As time-starved customers reach for pick-me-up beverages, ready-to-drink (RTD) cold coffee and energy drinks are standing out from the cold vault. New flavors, forms and methods are pushing the boundaries of packaged beverages, especially when it comes to cold coffee. Meanwhile, energy drink flavors are evolving to appeal to Gen Z consumers.
When it comes to beverages, Jared Scheeler, CEO of the The Hub, a four-store convenience chain in Dickinson, N.D., said the main trend he sees is an uptick in innovation, with most beverage companies pushing the envelope today in terms of flavor offerings.
Scheeler said it’s refreshing to see non-traditional fruit flavors integrated into the enhanced and sparkling water categories — flavors like watermelon, papaya, blood orange and green apple. But flavor creativity is appearing across the beverage board, including in the energy drinks segment as it adapts to appeal to a new generation of customers.
“I don’t think that a cotton candy-flavored beverage would have worked 10 years ago; however, it’s one of our top flavors in functional energy,” Scheeler said. “Certainly, the orange vanilla varieties have performed well, starting with the Orange Vanilla Coke and carrying over to our functional energy lines.”
Bevs With Power
The energy beverage segment continues to enjoy considerable growth, Scheeler noted.
“That energy category has seen steady growth for years, and to maintain that growth, there had to be some innovation,” said Scheeler. “With brands like Reign, Bang and Rockstar XDurance, we saw that innovation, and it gave a nice boost to our energy doors.”
Wells Fargo Securities/Nielsen reported that the energy category improved slightly and remains strong, with dollar sales up 10.7% for the past 12 weeks and 11.8% for the past 52 weeks ending Oct. 5. Carbonated soft drink sales rose 2.5% and 3.3% for the same periods.
For RTD coffee, flavor is definitely a factor, but brewing method is also key in updating the simple old ‘cup of joe.’ Gary Hemphill, managing director of research with the Beverage Marketing Corp., told CSD that RTD coffee has “caught fire” the last several years, seeing substantial growth from a relatively small customer base.
What’s driving growth? Innovation.
“New flavor concepts are most definitely a viable means of innovation,” said Hemphill. “The most successful recent innovations have been more process-driven. Cold-brew and nitro coffees, for example, have helped to spur category growth.”
Those form-over-flavor observations are echoed by Mike Nelson, senior category manager for Plaid Pantry, with 110 stores in the states of Oregon and Washington. “Oatmilk coffees are clearly the next big thing,” said Nelson. “Nitro cans are also very hot right now.”
According to Beverage Marketing Corp. numbers provided by Hemphill, RTD coffee retail sales dollars have doubled over the past five years, rising from $2.10 billion in 2013 to $4.25 billion in 2018. Sales are projected to top $4.65 billion this year.
Scheeler’s experience supports those numbers. Both canned and bottled coffee in his stores have shown steady growth over the past five years. The challenge for manufacturers now is to duplicate the flavor of coffee shop beverages, he noted.
“The average coffee consumer has developed a more sophisticated palate over the past decade,” said Scheeler. “While the strongly flavored and sugary beverages have a place, there’s an opportunity to satisfy that coffee shop drinker by developing beverages more suited to their tastes.”
Nitro vs. Nitro
Still, the RTD coffee surge isn’t brewing everywhere. Nelson said that he’s seeing it begin to ebb somewhat in his region.
“It’s surprising to me how flat our RTD coffee has been,” said Nelson. “I really thought the ‘coffee craze’ was going to be here for quite some time. But it’s not looking that way now.”
Its competition? Dispensed coffees. “Nitro coffees are really popular right now,” Nelson said. Dispensed nitro closely replicates the flavor and texture sought by those coffee shop drinkers to whom Scheeler referred. Can nitro cans match dispensed?
Despite that contest between coffee forms, it may be a good idea for retailers to keep an eye on what the biggest players in the category are doing.
“The partnership between Pepsi and Starbucks has long led the RTD coffee category,” said Hemphill, “but other companies are gaining share. Coke has gotten more aggressive, and more localized coffee purveyors have started to make their mark.”
Finding the balance between staid, reliable brands and innovative upstarts will be key in maximizing not just RTD coffee sales, but packaged beverages across all segments.