Ready-to-drink coffee market jolts US

Everyone wants to be involved in a "hot" consumer trend, even if the idea has a slightly warmed-over feel - like the cold coffee that`s about to appear ready-to-drink in supermarkets across the United States.

Prepackaged coffee drinks from pioneer Starbucks started migrating to store shelves in 1996. Despite an uneven track record, food and beverage companies are now rushing to appeal to the tastebuds and lifestyles of the 20-something coffee bar set with pop-the-top, sweetened, iced cappuccino-like drinks.

"The ready-to-drink market is taking off," said Suzanne J. Brown, marketing consultant at Hope-Beckham Inc. in Atlanta, who has been following the ready-to-drink niche market for years. "It`s so convenient."

Iced coffee is consumed mostly by 18- to 24-year-olds, more than twice any other age group, according to the National Coffee Association`s 2001 drinking trends survey.

Of 107 million daily coffee drinkers, the association found there were two million daily drinkers of iced/cold coffee beverages, an additional six million weekly drinkers, plus another 41 million occasional drinkers, all of whom are just as likely to quaff the beverage in the afternoon or evening as in the morning.

Statistics like these have attracted a number of big consumer product companies to this market - PepsiCo Inc., Procter & Gamble Co. and Coca-Cola Co., among others.

The US market was not kind to early entry Nestle, whose Nescafe canned product flopped in the United States several years ago, though it is doing well in European markets.

Ready-to-drink coffee has long been a booming beverage market in Japan, where sales outstrip soft drinks, and coffee can be conveniently purchased from vending machines.

"Coffee drinks are not going to be the next bottled water or sports drinks. They are part of the bloom in noncarbonated beverages that we are seeing. They are going to be good niche products," said Jeffrey Kanter, beverage analyst with Prudential Securities.

Sales of shelf-stable - not refrigerated or frozen - iced coffee products from the top 10 brands in supermarkets, drug stores and mass merchandisers were up 6.3 per cent at $103.5 million over the last year, according to Information Resources, Inc.

The IRI data exclude sales from Starbucks.

"We`re at or near a double-digit rate of growth the first years but coming from a low base. We are a $350 million to $400 million retail category, with bottled Frappuccino 90 per cent of the ready-to-drink category," Keith Reimer of the North American Coffee Partnership said, referring to Starbucks` trademark bottled drink.

The partnership, a joint venture between Starbucks and PepsiCo, recently rolled out the DoubleShot canned espresso beverage, meant to be served over ice or chilled.

"Frappuccino hits the sweet spot of the young professional or college student and the soccer mom looking for a sweeter or more indulgent afternoon drink," Reimer said referring to the ideal demographic.

Most in-store Frappuccino sales are fresh made, not the bottled version available in some Starbucks stores and supermarkets, and demand does not appear to vary with the season.

In one busy Starbucks location just off New York`s Times Square, two young men in Air Force uniform, ordered a tray of large Frappuccinos striped with caramel flavoring and heaped with frothy topping.

"They`re cool," said one airman, adding he liked the taste because it did not have too strong a coffee flavor.

But they shook their heads `no` when asked if they would buy canned or bottled cappuccino beverages from a grocery store. "I assume they would be too sweet," one said.

DoubleShot, in a 6.5 ounce can, is being positioned as a chilled morning beverage to kick-start the day and plays to a slightly older demographic, according to Reimer.

In 1998, the Havana Cappuccino line was introduced by the North American Beverage Co. of Ocean City, New Jersey.

"We are targeting anybody who likes coffee," said John Imbesi, president of North American Beverage.

"We also make the only diet and caffeine-free product we know of on the market. About 10 to 12 per cent of grocers` customers have some dietary restrictions," Imbesi said.

Beverage giant Coca-Cola jumped in and bought the Planet Java company including the bottled-drinks line in January 2001 from founder Larry Trachtenbroit and a group of investors.

Using the keep-it-simple method, Trachtenbroit and his staff just asked people what they were looking for.

"I didn`t have the money for focus groups. In three weeks, we went from bottle to final flavours," he said referring to his simplified test marketing approach.

Planet Java now has three flavors to appeal to the hip coffee-drinking set - Javadelic, a low-fat offering, Caramocha which is a coffee chocolate-caramel flavor, and Tremble with enhanced caffeine.

Morningstar Foods in May announced a licensing agreement with Procter & Gamble to launch and market Folgers Jakada, a chilled coffee drink concocted with P&G`s Folgers Mountain Grown Coffee brand and lowfat milk.

The company last week launched nationally with three flavours in the first plastic 10.5-ounce bottle in the refrigerated section. It will later be found in a four-pack in the shelf-stable aisle of grocery stores.