Packaged cold brew coffee is gaining traction, & still has plenty of room for additional players

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Cold brew coffee is creating quiet the buzz in the US with new brands streaming into the market and retail sales growing exponentially in the past five years. 

Estimates of cold brew coffee sales vary with data from Mintel placing sales of the beverage at about $7.9 million as of September 2015 and SPINS estimating sales at $38.4 million as of April 2016. But both companies agree that sales have more than doubled year over year with Mintel quoting 115% growth from 2014-2015 and SPINS estimating 111.4% growth from 2015 to 2016.

“RTD Cold Brew coffee sales have been doubling year-over-year across all channels combined since this product launched just a few years ago ... and we anticipate many more brands will respond to the consumer demand for this beverage in the coming years,” Kora Lazarski, strategic alliances with SPINS, told FoodNavigator-USA.

Yet, general awareness of the beverage remains relatively low and cold brew makes up only a small part of the overall $2.32 billion ready-to-drink coffee segment, according to Euromonitor data.

“Right now, cold brew coffee both at the coffee shop level and in the packaged ready-to-drink coffee segment is definitely a small, but growing part of the segment,” Euromonitor Senior Beverage Analyst Virginia Lee told FoodNavigator-USA at The Healthy & Natural Show in Chicago in mid-May.

As evidence of consumer interest in the beverage and its potential as a CPG, Lee pointed to the recent $4 million investment in packaged cold brew coffee company High Brew Coffee, and its distribution deal with the Dr. Pepper Snapple Group. She also noted large retailers, such as Target, are starting to carry four-packs of cold brew coffee, which reflects its potential for increased penetration.

What is driving consumer interest?

Cold brew’s percolating popularity can be attributed in part to its ties to the larger health and wellness trend, Lee said. She explained that because cold brew coffee is processed by allowing grounds to soak in cold water for up to 12 hours and does not use heat it has a smoother taste and is less acidic than traditionally hot brewed coffee. As a result there is less need to add sugar or cream to the beverage – making it a healthier option for some than regular hot brewed coffee.

Lee also noted that cold brew is popular because it is convenient and is “cool” because it is considered a handcrafted artisanal product by many consumers.

“The other thing that makes cold brew coffee appealing is because cold brew coffee has to be prepared in advance there is kind of a feeling of ‘I don’t want to miss out’ because once the coffee shop runs out of cold brew coffee you’re going to have to wait 12 hours or more to serve the next customers,” Lee said.

A premium product                                                               

Given the extra time and skill it takes to make cold brew coffee, the beverage often sells as a higher price point than regular iced coffee. This means most cold brew drinkers are more likely to be affluent, Lee said.

She added that Millennials also are very interested in cold brew because it often comes with a “story saying we use this kind of cold brew method to produce it,” which meets younger consumers’ desire to know more about what they eat and drink.

Category still has room to grow

While many new brands have entered the packaged cold brew space in the last two to three years, Lee says there is plenty of room for additional companies that set their product apart from the pack.

To build brand awareness in the nascent packaged cold brew coffee category, brands need to identify their “hook,” Lee said. “Is there a more delicious flavor? Is your hook that it contains less calories?”

She also recommends cold brew coffee made from gourmet or single origin beans emphasize their supply line “because consumers are willing to pay more for cold brew coffee, but I think that there needs to be a story behind it.”

CPG cold brew coffee manufacturers can also set their product apart from the competition through unique packaging, Lee said.

“Right now a lot of cold brew is currently in aluminum cans and glass bottles, but I can see in the future different packaging formats coming to the fore,” she said. 

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