When analyzing the U.S. coffee market, data shows that the growth of the caffeine-inducing beverage category is largely being driven by single-serve, ready-to-drink (RTD) and single-cup coffee. Nevertheless, ground coffee remains ahead of RTD when it comes to sales, at least for now.

“The $15.1 billion coffee category is projected to grow respectably through 2024 at 22.7 percent to reach an $18.5 billion market, which amounts to a 4.2 percent compound annual growth rate,” said Jill Failla, foodservice analyst with Chicago-based Mintel, in Beverage Industry’s September 2019 issue. “Right now, it’s primarily RTD coffee, with the help of single-cup coffee, driving the segment’s growth, while roasted coffee and instant coffee are losing share.”

Market Segments
• 2020
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Refrigerated RTD coffee amassed $487 million in sales in total U.S. multi-outlets and convenience stores as of the 52 weeks ending May 17, according to data from Chicago-based Information Resources Inc. (IRI). This is a nearly 20 percent increase compared with the year prior. The shelf-stable RTD cappuccino/iced coffee segment also registered growth, but on a smaller scale. The segment posted approximately 3 percent growth in dollar sales, totaling nearly $2.9 billion.

Failla noted that RTD coffees have capitalized on the market due to its high level of innovation and convenience.

“The innovation I'm currently seeing in RTD rivals even that of some of the top coffee cafés,” she said. “For example, there's been a quick rise in the number of RTDs offering functional ingredients and benefit claims, from adaptogens to nootropics. Young consumers and Hispanic consumers are core consumers of RTD coffee, which bodes well for the continued future growth of this format.”

Currently, IRI reports that in the top spots for refrigerated RTD coffees are Starbucks and Stok, with a nearly 37 percent and 35 percent share, respectively, for the 52 weeks ending May 17.

Gary Hemphill, managing director of research for New York-based Beverage Marketing Corporation (BMC), also recognized the performance of RTD coffee and the sub-segments that have emerged most recently.

“Ready-to-drink coffee is growing the fastest from a relatively small base,” Hemphill said in Beverage Industry’s September 2019 issue. “The segment has gotten a boost from recent process-driven innovation like cold brew and nitro coffee.”

He also pointed out that one of the vanguard innovations has been RTD cold-brew coffees. “Cold-brew coffee has given a boost to the RTD segment,” he said. “Its smoother taste profile appeals to consumers.”

As consumers redefine health and wellness, non-dairy innovations continue to proliferate the RTD coffee market.

“Non-dairy milk alternatives are a large part of the RTD market's innovation. Consumers are seeking them out for health and taste reasons alike, and unsurprisingly, interest is driven by Gen Zers and millennials,” Mintel’s Failla said. “More major brands are launching non-dairy milk RTD line extensions, and new up-and-coming brands are offering them right out of the gate.”

As noted by analysts, among the appeal for cold-brewed and nitro-brewed RTD coffees has been their ability to support sugar-reduction trends.

“I'm seeing more brands reformulate RTDs with lower sugar content and natural alternative sweeteners, such as date syrup,” Failla explains. “I'm also interested in the emergence of flash-brewed coffee, which has the potential to surpass cold brew as the cold coffee darling. The brewing method for flash-brewed coffee preserves some of the more delicate coffee notes for easy drinking and is said to require little to no sugar or creamer.”

Regarding functional RTD coffees, Chicago-based Euromonitor International highlights the mixed performance the segment has seen in the past few years. Yet, the market research firms also foresees further potential in terms of fortification.

“Beneath the two giants, Starbucks and Monster, smaller brands are moving aggressively into this space,” Euromonitor’s March 2019 report titled ‘RTD Coffee in the US’ stated. “Exploration is taking place in functionality beyond energy, including MCT oil, probiotics, and CBD oil in products, offering a much wider range of functional benefits than were previously available.”

Although RTD coffee is driving much of the growth within the overall coffee market, other segments have struggled to further their reach.

Single-serve coffee pods, for example, reached nearly $4.5 billion in sales according to IRI’s data for the 52 weeks ending May 17. The segment experienced growth of 5.5 percent compared with the year prior. While private-label brands still are in the top spot for sales in the single-cup coffee category, Folgers’ single-cup segment grew more than 100 percent in the 52 weeks ending May 17, according to IRI’s data.

Although coffee pods have helped fuel growth in recent years, Euromonitor cautions that the coffee sub-segment could move in another direction.

“The key growth area is in private-label pods, which are taking major share from Keurig’s more expensive branded offerings,” the market research firm’s report stated. “Premium pods, Nespresso in particular, are also doing well although they are a much smaller segment.”

Although ground coffee has experienced contraction in recent years, the segment registered a 1.7 percent growth in dollar sales, totaling $4 billion in IRI measured channels.