- Britvic announces the latest acquisition in the cold brew segment by purchasing Jimmy’s Iced Coffee
- A recent study found that 60% of young consumers prefer RTD coffee over traditionally brewed coffee
- Some smaller businesses struggle to meet this significant increase in demand for cold brew products, leading to acquisitions
IT’S NO secret that consolidation has become commonplace in the coffee industry. But more than ever, we’re seeing a disproportionate volume of acquisitions in the cold coffee segment.
Last week, soft beverage group Britvic announced its acquisition of Jimmy’s Iced Coffee for an undisclosed amount, allowing them to enter the UK ready-to-drink (RTD) coffee market.
Jimmy’s Iced Coffee has over 10,000 distribution points in the UK and achieved a remarkable 43% sales growth in the 12 months leading up to June 2023, reaching £17m in revenue.
The week before, Keurig Dr Pepper (KDP) announced a $300m equity investment in La Colombe Coffee Roasters. The agreement also includes the distribution of La Colombe’s ready-to-drink products.
Last month, Central American multinational beverage company Beliv acquired a 78% stake in High Brew Coffee. High Brew was one of the pioneering cold brew brands in the United States, leading the RTD trend by introducing its drinks to grocery and convenience store shelves during the 2010s.
In June 2022, SYSTM Foods acquired cold brew specialist Chameleon. The month before, they also acquired RBBL, a brand of plant-based RTD “functional beverages,” which included a line of cold brew drinks.
“I believe the acquisitions in cold brew really started much longer ago with a realisation in the corporate world the cold brew is here to stay and was not even close to being fully developed,” says cold brew coffee consultant Wes Kerlin.
For example, Nestlé USA acquired Chameleon in 2017, five years before the SYSTM Foods acquisition, giving the brand unprecedented access to specialty coffee’s cold brew boom.
The explanation has been straightforward over the last few years. When Westrock Coffee Company acquired S&D Coffee & Tea in early 2020, CEO Scott Ford said: “Our foundation is and will remain coffee, but we intend to continue to lead as the industry morphs beyond traditional hot coffee into cold brews, custom blends, and other extract-based options.”
This trend clearly paid dividends, too. In the period from April to June 2021, Starbucks revealed that 75% of total beverage sales were cold drinks. This trend continued into 2022 – and shows no signs of slowing down.
Why so many cold coffee acquisitions?
For the companies purchasing these cold brew brands, there is one clear driver. The acquisitions allow them to capitalise on a gold rush the specialty coffee industry has known about for quite some time.
Cold brew has become more popular for a number of reasons. As well as convenience – the impact of which can’t be understated – lifestyle is a major factor.
Cold brew is increasingly viewed as a healthier alternative to energy drinks and sugary sodas – which aligns with a renewed focus on health and wellness largely being driven by millennials and Generation Z.
As well as this, seasonality has historically had a significant impact on coffee sales in major consuming markets. In the past, sales typically dipped during the summer – coffee was a hot drink, and people wanted to pick up something colder. But cold brew has helped to give coffee consumers something to drink all year round.
Recent acquisitions aim to meet this surging demand more effectively. “The last ten years have seen huge jumps in RTD cold brew sales in the US, the world’s largest cold brew market,” says Wes. “As such, there has been a near-constant lack of capacity.”
Smaller businesses have struggled to keep up with the growing popularity of cold brew products. Acquisitions are taking place to bridge the gap. “When you acquire capacity through corporate purchase of the company, the capacity issue is solved,” says Wes.
Ultimately, specialty coffee brands that have pioneered the cold brew segment for years are getting acquired at a rapid pace. Their innovations have helped to address historical weaknesses in the industry, and multinationals are looking to capitalise on this potential and reap the benefits.
This situation drives the ongoing acquisitions in the segment, as larger companies step in to fill the capacity gap that smaller brands have been unable to fulfil.
What happens next?
Looking forwards, the increasing number of acquisitions in the segment points in one direction – consolidation.
For emerging cold brew brands, this means a more competitive marketplace with fewer players operating. This could mean that new brands are disincentivised from entering the market, potentially stifling innovation.
On the other hand, cold coffee in the hands of multinationals – with the extensive reach and infrastructure to need experiment – could mean more product development. These consolidators are likely to have an increased fiscal capacity to make “mistakes” and absorb any costs. For instance, just last week, Wendy’s launched its Frosty Cream Cold Brew, which debuted with three separate flavours.
Nevertheless, what is clear is that consolidation is only set to continue. What this means for cold brew, the people who drink it, and competition in the segment remains to be seen.