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Call it a cold brew boom.
At Starbucks (SBUX) locations across America, iced coffee drinks are red hot, with cold beverages now massively out-selling hot cups of Joe. During the fiscal third quarter ended June 27, cold beverages accounted for 74% of total domestic beverage sales — a new record and up ten percentage points over the past two years.
"We continue to see strong demand for Starbucks Cold Brew, Nitro Cold Brew, and Starbucks Refresher beverages, while iced shaken espresso alone contributed more than a third of the iced espresso growth in the quarter," CEO Kevin Johnson said on the earnings call with analysts on Tuesday evening.
On that call, the word "cold" was mentioned 24 times, while "hot" came up twice, according to Yahoo Finance's tally. "Cold" was also mentioned almost as many times as "coffee" on the call.
The cold beverages, generally ticket and margin accretive, are particularly popular with the younger customer base.
"I tell ya — customers love them, and especially the millennial and the Gen Z cohorts, they really enjoy those cold beverages," Johnson told Yahoo Finance Live in an interview on Wednesday.
He added: "So that is really a big part of what's driving growth in terms of the platform is the fact that we have these personal, handcrafted beverages, both hot and cold, that customers love."
During the quarter, the coffee giant's U.S. revenue skyrocketed 90% year-on-year, with same-store sales increasing 83% from a year ago — boosted by cold beverage sales and digitally-savvy customers on its popular mobile app.
During the fiscal third quarter, 90-day active users on the Starbucks Rewards app in the U.S. were up 48% from a year ago to 24.2 million. According to Johnson, those 24 million active members now represent 51% of all spend in U.S. stores, up eight percentage points from pre-pandemic levels.
Starbucks' digital rewards
Digital deals are taking the fast-food industry by storm, and have become a larger component of the COVID-era eating experience for chains like McDonald's (MCD) and Burger King. App-based deals serve the dual purpose of cultivating convenience and loyalty, even if consumers don't eat in the establishment.
"The two transformative elements of modern-day retail are number one, creating a great experience in your brick and mortar store, so that it's a destination for the consumer and then extend that experience with digital mobile relationships," Johnson told Yahoo Finance.