- Sugary drinks meet Gen Z’s demand for sweet flavours and coffee brands are taking note
- The RTD coffee market – projected to grow by 5.3% by 2028 – has huge potential for sweeter drinks
- Despite health concerns around sugar intake, sweet drinks are a market entry point for young consumers
IT COMES as no surprise that the sweet drink segment is growing at an astonishing rate. Rising costs across the coffee industry combined with a booming demand for convenience has seen RTD and canned beverage options flourish.
Demand for coffee continues to grow, but consumers are pinching pennies in a context of inflation and Gen Z – whom the industry is banking on – wants fast, pretty, customisable coffee options. And sweet is a known entry point for most coffee drinkers.
Large multinationals and chains have mimicked specialty coffee service and acquired specialty brands to offer sweet, accessible, premium products. Starbucks’ Pumpkin Spice Latte and Chobani’s acquisition of canned cold brew producer, La Colombe are some cases in point. Outside of coffee, large brands like Taco Bell are also experimenting with new frozen drinks as they compete for market share.
With convenience winning the hearts and wallets of young consumers, new competitive RTD products have been hitting the shelves. 7-Eleven’s latest RTD coffee line offers an affordable, convenient, yet premium option to consume coffee.
The RTD coffee market is one of the largest growth segments for sweet coffee options. Projected to grow by more than 5.3% by 2028 to a value of $43.8 billion USD, it is outpacing the growth of the global coffee market, which is expected to grow only 4.37% in the same period.
The growth of sweet drinks hasn’t been an easy one, with a lot of backlash and controversy related to sugar content and health issues. After being accused of having “scandalous amounts of sugar” in its drinks in 2016 – up to 25 teaspoons per cup – Starbucks committed to reducing sugar in its more indulgent drinks by 25% within four years.
Meanwhile, large brands like Costa Coffee and McDonalds are aggressively pushing their way into the coffee market by leveraging sweet, customisable drinks. Sweet drinks are no longer an alternative option to coffee, but a consistently available option that competes within the premium to lower grade specialty coffee segments.
Pour over and single origin don’t cut it anymore – new coffee consumers want a sweet entry point
For a long time, pour overs and single origin were the hallmark of specialty coffee. Today, they still have an audience amongst Gen X and older millennial specialty coffee lovers, but they aren’t resonating with customers the way they used to.
“In a cafe, the pour over single origin experience will likely become a premium and expensive exchange, a focus on the ceremony,” says Connor Nestor, Managing Director and Co-Founder of New Ground. “That preparation time will be used to educate consumers on the coffee and process, and sold as an experience rather than a product.”
As many consumers demand more convenient options and reject the elitism of specialty coffee, sweet drinks are ready and waiting to fill the void – especially to capture the attention of young, new consumers looking for an accessible entry point into coffee.
As Gen Z consumers are positioned as the next big purchasing power, it makes sense that brands are looking at what they want, and moving quickly.
“I know of large coffee shop chains that have to adjust their coffee menu to meet such consumer preferences in a matter of days,” says Nicholas Yamada, Business Developer Director for Profile Print in Latin America.
“It isn’t like the old days, when a change in the menu would be seasonal or take a few months to be implemented – now it’s like flipping a switch. Ultimately, companies looking for profit have to chase where the money is being spent.”
Coffee alone isn’t enough to capture young people’s attention – at least, not anymore. For specialty businesses looking to attract young consumers, sweet drinks may offer an entry level for them to enter the coffee market, ensuring their purchasing power isn’t used elsewhere.
“Gen Z will absolutely be the next big purchasing power in the coffee world. The kids are driving change and they want to be different from their parents. They want individuality and they want options,” says Connor. “RTD is the format that allows for rapid innovation and scaled supply, so the category is growing rapidly.”
However, maintaining the attention of young consumers is another matter. Many brands have had to prioritise the aesthetics and communication of products as much as – if not more – than taste itself, using such novelty to capitalise on trends and media attention.
Is the future looking sweet?
The growth of social media platforms is increasingly shaping how young consumers spend and their attitudes towards brands. Social media propelled sweet drinks to stardom through the likes of Emma Chamberlain and Tik Tok trends.
“Activations, Tik Tok influencers, collaborations, new product development, unique distribution, and places to buy – I think all of these things are what make the experience interesting,” says Connor. “If you’re a brand that has great values that resonate with consumer communities, you’ll have success.”
As sweet drinks’ popularity continues to surge, hope isn’t entirely lost for those wishing to provide a more traditional, or specialty coffee experience. Espresso is still the base for a lot of recipes and coffee drinks, giving it centre stage – however, as consumer preferences change, specialty coffee may have to rethink how they present their staple product.
“I know a lot of people who have become huge coffee geeks, but started with a Starbucks Frappuccino,” says Nicholas.
“That said, I see great potential for instant coffee, especially used as the base ingredient in a range of sweet coffee beverages. I wouldn’t be surprised to start seeing less espresso machines and more instant solutions for those aiming at this young audience that is craving instagrammable coffee drinks.”
Nescafé’s latest release, the bottled Espresso Concentrate, seems to confirm this trend. While diametrically opposed to specialty coffee’s founding taste and quality principles, it could ironically benefit specialty brands in the long term.
As sweet coffee drinks become popular amongst Gen Z consumers, they provide them with an entry point that could eventually lead them to drinks that have coffee as the base rather than the ingredient. Meanwhile, the industry will continue to invest in the profitable new segment.
Coffee Intelligence
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