The cold rush is coming
Costa Coffee RTD Latte & Chocolate Cheesecake Summer 2024. Image: Costa Coffee
After experiencing strong growth over recent years, RTD coffee offers excellent opportunities for growth and innovation in Europe. By Thom Walton
When you think about European coffee culture, your first thought is probably sipping espresso at the counter in Rome or café au lait on the boulevards of Paris or perhaps the vibrant specialty scene you can find on high streets across the continent.
And while hot coffee continues to dominate the European market, ‘the times they are changing’, with consumers increasingly seeking cold options. Within this, ready-to-drink (RTD) coffee is a particularly exciting space offering consumers convenience, innovation, and a fresh experience.
In this article, we will explore what is driving this trend, where the trend is most profound, where it is going next, and how players in the industry can capitalise on the growing ‘cold rush’.
What’s driving the ‘Cold Rush’?
One of the things we at Finlays love about the coffee industry is that it never stands still; there is a constant thirst for innovation and bringing new experiences to its consumers.
Nowhere is this seen more clearly than in the RTD coffee space, where we are seeing huge amounts of innovation to bring new experiences to consumers – and particularly younger consumers – who are seeking convenience, novelty and innovative flavour profiles and combinations.
Convenience is particularly influential. The ability for great tasting coffee, which can be enjoyed immediately, anywhere, at any time offers a huge benefit to consumers.
So, while Europe might trail the US market when it comes to RTD coffee, it is catching up fast.
Where is RTD coffee being embraced?
The key markets today are in Western Europe, where RTD coffee is reaching significant scale, with further high growth forecasted. Germany is currently the largest market and has reached over half a billion dollars (USD $501 million in 2023) with 6 percent CAGR predicted up to 2028.
The UK is hot on its heels, currently valued at $340 million, but with predicted growth at 15 percent CAGR between 2024 and 28, per Euromonitor International. In fact, according to Euromonitor, the UK is forecasted to reach over $700 million by 2028, which would make it the largest market in Europe.
Multiple emerging markets
There is good growth potential elsewhere as well, with the Netherlands, Spain, Switzerland, and Turkey all expected to reach over $250 million by 2028. We are also seeing RTD coffee emerging in markets with high coffee consumption, where younger populations are driving market trends (such as Turkey, Sweden, and Spain), and where there is a high dairy intake (Switzerland, Austria, and Belgium).
Turkey, for example, expects more than 19 percent growth between 2024 and 2028, with high popularity of RTD coffee products such as Nescafé’s Xpress.
Where is acceptance slow?
Uptake has been slower in Italy, where coffee consumption remains fairly traditional and penetration of multinational foodservice operators is lower, therefore not driving the overall trend for iced coffee as effectively. With that said, even in traditional coffee markets, we are seeing younger consumers in this market beginning to make the switch.
Cold brew vs iced coffee
Within RTD coffee, a segment we are particularly excited about at Finlays is cold brew. While this segment is still in its early days, high growth is predicted over the coming years.
And to be clear – it is not a question of cold brew versus iced coffee – there is plenty of headroom in the European market for both, catering as they do to different consumer needs. Cold brew’s flavour profile and perceived smooth taste make it a perfect solution for an elevated offering.
In fact, the critical challenge facing the cold brew segment is around consumer education of what cold brew is, and the benefits it offers compared to iced coffee. However, this is something we are now starting to see thanks to major foodservice operators such as Starbucks featuring cold brew on its menus.
Cold brew’s trajectory in Europe
To understand the future of cold brew coffee in Europe, it is useful to look to the US market where cold brew has experienced astronomical growth over the last ten years or so, and now accounts for a fifth of all consumer spending on RTD coffee in retail. In the US, lots of brands, such as Starbucks and Peet’s Coffee, are effectively balancing their portfolios with both iced coffee and cold brew to target different market segments and consumers.
Following that path, cold brew is starting to emerge across Europe, and particularly in the UK, as well as Germany, primarily being driven by younger consumers who are seeking an elevated experience.
However, until now, the European market has struggled with supply challenges, with accessibility of high-quality cold brew concentrates hampering growth.
What’s next for RTD coffee in Europe?
RTD coffee is a hugely exciting opportunity for brand owners in Europe, with high growth predicted over the coming years. Here are four key trends to watch out for:
- The Cold Rush. Expect to see consumers continue to explore cold coffee options, establishing RTD as a firm favourite across Europe.
- Blurring lines. The blurring of RTD coffee with energy drinks is another key dynamic, with coffee offering a strong and compelling alternative to traditional energy drinks.
- Cold brew enters the mainstream. With companies such as Starbucks, Blank Street, as well as independent coffee shops now offering cold brew, the stage is set for cold brew to enter the mainstream. Cold brew’s visibility will only increase, driving consumer awareness and understanding of the unique benefits it offers.
- Innovation. As always in the coffee industry, we expect to see a huge amount of exciting innovation in the category. Recent examples include Joe and The Juice offering cold brew tonics, the continued use of CBD for functionality, and of course, the continued fusion of coffee and alcohol in applications like RTD cold brew martinis.
It will be fascinating to see what other innovations we see over the coming years.
- Thom Walton is group head of marketing and communications at Finlays, a leading global supplier of tea, coffee and extract ingredients and solutions to brand owners, retailers, and foodservice operations. Starting his career in creative marketing, Walton joined Finlays in 2019 where he is responsible for global marketing and communications. He uses his personal passion for tea and coffee in all their formats to support Finlays to connect with their customers around the world.
