Sep 44 min read

Insight of the Day: Hot Beverages Full of beans: cold brew category report 2024

Findings:

The ready-to-drink (RTD) iced coffee market in the UK continues to grow, with a 7.2% increase in value and a 5.2% rise in volume over the past year. However, not all major brands have benefited from this growth; some, like Costa and Jimmy’s, have experienced significant volume declines.

Key Takeaway:

Despite the overall market growth, individual brand performance varies widely due to factors like supply chain issues, reduced promotional activities, and competition from both premium and value-oriented brands.

Trend:

The RTD iced coffee sector is expanding rapidly, driven by younger consumers who prefer cold coffee formats, and by innovations in flavor, especially caramel, which has driven significant category growth. However, the market is becoming increasingly competitive, with some brands struggling to maintain their previous momentum.

Consumer Motivation:

Younger consumers are motivated by the convenience of RTD iced coffee, the variety of flavors, and the appeal of cold formats that mirror their coffee shop experiences. The desire for indulgent, flavored options, such as caramel, is particularly strong.

What is Driving the Trend:

The trend is driven by the increasing preference for cold coffee among younger demographics, innovations in flavor profiles, and the growth of on-the-go consumption. However, the market is also influenced by economic factors like the cost of living, which affects consumer willingness to pay premium prices.

Who are the People the Article is Referring To:

The article refers to both consumers and brands within the RTD iced coffee market. The consumers are primarily younger individuals, aged 18-34, who are driving the demand for cold coffee products. The brands include market leaders like Starbucks and Costa, as well as challengers and value brands.

Description of Consumers, Product, or Service:

The consumers are typically younger, tech-savvy individuals who frequent coffee shops and are looking for convenient, flavorful, and sometimes indulgent RTD coffee options. The products in question are RTD iced coffees, which are becoming increasingly popular as a daily beverage choice.

Conclusions:

While the RTD iced coffee market continues to grow, not all brands are benefiting equally. Factors such as supply chain disruptions, reduced promotional activities, and the rise of both premium and value-oriented competitors have led to volume declines for some major players like Costa and Jimmy’s.

Implications for Brands:

Brands need to innovate and adapt to the competitive landscape by focusing on flavor innovation, addressing supply chain challenges, and finding the right balance between pricing and promotion. Emphasizing quality and distinctiveness will be crucial for maintaining market share.

Implications for Society:

The growth of RTD iced coffee reflects broader societal trends towards convenience, on-the-go consumption, and the influence of younger generations on food and beverage preferences. However, the market’s reliance on promotions and premium pricing may face challenges as consumers become more price-sensitive.

Big Trend Implied:

The big trend implied is the continued expansion and evolution of the RTD iced coffee market, with a focus on flavor innovation and catering to the preferences of younger consumers. However, brands must navigate a competitive landscape where supply chain issues and economic pressures can impact performance.

*The varying performances among RTD iced coffee brands can be attributed to several key factors:

Declining Brands: Some brands, like Costa, faced significant supply chain disruptions due to poor weather conditions affecting coffee harvests in key producing countries like Vietnam and Brazil. These disruptions led to product availability issues, which directly impacted sales and market presence.
Increasing Brands: Brands that managed to secure stable supply chains or quickly adapt to disruptions were able to maintain or grow their market share.

Declining Brands: Jimmy’s, for example, experienced a decline after pulling back on promotions that had previously driven significant sales. In a highly competitive market, reducing promotional activities can lead to decreased visibility and sales, especially when consumers are price-sensitive.
Increasing Brands: Brands that continued to invest in promotions, like Starbucks, were able to attract more customers. Starbucks' extensive distribution and promotional activities helped it gain significant volume and value growth.

Declining Brands: Brands that failed to innovate or introduce popular new flavors struggled to keep up with consumer preferences. In a market where flavor variety is crucial, a lack of appealing new offerings can lead to stagnation or decline.
Increasing Brands: Starbucks and other brands that introduced and promoted popular flavors like caramel saw substantial growth. Caramel, in particular, drove a significant portion of the overall category growth, proving that flavor innovation is critical for success.

Declining Brands: Some mainstream brands may have been perceived as offering mid-quality products while charging premium prices, which did not resonate with consumers seeking either high-quality or value-oriented options. This misalignment between product quality and consumer expectations can lead to declines.
Increasing Brands: Brands that successfully positioned themselves either as premium, with high-quality ingredients, or as value-oriented with competitive pricing, managed to attract a broader consumer base. For instance, Starbucks' strong brand recognition and premium positioning, combined with effective promotional strategies, helped it capture more market share.

Declining Brands: Brands that struggled with distribution issues, as seen with Costa, saw a drop in sales. Limited availability in key retail locations can significantly impact a brand's performance, especially in a fast-moving consumer goods category like RTD iced coffee.
Increasing Brands: Brands that expanded their distribution networks or secured prime retail placements, such as Starbucks, benefited from increased consumer access and convenience, leading to higher sales volumes.

Declining Brands: Brands that did not align closely with evolving consumer preferences, such as the growing demand for protein-enriched or unique flavored beverages, experienced declines. Consumers are increasingly seeking products that offer both indulgence and functional benefits, and brands that miss these trends can lose relevance.
Increasing Brands: Brands that tapped into current consumer trends, such as the demand for high-protein RTD coffee or innovative flavors like caramel, saw increased consumer interest and sales.

Business Intelligence