(Bloomberg) -- At the Super Bowl last Sunday, Danone SA’s commercial featured Channing Tatum tossing a large bottle of STōK Cold Brew Coffee to British soccer players. Nestlé SA’s showcased a game watcher at home consuming a Coffee-Mate product specifically designed for cold drinks.
The fun — and expensive — ads reflect a deeper shift in the coffee industry: Not only are consumers choosing cold over hot coffee, but they are also starting to drink it at home instead of just at cafes.
Already more than 70% of all the drinks sold at Starbucks Corp. are cold, with consumption being fueled by Gen Z. Now a wider lineup of multi-serving bottles and cold coffee machines have made it easier than ever to make a drink at home.
That hasn’t gone unnoticed by Starbucks founder Howard Schultz and other alumni of the world’s largest coffee chain operator. He is investing in Cumulus Coffee, a company started by a former Starbucks executive that has recently launched a $700 machine to make cold brew at home.
“Coffee at home is consumed massively around the world — all we’re doing is reflecting on the transformation in the category that exists and bringing cold coffee into the home.” Schultz said in an interview. “The size of the prize is so big.”
Cold brews are often less acidic, richer and sometimes have a chocolatey coffee taste, making it a good entry point for people just starting to get hooked on caffeine. They also pack a stronger caffeine jolt, making them more attractive to many drinkers.
For years, though, cold brews were more troublesome to make, often requiring at least 12 hours of brewing and greater attention to factors like how the coffee used to make the beverages was ground. As a result, the market was restricted to mostly coffee shops.
But a wave of innovation now means the beverages can be purchased in bottles and cans. And with a Cumulus machine that sucks nitrogen out of its surroundings, consumers can create their own foamy, nitro cold brew from the comfort of their homes.
A recent survey by the National Coffee Association revealed that 18% of respondents had consumed ready-to-drink coffee in a bottle or can the previous day, more than double the levels seen in the prior four years. That made the category, which includes cold drinks, the third most popular way of drinking coffee at home — surprisingly overtaking espresso machines.
Booming Sales
Sales of ready-to-drink coffee topped $1 billion in the past year, up more than 80% from 2021, according to data from consumer researcher NIQ.
Multi-serve bottles such as Danone’s STōK Cold Brew Coffee also allow for more customization. At home, consumers can add water, milk or other flavored syrups and creamers to make lattes and martinis — all with no cafe equipment and at a lower cost.
“Consumers have for years been getting their cold coffee outside the home, learning their formats, learning what they like, what they don’t like,” said Matthew Barry, the insight manager for food and beverage at Euromonitor International. “And now increasingly they’re saying, ‘You know what? This is really expensive and the cost of living is high right now. Maybe I can try to do this at home.’”
Americans are pinching pennies as inflation has eroded their buying power, with the price of everything from meat to gas surging in recent years. To make matters worse, bad weather in top coffee producer Brazil curbed supplies, sending prices of the arabica variety favored by Starbucks to a record.
To be sure, making a cold brew at home isn’t always fast and cheap. A Cumulus machine costs as much as six times the price of a Nespresso maker used for hot beverages. Add to that the price of pods, which retail for another $25 for a pack of 10.
“Obviously the machine is an investment, but if somebody does some back-of-the-envelope math and you’re spending $5 to $7 one time or maybe two times a day at a cafe, this thing very quickly pays for itself,” said Mesh Gelman, founder of Cumulus and a former Starbucks executive.
Other companies are making investments too. Westrock Coffee Co., a private label company, recently poured $315 million to build a new plant in Conway, Arkansas, to make cold coffee. The manufacturing line that makes big bottles of cold beverages was the first of four to open last year, and half of its capacity is already sold out.
The market is ripe for more growth, with young consumers share their at-home recipes on social media, said Niel Sandfort, chief innovation officer at Chobani. In 2023, his company acquired La Colombe, which has a lineup of 42-ounce bottles of cold coffee.
Younger drinkers are treating cold coffee as an energy drink, “more of a dopamine moment,” Sandfort said. “That dopamine moment is much more of an exciting, enriching, on-the-go experience.”
