Packaged ready-to-drink (RTD) coffee is flying off the shelves at Country Corner Grocery & Deli in Eastsound, Washington. The products are doing so well that the store recently added a dedicated RTD coffee cooler adjacent to its fountain dispenser, according to manager Liz Longworth, while space in the walk-in cooler has also been expanded. Longworth credits the drinks’ convenient packaging, array of flavors and dairy and non-dairy options for the surge. “There are so many new options that allow almost every customer’s needs and wants to be met,” she said.
Indeed, RTD coffee is, well, hot. “Ready-to-drink coffee is a $3 billion category,” noted Brandan Strickland, brand director at Cola-Cola Co.’s North American operating unit, adding that from 2017-19, dollar sales of RTD coffees shot up 16%, per NielsenIQ data.
Convenience stores are a key channel for the drinks, and beginning in 2022, NACS category definitions will break out RTD coffees as a packaged beverages subcategory. According to NACS State of the Industry data, with major subcategories like carbonated soft drinks, energy drinks and bottled waters factored out, RTD coffees helped
Consumers are trading over to chilled RTD coffee drinks to satisfy their energy needs but still get the coffee flavor.
drive a 70% gain in average store sales of “other” packaged beverages last year. “There’s a lot of innovation within RTD coffee,” remarked Jayme Gough, NACS research manager, pointing to the growing popularity of products like canned lattes and other specialty drinks.
Retailers also report strong trends for RTD coffee. “In today’s world, consumers are increasingly looking for their next caffeine fix,” said Chris Hartman, director of fuels, forecourt and advertising at Rutter’s. “While we continue to have success with roasted coffee, there’s evidence that consumers are trading over to chilled RTD coffee drinks to satisfy their energy needs but still get the coffee flavor.” Hartman added that the trend is here to stay as “customers are even more time starved and prefer grab-and-go options to traditional coffee.”
Pandemic behavior is also spurring demand for RTD coffees. “Some traditional coffee drinkers have shifted their buying habits in an effort to reduce touch points,” remarked Hartman. “Perhaps some have gone to energy drinks and others to coffee RTDs.”
Temporary shutdowns of foodservice operations, including hot coffee service, early in the pandemic may have contributed to last year’s strong growth, Gough added. Indeed, c-store sales of Dunkin’ iced coffee RTD beverages—one of the segment leaders—grew 9% in 2020, accounting for more than $80.5 million in sales, according to Strickland from Coca-Cola, which produces and distributes the brand.
Blurring the Lines
The growing popularity of RTD coffees has sparked a wave of line extensions and new entries, including those that cross into other drinks segments. Dunkin’ iced coffee RTDs launched Girl Scout cookie-inspired flavors earlier this year, such as Thin Mints, Coconut Caramel and S’mores.
Greek yogurt manufacturer Chobani, meanwhile, entered the segment in January with Chobani RTD cold brewed coffees in four flavors. New brands also include those that are coffee hybrids—drinks enhanced with the bean-derived beverage. Coca-Cola, for example, now markets Coca-Cola with Coffee and Coca-Cola with Coffee Zero Sugar. San Pellegrino sparkling water has expanded its Essenza line with coffee-inspired variants, and Diageo Beer Co. USA recently introduced Guinness Nitro Cold Brew Coffee beer.
“Research shows that consumers are looking for new coffee experiences,” explained Strickland. “Coke with Coffee addresses this opportunity to extend beyond traditional category offerings and drive true incrementality by recruiting more drinkers to the RTD coffee category.” More than 50% of Coca-Cola drinkers and coffee loyalists enjoy both beverages on a regular basis, he noted, so “Coca-Cola with Coffee means they don’t have to make a choice between Coke or coffee when they need an afternoon pick-me-up.”
Launched in January 2021, the new products had already generated $21 million in retail sales by March, Strickland reported. Coca-Cola with Coffee is available in three flavors—caramel, dark blend and vanilla—while Coca-Cola with Coffee Zero Sugar is marketed in dark blend and vanilla flavors. For c-stores, the new entries are supported with TV spots on pump screens, pump toppers, counter caddies, slim coolers and temporary racks, while advertising promotes, “Sips like a Coke, finishes like a coffee.”
Spiked coffee products are also making their way onto c-store shelves. Guinness Nitro Cold Brew Coffee beer, packaged in four-packs of 14.9-ounce cans, launched in the spring, and according to Nikhil Shah, Guinness brand director, “We think there’s a natural fit for this product at convenience stores based on the success of the RTD coffee and alcohol categories.” In introducing the 4% alcohol by volume (ABV) brew, Diageo found that “there’s an authentic connection between Guinness and coffee,” Shah explained. “We roast our barley using the same process that coffee roasters employ when roasting their beans, so there’s an inherent symbiosis.” The brew is best enjoyed straight from the can or poured into a glass to activate the nitrogen-infusing widget inside the can, the company said.
Wine-based Café Agave, meanwhile, has been available in c-stores for a few years, according to Ami-Lyn Bakshi, co-founder of Café Agave Inc. “It was created for c-stores as most carry beer and wine,” she said, and because the channel “is known for coffee.” Packaged in 187-ml. cans, Café Agave, with a 12.5% ABV, is ideal for daytime social activities, such as brunch, golf, tailgating and fishing, Bakshi said. Marrying alcohol and coffee is a perfect pairing, she noted. “Coffee and alcohol are among the most ubiquitous beverages. Combining them creates a big opportunity.” Hartman agreed. “The beer and alcohol categories are on fire with new innovation,” the Rutter’s executive said. Pointing to the success flavored malt beverages have enjoyed, he added, “There’s good opportunity for coffee to gain traction in the alcohol segment.” Rutter’s offers Pabst Hard Coffee in all its beer locations, and Hartman said “it’s doing quite well.”
Coffee and alcohol are among the most ubiquitous beverages. Combining them creates a big opportunity.
With the growth and proliferation of the RTD coffee segment, convenience retailers have been working to take advantage. Hartman said Rutter’s carries over 50 RTD coffees, and “we believe a variety of choices has been the key to our success.” The chain will sometimes run promotions to drive trial and give loyal customers a good deal.
At Handy Stop Market & Café in Lafayette, Louisiana, owner Bradley Cruice said that while he has seen the expanded selection, his store opts to focus on locally produced products over national brands. RTD coffees that have performed well for the retailer include products from Reve Coffee Roasters and Magnolia Moon, as well as Reve Local Coffee stout, a collaboration between the coffee roaster and Louisiana’s Parish Brewing Co. The hybrid drinks are perfect for “people who are looking for something new,” Cruice said.
One key opportunity the emerging beverages offer c-store operators is as a traffic driver during the afternoon daypart. “RTD coffees are popular in the afternoon and are serving as either snacking occasions or as fillers between meals,” remarked Gough. According to Bakshi, 65% of adults drink coffee, and 50% of them consume the beverage in the afternoon. For this reason, Strickland recommended that retailers promote and merchandise RTD coffee products for multiple dayparts.
Marketers and retailers alike don’t expect RTD coffees and their many variants to slow down anytime soon. According to Strickland, Coca-Cola is projecting continued growth through 2023. “I believe the ceiling is very high for these products,” said Hartman. “Retailers who position themselves with a healthy selection and dedicate the space needed for growth will lead the charge in continued success for RTD coffee sales.”