- The cold coffee sector is expected to grow by 22% each year for the next five years, bringing its total value to around $1.4 billion by 2027.
- Starbucks sold 90 million Pumpkin Cream Cold Brews in 2020, outperforming its Pumpkin Spice Latte
- Premiumisation of the sector adds value to the industry as a whole
UNTIL RECENTLY, cold brew was the industry’s singular solution to cold coffee. Now, the segment is widely recognised as one of the largest growth areas in the global coffee market.
Recent estimates anticipate an annual growth rate of more than 22% in the sector over the next five years, bringing its total value to $1.35 billion by 2027.
The launch of the Toddy brewer in the 1960s saw cold brew consumption gather momentum. Their popularity exploded in the early 2010s following the introduction of RTD products from well-known specialty brands such as Stumptown.
At this point, greater nuance was introduced to the cold coffee sector as a wider range of flavours were made available.
Further innovation in the sector saw David Smith of High Brew introduce the first pasteurised, shelf-stable cold brew. For the first time, flavourings, dairy products, and sweeteners could be added to RTD products, and an entirely new range of marketable coffee products were born.
By 2014, large brands such as Starbucks, Chameleon and La Colombe were producing their own line of RTD cold coffees and were dominating the market.
Last year, former CEO of Starbucks Howard Schultz, estimated that the demand for customised cold coffee beverages was so large that it accounted for around 75% of total beverage sales in US-operated stores.
As an example, Starbucks’ Pumpkin Spice Latte was once their most popular seasonal beverage. However, the Pumpkin Cream Cold Brew outsold its hot counterpart in 2020 with over 90 million sold, just one year after its launch.
Diversification of the cold coffee sector
No longer a sub-segment of hot coffee, cold coffees are now fully established as a standalone category that was valued at over $400 million in 2021.
The diversification of the sector is evidence that cold coffees now hold a distinct place in the industry. As demand grows, an increasing variety of products are being released that not only drives the category forward, but the entire industry.
Randy Anderson is the founder of Cold Brew Consulting. He claims that the huge growth of the cold coffee market has taken even producers and retailers by surprise.
“Every year, the compound annual growth rate forecasting is pretty much destroyed by much higher growth than is anticipated,” he says. “This has gone on year after year.”
Innovation in the sector goes beyond the widening range of products available. Equipment manufacturers are finding new, more efficient ways to brew cold coffee.
For example, the recently launched Coldstretto from Bkon provides shelf-ready cold espresso, and Marco Beverage Systems’ POUR’D is a cold coffee dispense system that enables cafés to serve RTD or cold brew concentrate at the point of service.
Randy suggests that a key driver for growth in the segment is the ease with which coffee shops can provide cold coffee products to consumers, minimising labour costs.
“More and more coffee shops are beginning to purchase concentrate rather than to try to make it themselves,” he says. “The main reason for this is that the concentrates are strong enough to replace espresso shots when making cold drinks.
“The cost is very similar to making a shot of espresso, but there is no labour involved in making the cold brew.”
Premiumisation of the cold coffee sector
As cold coffees assert their dominance in the market, they can also bring a myriad of opportunities for the industry.
At Producer & Roaster Forum last year, Matt Swenson explained that the rise of cold coffee goes beyond a consumer trend, and that the premiumisation of the sector is adding value to the industry and enabling wider growth.
An increasingly diverse range of cold coffee products is introducing new consumers to the industry. A recent study found that 60% of young consumers prefer RTD coffee over traditionally brewed coffees. This not only shows the role of the sector in expanding the industry’s reach but also indicates its more central role in the future.
“By using high-quality coffees, some that are even decaf, people who normally don’t drink coffee can enjoy new flavours from both cold brew concentrate and RTD brands,” Randy says.
The premiumisation of the cold coffee sector could also add value at the farm level. As the demand for a higher-quality cold coffee product increases, there is a greater opportunity for farmers to produce and sell their coffee at the higher prices specialty coffee receives.
And as the premium cold coffee sector expands into completely new markets, this presents a wider opportunity for actors along the supply chain to participate in the sustainable sourcing practices that are associated with specialty coffee.
“Very recently, cold coffees have started to be supplemented with products such as mushrooms, CBD, non-essential amino acids, extracted botanicals and other ingredients that provide functional benefits to the consumer,” Randy says. “There truly is a lot of room to grow in this area.”
However, there are still obstacles to overcome. Producing cold coffees presents a new set of food safety challenges for businesses. For example, there is a lack of manufacturers in the US that hold the LACF certification, which allows them to package and distribute pasteurised and low-acid coffee products such as RTD and cold brew coffee.
While year-on-year growth is expected in the sector, an inadequate solution to these concerns could be a limiting factor.
But the cold coffee segment is a different beast than it was 20 years ago. Given its huge growth potential, it can be expected that businesses will pour investment and resources into ensuring a safe, efficient and optimised supply chain. In other words, this is just the beginning – there is certainly more to come.
