As the U.S. coffee market adapted to a growing work-from-home lifestyle and a drop in foodservice options, coffee goods saw an increase in purchases for home consumption in 2020. According to data from Chicago-based Information Resources Inc. (IRI), the category was worth $10.8 billion as of May 16, with most subcategories growing throughout the 52-week period.
According to data from 2020, single-serve, handy categories such as ready-to-drink (RTD) and single-cup coffee were significantly responsible for the expansion of the caffeine-inducing beverage category. When it came to sales, though, ground coffee still outsold RTD.
Indeed, the pandemic has the potential to enhance premium coffee trends for households who are less financially harmed and want to make longer-term purchases for in-home coffee consumption. As customers shift to drinking coffee mostly at home, the COVID-19 pandemic has the potential to deliver new insights to the coffee market.
The premiumization movement has swept RTD coffee, as it has many other soft drink categories including the hot coffee sector. In favor of cold-brew options, sugar and milk are gradually being phased out. RTD coffee is becoming a clean-label energy beverage rather than an indulgence. Because of the minimal ingredients, the taste and quality of the coffee have become a primary priority for younger brands and consumers.
Consumers are prepared to pay extra for organic, ethically sourced, or non-GMO products, which are another premiumization driver. RTD coffee will be able to expand in volume while also increasing in value through higher unit costs thanks to clean labeling and great quality.
As more consumers opt for the convenience and added health benefits of this sector, the RTD coffee market will likely continue to innovate and evolve. Over the next five years, the expanding number of young adults and youth will most certainly support the RTD coffee segment, displacing other coffee segments such as instant coffee.