Ice Coffee Summer
What’s with all the ice coffee?
Is there a quick-serve chain anywhere that didn’t run an ice coffee promotion this summer? Or at the very least featuring a coffee-flavored ice cream or slushy drink? How did a modest Northeastern regional specialty so quickly and universally become so … well … hot?
Far more than a tempest in a chilled cup, the ice-coffee craze represents the confluence of many essential industry trends. As everything else in the restaurant world these days, one lead factor in the story is cost, with "affordable treat" stamped all over the ice coffee phenomenon. But this is also a story of favorable demographics, daypart extensions, flavor searches, traditional soft drink declines, and the driving ambition of the suddenly caffeinated elephant in the room, McDonald’s.
To first give this some quantitative context, NPD Group analyst Bonnie Riggs notes that the restaurant industry sold a reported 640 million servings of ice coffee in the calendar year ending March 2008. That’s a 38 percent increase over the previous year, on top of a 37 percent industrywide increase from the year before that. For the quick-service industry, the most recent year saw 40 percent growth in ice coffee sales, with this segment accounting for the vast majority of total sales and total growth.
Now, if one considers that, according to the National Coffee Association, 52 percent of Americans over the age of 18 drink coffee every day and that U.S. consumption of coffee is 400 million cups per day, some bells really start to go off. It’s not just that the growth rate in the consumption of ice coffee is so steep. It’s that the ice coffee market is still virtually untapped in terms of its potential.
Another compelling piece of data, Riggs points out, is that the demographic most enthusiastically supporting the chilled coffee drink phenomenon is the caffeine-craving, sweet-on-sugar,18-to-34-year-old consumer—key to quick-serve success. Interestingly the phenomenon swings to the feminine side, which can be of particular value to an industry trying to attract more female customers. The next largest group of ice coffee drinkers is the 50-plus crowd, although presumably it includes purists not interested in berry coffee flavorings or coffee shakes with whipped-in shots of espresso.
While Starbucks gets a lot of credit for the popularization of the cold coffee-flavored drink trend thanks to its Frappuccino, the current actual leader of the ice coffee pack is Dunkin’ Donuts. Having brewed fresh ice coffee year-round for more than 25 years, the company takes great pride in having pioneered the industry-standard double-brew system for ice coffee, in which a double portion of ground coffee is used in the base brewing to ward off dilution by ice. The chain even lays claim to selling nearly one-third of all the restaurant ice coffees sold in the U.S.
It’s clear that times are changing, and the competition heating up, when this vested and venerable chain introduces a rainbow of fruit-, spice-, and nut-flavored ice coffees. During the May celebration of the second chainwide free ice coffee day, an estimated four million cups of ice coffee were dispensed by the chain’s nearly 6,000 domestic units.
Given the relatively small product cost of coffee, sampling figured into a number of promotional initiatives this summer. So did trial coupons, bounce backs, line extensions, taste tests, dedicated websites, blogs, billboards, POP material, daypart promotions, cause marketing events, and traditional major media advertising. If not exactly swimming in ice coffee, the American consumer was certainly swimming in the creative of ice coffee this summer.
As with so much else in the industry, the rising tide of McDonald’s interest in the coffee and afternoon dayparts has lifted a lot of ships in the ice-coffee sea. A widely broadcast commercial campaign, featuring a subtly stylish swing through town from the perspective of a customer holding a branded cup of McDonald’s ice coffee, has received a lot of television exposure recently. Yet this is only the tip of a pretty enormous promotional iceberg.
In Seattle, for example (the home base of you-know-who), McDonald’s launched “unsnobby.com,” a coffee promotion Web site, and conducted an imaginative street promotion with coffee cups frozen in blocks of ice. In Chicago, special ice coffee commercials were filmed that played off the local rivalry between the Cubs and White Sox baseball teams. Festival sites and family attractions have been besieged by orchestrated squadrons of free sample providers in New York. In southern California, an “on-the-go” theme has been featured in advertising for the thirsty drive-thru crowd. In a number of the mountain states, a mobile phone-based ice coffee coupon strategy has been employed to lure the 18-to-34 demographic. And so on …
It’s well worth noting that the performance of McDonald’s specialty coffee line, including its ice coffee varieties, is not yet being hailed as a great success by all industry observers. A recent article in the Chicago Tribune described the company’s specialty coffee sales as “tepid,” less than 3 percent of total sales. Now unless my math fails me, 3 percent of McDonald’s total sales would be right about the $600-million mark.
Gives me the shivers just to think about it.
Steve Weiss, a CIA graduate and veteran foodservice editor, is director of trends research with Near Bridge Consulting. Weiss can be reached at steve@qsrmagazine.com.
