Servings of cold brew coffee ordered at quick-service restaurants climbed 27 percent in the 12 months ending April 2022, year-over-year, according to The NPD Group/CREST.
That equated to 373 million servings, which is no small figure. Servings of frozen/slushy coffee from quick-serves during the same stretch jumped 3 percent to 726 million, showing customers are open to cold coffee in myriad formats.
However, iced coffee remained the cold leader, as customers ordered 2.8 billion servings in the calendar up to April, up 11 percent from the year prior.
Roughly 70 percent of all sales at The Coffee Bean & Tea Leaf are cold coffee and cold tea. Sanjiv Razdan, president, Americas and India, attributes it to several factors:
First, the consumption of coffee shop beverages has moved away from first thing in the morning “and become a pick-me-up treat, a recharge beverage that people consume across the day,” he says.
“As that daypart consumption has changed, people use the beverage very differently. Cold is more versatile and tends to be more suitable for various dayparts up until late evening.”
Secondly, the quality of these cold drinks has improved as consumers’ became more sophisticated. “There’s an appreciation for the craftsmanship that goes into these drinks,” Razdan says. And finally, cold beverages fit snuggly into the off-premises trend that boomed amid COVID-19 conditions.
More than 58 percent of Bad Ass Coffee’s business fits into the cold bill, which includes everything from cold brew to smoothies and blended drinks, with iced lattes being the hands-down top category. Bad Ass Coffee has 22 stores with eight under construction.
Cold drinks constitute 70–80 percent of sales At Dutch Bros. as well. “Cold travels better and more of our drinks are traveling with us as opposed to being enjoyed in the moment,” CMO John Graham says.
Innovation and LTOs
To succeed in cold beverages, it’s vital coffee shops innovate and continue to create excitement in this category.
Coffee Bean & Tea Leaf launched a summer LTO with three cold brew teas: watermelon mint; peach jasmine; and mango caramel. Previously, the brand focused innovation on lattes and iced drinks but switched to cold brew this year, Razdan says.
The brand also embraced decadence with its Belgian Chocolate Ice Blended Drink.
To generate engagement, Coffee Bean & Tea Leaf launches these beverages as LTOs, but adds them to the permanent menu if they do well. But limited runs really drive sales, he says. “We’re a society driven by the fear of missing out and we want to try new things and be the first to try something that our favorite brands are bringing to us,” Razdan says. “We create that buzz and it plays for us very well.”
Bad Ass’ summer LTOs included Beach Bonfire Latte (iced, frozen, or hot): espresso and milk with macadamia nut, toasted marshmallow, and dark chocolate swirl syrups; and Beach Bonfire Cold Lava Cold Brew: Hawaiian blend cold brew, macadamia nut syrup, and toasted marshmallow cold lava (cold lava is cold foam made with milk and syrup).
It’s essential to stay ahead of trends, CEO Scott Snyder says, because guests love customizing drinks. “Brands are listening and creating more and more innovation,” he says. “We have tea, coffee, cold brew, smoothies, and we use those as base elements and then listen to what our customers want. When you see a trend, you see innovation.”
While customers of all walks are enjoying cold drinks, they do tend to skew more toward younger demographics, Razdan says, and are also proving an option for the much younger crowd—the tweens and teens who don’t yet drink caffeine but want a drink when their parents go to a coffee shop.
Younger consumers have grown up with coffee shops, Snyder adds. So they’re accustomed to ordering blended, non-alcoholic drinks before they were adults, and are now comfortable with these options.
While hot beverages remain popular in the mornings, the customer who buys that often comes back in the afternoon for something cold, he says. “What we really see, especially with that younger demographic, is that afternoon bounce-back with a cold brew product,” Snyder says. “The cold brew packs quite a punch so you can make it straight up or with cream or flavors and it can be both a treat and a pick-me-up. We see a bigger influx [of these] in the afternoon.”
Chilled out marketing
While Coffee Bean & Tea Leaf uses store menuboards and social media to promote cold drinks, especially new ones, the loyalty program is also great for this purpose. The concept sends members customized messages based on what they’ve previously drunk.
Bad Ass Coffee promotes its cold coffees with in-store tactics including posters, table cards, and menu highlights, as well as online marketing with geotargeted ads. Social media is exploding, too.
But most important is loyalty, Synder says. “It gives great access to the customers who are our best customers, who are also our best word-of-mouth and influencers,” he says.
Dutch Bros.’ loyalty base is also a great tool for promoting cold coffees.
“Our first stop in anything we do is our rewards program,” Graham says. “We back that up on the social side with text and email programs. We have a great customer data program and talk to customers the way they want.”
Cold beverages aren’t going anywhere, Razdan notes. “We’ll see significant growth of cold brew teas and coffees with their more delicate flavor, more nuances. Cold is here to stay but the name of the game is innovation,” he says.
Synder echoes the thought. “The younger audience who grew up in these stores are creating that same family experience now with their kids,” he says.
“Diversity and creativity in your menu is also what customers are looking for. Everyone gets excited when there’s something new. By the same token hot isn’t going away; it’s where this all started.
“But I do believe that cold as the dominant percentage is here to stay,” Synder adds.q