While Starbucks still gets the big headlines with drinks like its summer buzz-kill early Pumpkin Spice Latte release, store aisles are literally overflowing with ready-to-drink coffee products. This trend reflects a shift in consumption habits that could make a serious dent in energy and carbonated soft drinks.
According to Nielsen, dollars sales of RTD coffee products in the United States rose 16% in the 52-week period ended July 27.
While that’s an impressive figure, there’s a lot more to the story. Nielsen Innovation Measurement data show that since August 2018, 1,019 new coffee products have been launched in the U.S. market. Within the past year, 158 new RTD offerings have hit shelves — including 89 new cold brews and 30 iced coffee varieties.
And there’s a lot more to come, given the advent of varieties like mushroom-based and “beanless” coffee, plus the blurring of category lines across coffee and alcohol beverages and the inevitable onslaught of CBD-infused caffeine fixes.
Much of the innovation in RTD coffee is in response to changing habits, including those of millennials. “In our work with Peet's Coffee to launch the canned Iced Espresso, we discovered that millennials don't have the same morning rituals as their parents,” says Rebecca Armstrong, principal and managing director at the North advertising agency. “They live in urban environments, they don't brew at home and they spend more time commuting.”
Moreover, millennials don’t drink coffee exclusively in the morning, Armstrong adds. “New types of cold, refreshing coffee products allow them to add coffee to other parts of their day when they're not necessarily looking for a hot beverage."
Hence the threat to other beverages that have long satisfied afternoon cravings.
“The rise in these is a serious risk for soft drinks and energy drinks,” says Barry Dan, group account director at media agency Noble People, which has worked on some of Dunkin’s RTD beverages. “Coffee is America's go-to morning beverage. But it's mostly a morning drink, and people often switch to sodas or Red Bulls in the afternoon. These ready-to-drink options could flip that on its head.”
Even so, the tidal wave of RTD coffee makes it difficult if not impossible for individual brands to stand out.
“Right now, there aren’t many brands, particularly in the RTD space, who have figured out what they do for their consumers and which moments they can own,” says Asher Wren, business planning director at design and innovation firm Firstborn, which has been involved with the U.S. debut of Suntory’s Boss Coffee. “They’re all hand-steeped, they’re all artisanally roasted, they’re all expertly crafted…and ultimately many are saying the same thing.”
So far, the non-coffee side of the beverage industry has responded in a traditionally defensive way by beefing up media spend, says Noble People’s Dan. “That is probably unsustainable, so I'm excited to see how the beverage industry innovates beyond just pumping more dollars into the world.”