Allegra reports on 'burgeoning' iced drinks sector as UK sales hit £370m
Iced drinks sales across the £6.4bn specialised coffee shop sector reached £370m in 2017 and are set to grow by 18% in 2018, according to the latest report from the Allegra World Coffee Portal’s study on the UK’s ‘burgeoning’ iced and blended drinks market.
And while the warm weather “continues to be the catalyst” for the consumption of iced drinks, Millennials and Generation Z “could hold the key to sustained year-round growth”, said Allegra in its ‘2018 Project Iced Beverages’ report, released yesterday (July 3).
Project Iced UK 2018, Allegra World Coffee Portal’s “definitive report on the UK’s out-of-home iced beverages market”, forecasts iced beverage sales to exceed £421m in 2018, representing year-on-year growth of 14%.
Sustained growth in the iced beverage segment is expected over the next five years, with the total sector expected to value £660m by 2022.
Bradley Journeaux, research manager at Allegra World Coffee Portal, said: “Iced beverages represent a major opportunity for coffee shops, with younger consumers in particular engaged with the wide selection of highly customisable and visually appealing drinks on offer.
“Innovation in brewing methods has forged entirely new product lines, such as cold brew and nitrogen infused coffee, which are starting to build market share. The potential is there for iced beverages to overcome the traditional British weather barrier and really become established as an all-year round mainstay.”
Currently, iced beverage consumption remains heavily dependent on weather conditions, with the summer months, typically June to August, by far the most lucrative period for coffee shop iced beverage sales. A successful iced offer is heavily dependent on operators’ ability to respond to the UK’s mercurial weather, it said.
Indicating long-term potential for UK consumption to emulate popularity in the US, the report showed that 60% of industry leaders believe iced beverages are becoming increasingly popular year-round. Most, however, expect the UK’s seasonality trend to continue in the near-term.
Millennials and Generation Z will drive future segment sales growth, with iced beverages representing significant opportunities to introduce younger consumers to the coffee shop market.
Allegra continued: “Instagrammable products, such freak shakes, iced coffee martinis and the Guinness-like cascade effect of nitro cold brew all appeal to a younger, more adventurous demographic.
“With their low sugar and calorie content, cold brew and nitro also represent significant opportunities for younger, health-conscious consumer spend.”
More than two-thirds of under 30s surveyed by Allegra said healthier options would encourage them to increase iced beverage consumption.
Allegra research also shows those under-30s are more likely to view iced beverages as good value for money and consume them year-round compared to older consumers. These factors make younger consumers a key demographic for coffee shops expanding their iced offerings.
Last month, Mintel research also showed the iced coffee boom as presenting strong potential among younger drinkers. The Mintel Global New Products Database (GNPD) reported that 66% of UK 18-24-year-olds say that chilled coffee is a good alternative to sugary drinks (CBW, June 6).
The nation’s favourite
Allegra also declared Starbucks as the UK’s favourite coffee shop chain for iced beverages, with 29% of consumers indicating it offers the best blended and handmade iced drinks. Costa (26%) came second among consumers, with Caffè Nero (7%) third, ahead of McDonald’s and Pret.
Independent cafés (12%) are also popular locations for iced beverages and noted by consumers for their strong handmade iced beverage offer.
As the most commonly visited locations for iced beverages, high street coffee-focused branded chains will continue to lead product innovation and raise consumer expectations. Allegra observes the opportunity for these retailers to capitalise on a wider range of iced beverages as many food-focused operators have yet to include iced drinks on their menus.
The UK ice forecast
It concluded by saying: “The future of iced beverage sales is positive, with Allegra research revealing more than half of industry leaders believe consumers are more likely to purchase iced beverages out-of-home than 12 months ago.”
Furthermore, it reports that more than half of industry leaders (52%) expect cold brew to become a coffee shop staple within the next three years, just 12% believe nitro will enter the mainstream.
Industry sources state more consumer education is needed on the latter product, with a high price point still deterring many (see CBW article this week on Lincoln & York).
In the longer-term, operators remain optimistic for the potential of the UK iced beverage market to mirror the US, where iced beverage consumption remains strong year-round.
- Project Iced UK 2018, Allegra World Coffee Portal’s industry research comprises of 50+ interviews and surveys with operators, suppliers and industry experts; consumer research comprising 2,000+ online surveys from the Allegra independent consumer panel conducted between April and May 2018; desk research across company websites, published accounts, industry associations, trade press and news articles.
- Photograph courtesy of Nestle Professional.