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The global ready to drink (RTD) coffee market size was valued at USD 22.44 billion in 2019 and is projected to reach USD 42.36 billion by 2027, exhibiting a CAGR of 8.31% during the forecast period.
The popularity of "café culture" has brought ready-to-drink coffee to the center stage of the global marketplace. Global brands are eyeing this lucrative space amidst consumers shunning carbonated beverages and energy drinks for on-the-go and highly convenient coffee beverage. The growing number of coffee drinkers have given rise to the inclusion of coffee in new occasions to relish their favorite drinks. Enhanced convenience and on-the-go lifestyles have nudge consumers to opt for the stimulating experience of coffee. Companies in the ready to drink coffee market are shifting their gears by developing and launching premium offerings that not only fetch higher margins but provide a more connecting and enchanting coffee-drinking experience.
The future growth opportunities in the market lie in the clean and functional market positioning - the energy drinks space is a vibrant platform wherein manufacturers can innovate and tap into pre and postworkout offerings that are infused with caffeine as a major stimulant. Coffee's natural antioxidant potential can also be utilized in digestive and immune health categories.
Out-of-home coffee consumption was majorly impacted during Covid-19 Pandemic
The outbreak of the coronavirus has affected public health as well as global economy. The COVID-19 pandemic has had an adverse impact on the global economy and has resulted in socio-economic disruptions. Along with other industries, the spread of COVID-19 has affected the food and beverage industry. The coronavirus has affected the coffee sector including production, consumption, and international trade.
Several offices, shops, and restaurants remained closed due to the adoption of full or partial lockdown in many countries; and this has led to decrease in coffee consumption out of the home. However, on the other hand, panic buying and stockpiling rose the demand for coffee in some countries.
Furthermore, the direct and indirect effects of COVID-19 pandemic have resulted in global recession. The recession would affect the income per house and this would further result in decrease in sale of innovative products such as ready-to-drink coffee products. Thus, the sales of RTD tea and coffee products would slow down; especially in 2020 and 2021.
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Growing Demand for Convenient Beverage
The convenient coffee category has a plethora of innovative products such as cold brew, snap chilled coffee, and sparkling canned coffee. These products have a higher demand among consumers in the age group of 18 to 39 years. This high demand is attributable to the growing shift towards RTD products as a healthier option over traditional carbonated soft drinks and energy drinks. Additionally, on-the-go consumers are turning towards these products to fit their busy lifestyles.
Decline in Consumption of Carbonated Soft Drinks (CSDs) and Energy Drinks
The growing health consciousness among consumers across the world has led to a shift from consumption of CSDs and energy drinks to ready-to-drink coffee. Furthermore, CSDs and energy drinks are associated with health hazards such as obesity and hypertension. Thus, the demand for a healthy substitute such as RTD coffee is growing.
Growing Coffee Consumption to Boost the Product Demand
The consumption of coffee is increasing among millennials. Thus, this increasing consumption would boost the adoption of convenient products such as ready-to-drink coffee. Also, the growing familiarity with the taste of coffee among the elderly population and energy benefits provided by these drinks further fuel the demand for the product.
Fluctuation in the Raw Material Prices
The rise in the cost of agricultural inputs and unpredictable weather has a major influence on the price of coffee beans. According to the International Coffee Organization, prices of coffee beans have experienced a downward trend since 2016. Thus, the constant change in the price of coffee beans has negatively impacted the manufacturing costs of this product. Also, the cost of ready-to-drink coffee is comparatively high than traditional coffee and this factor hinders the growth of the market.
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Innovative Paper and Cardboard-based Packaging Are Set to Gain Momentum in Foreseeable Future
The RTD coffee market has been thriving on the popularity of canned and bottled versions that are accessible and easily available. Ready-to-drink coffee sector has also evolved with the introduction of a whole range of increasingly sophisticated flavor choices. The value-addition in terms of organic and/or fair-trade coffees, with user-friendly and convenient packaging formats, including cartons, bottles, and lidded cups are expected to fetch sustainable sales growth during the forecast period.
Convenience Stores and Mass merchandisers Dominate Distribution of RTD Coffee
Mass merchandisers viz. supermarkets and hypermarkets along with convenience stores are controlling the distribution space of ready-to-drink coffee. With the rapid increase in the demand, convenience stores, quick-service restaurants, and gas stations are now selling high-quality coffee at affordable prices, this has appealed the busy consumers by effectively responding to their lifestyles.
Asia Pacific RTD Coffee Market Size, 2019 (USD Billion)
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Asia Pacific Remains Dominant During the Forecast Period
Japan has been a major driving force behind the dominance of Asia Pacific in the global market. The country has also remained at the forefront of innovation in iced coffee RTD variant launches in 2017. However, Japanese consumers are gradually inclining towards specialty, freshly-brewed coffee which has negatively impacted the RTD coffee sales. The evolving consumer’s opinions about this product as a next advanced step from instant coffee has made China the next regional hotspot.
The market in North America is primarily driven by the popularity of cold brew concept in the U.S. and Canada. Cold brew is helping premiums the RTD category amid gourmet coffee and convenience taking center stage in the region. The market in Europe is steadily catching up with the coffee revolution continuing to expand into all retail channels. The convenience of quick caffeine hit on the move is spurring the growth of RTD coffee in the region.
Ready to drink coffee Industry Key Players Adopting Different Growth Strategies
Manufacturers in this sector are innovating on the composition of the product to offer more personalized beverage drinking experience for their consumers. The big giants, on the other hand, are seeking consolidation of their market positioning by penetrating deeply among the different distribution channels.
Coca-Cola owns Georgia, one of the prominent names in RTD coffee sector. The company recently started expanding RTD in Europe, along with announcing partnerships with companies such as Dunkin’ Donuts and McDonald’s in the U.S. Similarly, In January 2018, the JAB-owned coffee company Keurig Green Mountain acquired the soft drink company, Dr. Pepper Snapple, in order to transform coffee into a worthy soda alternative.
In March 2020, U.S. based illy launched illy Cold Brew RTD coffee, which is naturally sweet and has minimal acidity. This development helped the company to enhance its product portfolio.
In February 2020, Danone brand, STok Cold Brew launched Cold Brew RTD Coffee. The Cold Brew RTD Coffee product of Danone is ideal for the consumers seeking more from the coffee without comprising on taste and convenience.
The ready to drink coffee beverage has remained largely successful in exploiting the convenience factor by eliminating the need for a brewer. Consumers’ inclination in better-for-you beverages is also facilitating the ready to drink coffee market growth. The robust popularity of cold brew coffee, in general, has made the ready-to-drink (RTD) coffee a preferable choice of consumers visiting convenience stores, coffee shops, and fast-food restaurants.
An Infographic Representation of Ready-to-drink RTD Coffee Market
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The future growth of the market hinges on the quality of coffee, accessibility, and the speed of service. The sustainability, transparency, traceability, and a variety of flavors and choices also remain the crucial factors influencing the purchasing patterns of RTD coffee.
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Value (USD Billion)
By Packaging Material
By Distribution Channel
Fortune Business Insights says that the global ready to drink (RTD) coffee market size was valued at USD 22.44 billion in 2019 and is projected to reach USD 42.36 billion by 2027, exhibiting a CAGR of 8.31% during the forecast period.
Growing at a CAGR of 8.31%, the market will exhibit fast growth in the forecast period (2020-2027).
The Glass and PET bottles segment is expected to be the leading segment based on packaging material in the global market during the forecast period.
Decline in carbonated soft drinks (CSDs) and energy drinks due to growing health concerns drive the adoption of RTD coffee market.
PepsiCo, The Coca-Cola Company, and Dunkin’ Brands Gropu, Inc are a few key players.
Asia Pacific is expected to hold the highest market share in 2019.
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