ICE ON FIRE
Sales of cold-brewed drinks are positively sizzling,
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.”
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.