Coffee Makers Look to Conquer the Supermarket Aisle
November 12 2017 - 9:29AM
Dow Jones News
By Julie Jargon
The hottest thing in coffee now is the supermarket cold
case.
Every major coffee maker from McDonald's Corp. to Blue Bottle
Coffee Co. is piling onto the refrigerated shelves of grocery
stores with bottled or canned frappés, iced mochas and cold brew, a
drink made from steeping coffee grinds in cool water for several
hours.
U.S. retail sales of refrigerated ready-to-drink coffee rose 29%
in the 52 weeks ended Sept. 10 to more than $289 million, according
to market researcher IRI. The broader category of ready-to-drink
coffee, which also includes beverages sold at room temperature but
intended to be chilled after opening, is valued at nearly $2.7
billion, according to estimates from Mintel, which predicts sales
will reach more than $4.4 billion in the next five years.
Ready-to-drink coffee in both cold and shelf-stable form is a
bright spot in an industry that is facing slowing growth, and
coffee-company executives see improving their market share in
supermarkets and convenience stores as crucial.
Several factors are working in favor of the cold stuff.
Younger consumers say they view cold coffee as a healthier
alternative to energy drinks and soda. It is often cheaper than a
cup of specialty coffee at a coffee shop. And people are
increasingly consuming on-the-go and have less patience to wait, as
evidenced by the rise of e-commerce and mobile order apps.
Kris Hardaway, a 24-year-old receptionist in Little Rock, Ark.,
keeps a 32-ounce bottle of cold brew concentrate that she buys from
Whole Foods for $10.99 in her refrigerator and pours herself a cup
every morning to drink during her drive to work. She said one
bottle lasts her about a week and a half.
"It's easier than waiting for my coffee maker to start," she
said, and faster than waiting in line at a coffee shop.
Cold coffee is the beverage of choice among 18- to 35-year-olds,
the demographic group driving coffee consumption in the U.S.,
according to industry analysts. Mintel found that 53% of
millennials surveyed last month said they drank iced coffee in the
last three months, up from 46% a year ago.
Nigel Travis, chief executive of Dunkin Brands Group Inc., said
he is happy to be making inroads in a category that he said
Starbucks has long dominated with its bottled Frappuccino drinks.
Getting its bottled coffee in cities where Dunkin doesn't yet
operate coffee shops allows it to introduce new consumers to the
brand, he said, adding that the chain's bottled cold coffee has
exceeded $100 million in retail sales since being rolled out in
supermarkets and convenience stores early this year.
Starbucks said it plans next year to roll out new bottled
Frappuccinos and coffee-and-fruit smoothies made with almond milk
and bottled single-serve cold brew.
Making and distributing bottled coffee to grocery stores is a
much more costly proposition than grinding beans and brewing coffee
in a coffee shop, however.
Dave Burwick, chief executive of Peet's Coffee, said cold-brewed
coffee is particularly challenging and expensive to produce because
it requires twice the amount of coffee than regular iced coffee to
extract flavor.
There are also multiple companies involved in the supply chain,
each taking a cut of the profits, from the co-packers that make the
concentrate to the bottling companies that package it to the
refrigerated trucks that ship the cans or bottles to stores.
Peet's, however, operates its own direct-to-store chilled delivery
network.
Despite the cost, major coffee retailers say they need to
capture sales wherever coffee drinkers are and offer more cold
alternatives for younger consumers who eschew hot coffee.
"The ability to have something for on-the-go consumption is
really important," Mr. Burwick said.
(END) Dow Jones Newswires
November 12, 2017 09:14 ET (14:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Starbucks (NASDAQ:SBUX)
Historical Stock Chart
From Aug 2024 to Sep 2024
Starbucks (NASDAQ:SBUX)
Historical Stock Chart
From Sep 2023 to Sep 2024