Not even a pandemic can cool off the hot ready-to-drink coffee market. Sales are percolating well, with big-name players coming onto the scene and providing c-stores with innovative options for customers. Though RTD coffee business may seem small, it’s a robust one with expected growth of 20%. In 2014, it represented just 2.5% of the total coffee market, but that figure doubled to 5% by 2019, according to the Coffee Association of Canada.
To a large degree, its Gen Z (those born between 1995 and 2007) leading demand with 46% drinking RTD coffee, as per September 2020 data from Mintel. Millennials are sticking with ground coffee, while their younger counterparts haven’t yet made that switch.
In fact, COVID-19 also has played a part in the rising popularity of RTD coffee. Java enthusiasts are looking for ways to have café-calibre, coffee-sipping experiences at home, now that lingering over a cuppa prepared by a barista is less viable.
“Pre-COVID sales were being fuelled by taste and time,” says David Schneiderman, CEO and co-founder of Two Bears Coffee. “Our lives had become busy without time to slow down. Now, RTD coffee gives customers something delicious with a great hit of caffeine without the line-ups at the local café.”
With wellness top mind for many Canadians, the door is open for c-stores to do well by stocking healthier versions of RTD coffees. Two Bears is the first Canadian company offering plant-based, ethically-sourced lattes and brew coffee made with oat milk. Its approach to retailer support is a multi-tiered system, which includes in-store promos, cross promotions with larger, more well-known brands and a digital campaign.
“Convenience stores have been selling RTD coffees for years with great success,” explains Schneiderman. “But they are losing out on the consumer who doesn’t want to drink something with as much as 48 grams of sugar and artificial ingredients.”
Station Cold Brew Coffee Co. will also be building on its roster, which includes top-sellers New Orleans-Style and Vanilla Nitro Cold Brews, with the new launch of its own plant-based, oat milk-based lattes. Mitchell Stern, company co-founder and VP, sales and marketing, says it is looking to expand into convenience stores and will support sales through in-store promotions, giveaways and price breaks. “We are constantly exploring new opportunities in this [c-store] space and, as the leading cold brew coffee brand in Canada, we want to own the space,” he explains. “Our biggest challenge as an independently owned, private company is competing with major companies with deep pockets who own the fridges.”
Clearly, competition is brewing in the RTD coffee space. Coca Cola with Coffee (made with Brazilian coffee) is set to roll out in Canada and the U.S. early in 2021. The beverage giant refers to the new offerings (available in 12-oz cans of Dark Roast, Caramel and Vanilla flavours) as “hybrids” in a new category it calls “refreshment coffee.” Joining the fray is Monster Energy, best known for its high-octane energy drinks. It already has Java Monster, which has performed well, but will bring on board Espresso Monster featuring a triple shot of coffee, plus natural stimulants like taurine and ginseng. It will come in two flavours, Espresso & Milk, and Vanilla Espresso, formulated to appeal to a market keen on embracing the cold brew coffee RTD trend.
Though the battle between brands will be steamy, there’s room in a category that has not reached its peak. “Canada is playing catch-up with the growth and popularity of our neighbours to the south,” explains Alfonso Tupaz, founder of Hatch, a Toronto-based company that produces private label RTC coffee available in the c-store space. “We would say that we’re four years behind, but it’s now reaching the level of where we think RTD coffee should be, compared to the U.S.”
The majority of Hatch’s beverage unit sales come from their private label business. According to Tupaz, 2020 has been its busiest year yet with cold brew. “Our clients fare well in the retail space.”
There’s still an unquenched demand above coffee enthusiasts. “Coffee is a daily routine for many people in Canada,” he points out. “By natural extension, we’re seeing coffee enter more point-of-sale areas, including convenience stores. RTD coffee, in particular, is a convenient pack format, and fits nicely with the convenience store model.”