The U.S. is experiencing a cold coffee craze, with spending on iced coffee, cold brew, and frozen coffee drinks exceeding $17.7 billion in 2023—more than double the 2016 figure. This surge, fueled by younger generations’ preferences and innovative offerings from major chains like Starbucks and Dunkin’, signifies a paradigm shift in the American coffee market, moving away from traditional hot coffee consumption. This article delves into the factors driving this remarkable growth and explores the implications for the future of the coffee industry.
The Iced Coffee Revolution: How Cold Brews Conquered America
Key Takeaways: A Cold Brew Awakening
- Americans spent a staggering $17.7 billion on out-of-home cold coffee in 2023, a dramatic increase from $8.5 billion in 2016.
- Starbucks, a major player in this boom, reported that cold drinks comprised 75% of its beverage sales in the fiscal 2024 third quarter.
- Younger generations (18-24 years old) are the primary drivers of this trend, with 45% reporting cold coffee consumption in the past day.
- The rise of **customizable cold coffee drinks**, with various syrups, toppings, and cold foam options, has broadened appeal and masked the bitterness often associated with coffee.
- The ready-to-drink (RTD) cold coffee market is also exploding, showing a 43% increase in consumption between 2019 and 2023.
The Starbucks Effect and the Rise of Cold Coffee
The dominance of cold coffee in the US market isn’t accidental. Major coffee chains, particularly Starbucks, have played a pivotal role in shifting consumer preferences. Matthew Barry, insight manager at Euromonitor International, notes, "The way it usually works in the U.S. is that coffee trends start at the coffee shop and above all, at the big chains like Starbucks." Starbucks’ success with iced and cold brew offerings has set a precedent for the wider industry, influencing both consumer expectations and competitor strategies. Their embrace of cold coffee, escalating from 37% of beverage sales in 2013 to 75% in fiscal 2024 Q3, underscores the market’s transformation. This didn’t happen overnight; it’s a testament to years of strategic planning and successful product innovation by coffee giants in a constantly evolving beverage landscape.
The Impact of Millennial and Gen Z Preferences
This isn’t simply a case of chain dominance. The cold coffee boom is intertwined with generational shifts in preferences. Younger consumers demonstrate a strong affinity for cold coffee, and this demographic has emerged as a significant driving force for this market expansion. A July 2024 National Coffee Association survey revealed that an impressive 45% of coffee drinkers between the ages of 18 and 24 had consumed a cold coffee beverage the previous day This is significantly higher than other age demographics and suggests that this trend is deeply ingrained in their consumption habits. Kelsey Olsen, Mintel’s U.S. food and drink analyst, explains, "There is less cravings for variety with those older generations…I think it’s kind of hard to break that mindset with a generation that, for so much of their lifetime, it has just been that hot beverage." Cold coffee, with its versatility and perceived accessibility, has successfully captured the attention and loyalty of a generation increasingly shaping consumer trends.
Customization and the Blurring Lines of Coffee
One factor contributing to cold coffee’s success is the extensive customization readily available in most large coffee chains. Syrups, toppings, cold foam, and a wide array of flavor profiles drastically alters the typical taste, turning what can often be a somewhat bitter drink into something appealing to a wider audience. This flexibility allows customers to personalize their beverage, creating a unique experience every time. While the level of customization opens options to consumers, it comes at a cost. The intense sweetness that results from these additions often means that what the consumer is receiving can be far removed from what someone might consider to be traditional coffee. The sheer volume of sugar in some popular offerings, like large frozen mochas from Dunkin’ and Dutch Bros (both exceeding 100 grams), highlights this trend. This is a concerning aspect that the industry should pay attention to more closely.
The Rise of Ready-to-Drink (RTD) Coffee
The rise of ready-to-drink cold coffee is another critical factor driving the overall market expansion. Ranging from single-serve bottles to larger multiserve cartons, these often offer a convenient and affordable option, especially for consumers who may not have the time or inclination to brew coffee at home or visit a coffee shop frequently. Euromonitor International recently highlighted that the popularity of ready to drink coffees is also accelerating with 43% growth from 2019 to 2023. This reinforces the idea that cold coffee isn’t just a coffee shop phenomenon; it’s a broader cultural shift involving broader, more convenient formats. The line between coffee, energy drinks, and other sweetened beverages has become increasingly blurred, a trend that is likely to continue in the future. Barry comments that "If you look at something like, the Starbucks Double Shot or Java Monster, is that an energy drink? Is that ready to drink coffee? I don’t know, the consumer doesn’t really seem to care." This highlights the evolution in consumer perceptions of coffee and its place within the broader beverage market.
The Future of Cold Coffee: A Long, Cold Brew
The future of the cold coffee market appears exceptionally bright. David Henkes, senior principal at Technomic, expresses optimism, stating, "One of the reasons we’re so bullish on cold coffee and cold brew and all of these things is that’s now becoming ingrained in the consumer and in what they expect and what they look for. And as these cohorts continue to grow and age and come into middle age, et cetera, that a lot of that preference is going to stick similar to how we saw that with the older consumers." This implies that even if there were some shifts in preferences in the next few years, the cold coffee industry’s trajectory remains positive. The current preference for cold coffee amongst younger demographics points toward sustained, long-term growth; a trend that is likely to continue influencing the future of the coffee industry. This is not a fad; cold coffee is here to stay, and it shows no sign of cooling down anytime soon.
