COLD BREW
HEAT MAP
Cold brew has taken the coffee industry by storm, generating triple digit growth in mature markets such as the USA, and heralded as the next big thing in developing coffee markets the world over. But what happens next to the ‘next big thing’? What’s the future for cold brew coffee in the USA, and how is it emerging in markets such as China and West Europe?
Words: Siân Edwards
Cold brew coffee is well established in the USA, the world’s largest consumer and producer. It accounts for one fifth of the overall market value* and more than half all RTD coffee launches in retail.
In this mature market, we’re seeing the category continue to develop, particularly in line with major consumer trends for health and wellbeing. Interest in added functionality has increased as consumers look for ‘drinks with benefits’ to support their physical and mental wellbeing. Products with specific caffeine levels (both low and high) are appealing to consumers looking for an energy boost, while also wanting to regulate their caffeine intake. This is contrasted with the development of indulgent products that draw on favourite flavours, such as snickers and churro, offering consumers a sense of nostalgia and escapism from busy and stressful lifestyles.
As a traditional tea-drinking nation, coffee consumption has typically been low in China. The average Chinese consumer drinks five cups per year, according to the International Coffee Organisation, less than 2% the amount consumed by Japanese or American consumers**. However, coffee is increasingly fashionable with younger consumers, aided by the major expansion of chains such as Starbucks, Luckin’ and Costa in urban centres. China is a flourishing coffee market, still in it’s infancy with major growth potential.
Cold brew has a major role to play in market development in China, as a convenient, refreshing and premium beverage. We’re seeing major players, such as Starbucks and JDE Peets generate major activity and drive innovation in the category, with products such as sparkling cold brew and instant (soluble) cold brew. While the overall coffee market is still in relatively early growth stages, the impact of multinational brands is intersecting with exposure to NPD on social media to drive mature innovations and consumer engagement in cold brew coffee.
Influenced by the North American market, there is growing consumer awareness of cold brew coffee in Western Europe, driving fast growth in launches and consumption. Similar to the US, much of this activity has been driven by major brand owners, such as Starbucks and Califia, launching products across both retail and foodservice. But, unlike the USA, cold brew coffee is not yet firmly established in the mainstream, with the category on the cusp of a major breakthrough in Europe.
From Finlays’ proprietary study of UK consumers, we know that people associate cold brew coffee with a smoother taste, reduced bitterness and higher quality products, but this awareness is not widespread, and there remains some confusion about the production methodology. The opportunity for major brand owners to enter, educate and own the European market is huge.
Latin America is one of the world’s foremost coffee producing and consuming regions, led by Brazil, where coffee is consumed by 97% of the adult population. However, RTD/iced coffee has been slow to take off in the region, with consumers appearing more ambivalent to the new formats and concepts such as iced and speciality hot coffees that have taken hold in third-fifth wave coffee markets.
Totalling $170mn in 2022, the RTD/iced coffee market remains small, but is expected to reach c$225mn in 2027. Much of this growth is expected to be driven by younger consumers, who are exhibiting greater engagement in premium coffee and multinational chains such as Starbucks, vs. older generations. Multinational trends intersecting with a regional love for coffee makes Latin America a major opportunity market for future growth of RTD/iced coffee, and cold brew in particular.
REFERENCES: *Nielsen/Technomic 2023, **The Economist, 2019, ***GlobalData Plc, 2022, ****GlobalData Plc, 2023
RTD/iced coffee is just emerging in this region, totalling less than $150mn in consumer sales in 2022. This is expected to reach c.$220mn by 2027, with growth of +10% CAGR during this period (2022-27)***.
So, while the overall category remains in early stages, there is strong growth potential particularly when considering the high demand for premium/adult soft drinks in the region. A high proportion (38%) of consumers in the Middle East & Africa don’t drink alcohol (vs. 22% global average), creating a large potential market for soft beverage brand owners in this region****
REQUEST A CALL BACK TO SPEAK TO ONE OF OUR TEAM ABOUT OUR RANGE OF COLD BREW SOLUTIONS
