In praise of RTD coffee
Refrigerated RTD Coffee at CVS. Image: Vanessa L Facenda
Great American inventions: the telephone, the microwave oven… the bottled Frappuccino? One may not typically hold a creamy bottled coffee drink in such esteemed company, but, in just the same way the telephone transformed communication, the drink has certainly revolutionised the retail ready-to-drink (RTD) coffee market in the United States.
Over the last decade, I have had the privilege of watching the US retail coffee market unfold and it has been quite a journey. Today, I invite you to sit back, relax and open a can of your favourite coffee as we reflect on where the market has been, where it is now and where it’s going next.
RTD coffee was first introduced in the US in the 1950s but didn’t fully resonate with consumers until forty years later. In the mid-1990s, an icon was born: the Starbucks bottled Frappuccino. This sweet, creamy, indulgent coffee beverage set the tone for what would be the RTD coffee space for over two decades.
The early 2000s saw a surge in the popularity of RTD coffee, with consumers increasingly interested in convenient on-the-go coffee options to fit busy lifestyles. Companies such as PepsiCo, Coca-Cola, and Nestlé began to invest heavily, launching products and acquiring existing brands. This helped the market nearly double from USD $450 million in 2001 to $850 million by 2005 (market size of canned and bottled RTD coffee from 2001 to 2015. Statista.com. 2017, February).
By 2013, the market was valued at $1.5 billion (per Nielsen) and was still exhibiting decent growth rates. But change was in the air. Consumers were becoming more health conscious and seeking alternative canned or bottled coffees that offered less sugar, less dairy and more coffee-forward flavour. Enter cold brew. What many predicted to be a passing fad quickly exploded into a multi-million-dollar segment of the category that transformed the RTD coffee landscape.
Cold brew has proven itself to be more than just a fad and has gained market share currently at over 20% of the total RTD coffee market. In just ten years it has gained nearly a quarter of an entire category. In fact, in recent years we have seen multiple variations: flavoured, nitro, dairy alternatives and most recently the explosive growth in multi-serve (32 ounces or above) cold brew coffee.
What does the future hold? As consumers become increasingly educated about coffee and interest in new products grows, we expect to see impressive year-on-year growth and – importantly – increased opportunities for brands. Here are three trends I think you should keep an eye on:
- Multi-serve momentum carries on. Multi-serve coffee has been on the market for a decade, but its popularity exploded during the pandemic. As consumers have begun to realise they can get great coffee at an affordable price to enjoy at home, expect this segment to see even more growth in the coming years.
- Natural energy will continue to steal share. With younger consumers becoming increasingly proactive over their health and wellness, they are turning to more ‘natural’ products for cleaner ways to consume food and beverage. This creates an opportunity for more coffee-based ‘energy’ drinks to steal share from the traditional products in this market.
- Private label potential. Private label coffee is sometimes equated to lesser quality. Yet consumers have started to see the potential across categories in private label and coffee is no exception. As shoppers become increasingly cost-conscious and aware of the premiumisation of private label coffee, they will start to seek out these products to fill a gap as a cost-effective solution.
- Stacy DeMars is marketing manager for Finlays Americas, a division of Finlays, a leading independent B2B manufacturer and supplier of tea, coffee and botanicals.