Ac­cord­ing to re­search firm NPD Group, iced cof­fee has seen a 16.9-per-cent growth in sales at “quick ser­vice” or fast-food restau­rants in Canada in the 12 months end­ing June 2016.

And the cold cat­e­gory’s pop­u­lar­ity is no longer lim­ited to the steamy summer months ei­ther.

“We have seen an in­creased shift in con­sumer pref­er­ence from hot to cold through­out the whole year. This is not sea­son­ally spe­cific,” says Mary Gra­ham, vice-pres­i­dent of cat­e­gory brand man­age­ment for Star­bucks Canada.

The java gi­ant has en­joyed a 30-per-cent growth in sales over the past two years of all things chilled, from their Frap­puc­cino and new cold brew to their Tea­vana line of prod­ucts.

McDon­alds is also see­ing strong iced-cof­fee growth of 23.4 per cent at its McCafé coun­ters over the last year.

Star­bucks’ iced tea busi­ness in Canada has grown 41 per cent since Au­gust 2014. In its big­gest takeover to date, the Seat­tle-based cof­fee colos­sus scooped up high-end tea maker Tea­vana for $620 mil­lion (U.S.) in cash at the end of 2012, bet­ting on tea as a big part of its fu­ture — which is now pay­ing off, she says.

Ap­prox­i­mately 85 per cent of tea con­sumed in the U.S. is iced, ac­cord­ing to the Tea As­so­ci­a­tion of the U.S.A. With this in mind, Mon­treal-based David­sTea is brew­ing up a rapid ex­pan­sion in the U.S. Com­pet­ing di­rectly with Tea­vana, the spe­cialty tea and tea ac­ces­sory re­tailer opened 39 new stores across North Amer­ica in 2015 and is on track to open just as many this year.

David­sTea launched its first lo­ca­tion on Queen St. W. in 2008 and now has165 shops in Canada and 47 in the U.S. Its first store out­side Canada was opened in 2011 in New York City, and by 2012 it had a lo­ca­tion in every Cana­dian province as well as in San Fran­cisco, its first U.S. West Coast lo­ca­tion.

“There’s a grow­ing en­thu­si­asm for iced tea among mil­len­ni­als and it is an in­cred­i­bly ex­cit­ing cat­e­gory for us,” says Is­abelle Grisé, chief mar­ket­ing and mer­chan­dis­ing of­fi­cer for David­sTea.

The Tea As­so­ci­a­tion of Canada says that as con­sumer de­mand has grown, fre­quent in­no­va­tion and con­stant mar­ket­ing of new prod­ucts have helped keep tea top-of-mind for con­sumers, es­pe­cially mil­len­ni­als, who are more likely than older gen­er­a­tions to drink

“There’s no real growth in hot cof­fee. . . . The cold-bev­er­age mar­ket is the evo­lu­tion for th­ese chains.”

DOUG FISHER

FOOD-SER­VICE IN­DUS­TRY AN­A­LYST

the bev­er­age for its health ben­e­fits (47 per cent ver­sus 41per cent).

“Any fruit-based herbal tea is a big seller,” says Lo­gan Klassen, man­ager of the flag­ship David­sTea store on Queen St. W. for the past year, as she mixes a Straw­berry Co­lada blend in the chain’s new­est in­ven­tion, the iced tea press.

Know­ing the mil­len­nial mar­ket well, the 26-year-old is mov­ing to Mi­ami next month to open a new David­sTea lo­ca­tion, the first in Florida.

Fisher points out that it’s a lu­cra­tive busi­ness, since the dif­fer­ence in cost be­tween mak­ing a so-called pre­mium iced tea and an or­di­nary iced tea is just pen­nies a glass.

Mean­while the NPD Group says cof­fee-crav­ing Cana­di­ans are be­com­ing more ad­ven­tur­ous when they visit the cof­fee shop.

Over the past four years, hot brewed cof­fee serv­ings have de­clined at a rate of 2 per cent while hot spe­cialty cof­fee serv­ings have grown by 4 per cent and iced spe­cialty cof­fee serv­ings have surged by 8 per cent, the re­search firm said.

Though the num­ber of an­nual serv­ings of hot, brewed cof­fee has de­clined, the num­ber of an­nual vis­its to cof­fee shops has ba­si­cally stayed the same.

The NPD Group says this shows con­sumers are be­gin­ning to al­ter their pur­chas­ing habits, which has prompted some chains like Star­bucks to be­gin ex­per­i­ment­ing with dif­fer­ent types of of­fer­ings, in­clud­ing wine, beer and non-cof­fee al­ter­na­tives.

Star­bucks es­ti­mates that one in two bev­er­ages sold in Canada are cold “and we ex­pect to more than dou­ble the size of our cold-bev­er­age busi­ness in Canada within five years,” Gra­ham says.

“Iced bev­er­ages rep­re­sent one of the fastest-grow­ing ar­eas of our busi­ness, and is an area in which we have in­vested in new prod­uct in­no­va­tion and will con­tinue to fo­cus on,” she says.

The in­tro­duc­tion of its cold brew in March 2015 got an ex­cep­tional re­sponse in Canada, fu­elling over 65 per cent of the com­pany’s cold cof­fee growth at launch time.

“While we have al­ways of­fered our cus­tomers new op­tions in cold cof­fee, noth­ing will com­pare to the pace of flavour, craft and brew­ing in­no­va­tion we will see in the next few years,” says Gra­ham.

Tim Hor­tons is get­ting in on the ac­tion this summer with the launch of its new bot­tled Iced Capp in gro­cery and con­ve­nience stores. The drink first launched in 1999 and quickly grew to be­come one of the chain’s most pop­u­lar cold bev­er­ages, the com­pany says.

“Pro­vid­ing a bot­tled ver­sion of our Iced Capp was a nat­u­ral ex­ten­sion of our re­tail prod­uct of­fer­ing,” says Tammy Sadin­sky, Tims Hor­tons’ ex­ec­u­tive vice-pres­i­dent of re­tail, in a state­ment.

Star­bucks launched its bot­tled Frap­puc­cino in 1996 and the com­pany says it con­tin­ues to be a hot seller.

VINCE TALOTTA/TORONTO STAR

Lo­gan Klassen, man­ager of David­sTea’s flag­ship store on Queen St. W., is mov­ing to Mi­ami to open the chain’s first Florida lo­ca­tion. David­sTea has 165 out­lets in Canada and 47 in the U.S., and is set to open 39 new stores in North Amer­ica this year.

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