Food & Beverage

Cold brew coffee resumes its pre-pandemic surge

Cold brew coffee has resumed its pre-pandemic fast growth and is expanding in numerous serving settings to a loyal customer base that skews younger, higher income and non-white.

Image provided by iStock.

September 7, 2022 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

Two-hundred-twenty-two has been a recovery year for convenience services and foodservice operators as many consumers return to the workplace and many operators have expanded their product offerings. One product that has performed exceptionally well has been cold brew coffee.

Cold brew and nitro coffees were virtually unknown in 2015, but by 2020, one in five Americans under age 40 consumed at least one every week, according to the National Coffee Association's National Coffee Data Trends Report.

David Henkes

While the coronavirus pandemic set back all foodservice sales, the foodservice industry is recovering, said David Henkes, senior principal at Technomic, during a presentation during the recent National Coffee Association Virtual Convention.

"The (foodservice) industry by the end of 2022 should be fully recovered to sales levels pre-pandemic," he said.

The news is especially good for categories that were on a fast track pre pandemic, such as cold brew coffee.

Cold brewing extracts coffee at a cooler temperature and for a longer time than conventional hot water extractions, according to the National Coffee Association. The combination of lower temperature and longer contact time produces a unique sensory and quality profile.

A fast track category

"Cold brew was one of the fastest growing beverages pre pandemic," Henkes said. Cold brew sales were growing at 28% per year from 2016 to 2018. It slowed in 2019, but still posted double digit growth.

During the pandemic, cold brew sales fell 13% compared to the total foodservice industry decline of 25%.

"I think that speaks to some of the staying power that cold brew has," Henkes said.

It has since returned to earlier growth level.

Consumer cold brew spend, $1.7 billion in 2020, was mostly at limited service restaurants, including coffee cafes, which accounted for over 90% of cold brew sales.

Cold brew is now expanding beyond the limited service venues to c-stores, colleges, full service restaurants and other outlets.

Expansion opportunities

"It speaks to a huge opportunity," Henkes said. "There's a huge opportunity in places outside of Starbucks or Peet's or some of the other coffee cafes because there's still not a huge penetration in quick service despite the fact that this is where most of the volume is. There are a lot of expansion opportunities really in just about every type of restaurant segments."

As with other product categories, cold brew menu offerings expanded during the pandemic, even as sales declined. Unit count of cold brew menu items grew 3.6% during the pandemic.

Over the last five years menu item growth was about 230% and there are now 228 unique cold brew menu items.

"The item count continues to grow," Henkes said. "Even while some of the other menu items contracted, we are seeing operators adding to some degree some innovation and excitement happening."

High price points

Price points have also been rising, resulting in improved margins.

In 2016 the average cold brew price point was under $4. Now it's $4.40.

"Consumers are willing to pay higher price points for a cold brew menu item," Henkes said. "Cold brew is a beverage that's unique; it's differentiated."

In c-stores, 31% have some type of cold brew offerings.

Retailers (supermarkets), recreation (theaters, golf courses, private clubs) also have high penetration — 12%.

Even in the highest penetrated segments, Henkes said there is still a lot of opportunity for growth.

The cold brew consumer

Who is the consumer?

A study released in 2021 indicated that of all consumers surveyed, 15% had a cold brew drink out of home in the last two months, Henkes said. It skewed toward males, 17%, versus 13% females.

As for ethnicities, cold brew skews to non-whites. Almost a quarter (21%) of Asians, 21% of Hispanic Americans and 16% of African Americans had a cold brew beverage in the last two months compared to 13% of white consumers.

It also skews to younger consumers. Nearly a quarter (24%) of Gen Z consumers and 27% of Millennials had a cold brew beverage in the last two months.

It also skews to more higher income consumers. Nearly a third (29%) of persons with over $250,000 in annual income had a cold brew in the last two months compared to only 10% of consumers with $25,000 in annual income.

A 'pick me up' occasion

The main consumption occasion for cold brew coffee is for "pick me up" versus "wash down food," "replace a meal," "quench my thirst," "have a snack," "indulge in a treat" and "a dessert." These were the seven different occasions measured.

"Cold brew is definitely not a breakfast oriented beverage," Henkes said. "It tends to be more of a pick me up."

Artisan positioning

Retailers are marketing cold brew coffee as an artisan oriented product.

A lot of menus use a "made in house" or "hand crafted" terminology to appeal to consumers.

"It's really playing on artisan positioning and really playing on that hand crafted mystique if you will that a lot of consumers find very appealing," Henkes said.

"Unlike some other coffee beverages, cold brew is able to position itself," he said. "This is definitely a beverage where you can market it throughout the day. Consumers are going to be looking at drinking it throughout the day. It's not a type of beverage that gets pigeon holed into a specific time of day or a specific area where consumers would more naturally think of it."

High consumer loyalty

Cold beverage consumers are loyal — venues that don't carry it will lose sales, Henkes said.

Nearly a quarter (24%) of consumers said they would go somewhere else to get it if a place doesn't have it. This number has risen over the last few years.

Almost a third of all consumers would leave or not have bought anything.

Retail chains are aware of this and during the pandemic, many offered limited time offers for cold brew beverages.

Caribou introduced a Nitro Latte.
Wawa launched Toasted Caramel Crunch cold brew.
Bob Evans came out with a sweet cream cold brew positioned as hand crafted in small batches.
7 Eleven offered cold brew items two for $5.
Peet's Coffee had a sweet cinnamon oat foam cold brew using its "baridi" blend, a craft coffee blend.
Tim Hortons had a holiday themed LTO with a mocha cold brew and pumpkin spice cold brew in the fourth quarter..

Beyond LTOs, Bigby Coffee had sweet foam, snow balled cold brew and sweet foam cookie butter cold brew.

Boston's Pizza, a sports bar, introduced a cold brew, which speaks to how the demand has spread. This is not a traditional cold brew segment.

Melt Bar and Grill in Ohio focusing on comfort food offered a brown sugar caramel cold brew.

Jamba Juice has two offerings of bold cold brew with agave, building on what Henkes called a cocktail flavoring, a flavor profile that is not traditional cold brew coffee flavoring.

Henkes said it will continue to outperform foodservice by a big margin, but he doesn't have a number.

During the question and answer session, the importance of "indulgences" in the ingredients was discussed. Henkes acknowledged that the indulgences are important in cold brew as in specialty coffee, but the coffee provides the energy that caters to the "pick me up" demand.

Henkes also agreed that there hasn't been a lot of focus on coffee origin for cold brew coffee in the menus. However, he said consumers overall are becoming more interested in coffee origin.

Asked if the average consumer knows difference between iced coffee and cold brew coffee, Henkes said they do not, but awareness is growing.

"There's no doubt that cold brew is an exciting part of the restaurant beverage landscape and is one that is expected to continue to grow," Henkes said.