This month, Ray Rowlands of Drinksinfo Ltd takes a look at the global development of commercialised iced coffee drinks and asks, would a figurehead provide the necessary boost to take the category from its fringe role into the mainstream?

The origins of coffee go back centuries and for many of us today the hot version of this beverage is an essential part of daily living. Its hot disposition is not only comforting; it also gives us a much needed lift, before, during and - for some - at the end of the working day.

The highest per capita consumption levels of hot coffee are to be found, not in the US or Western Europe, but in Australia where new cafes seem to sprout up overnight. But, it is not just in industrialised nations that hot coffee is popular, it is, in fact, fairly universally accepted.

Globally, the amount of coffee consumed outstrips tea, and by quite a way.

The energising capabilities of coffee notwithstanding, the drink may also be good for you. Caffeine, partly due to its effect on the central nervous system, both raises the metabolism and increases the oxidation of fatty acids. Coffee beans are also loaded with nutrients and antioxidants. Then, there are the various medicinal claims (e.g. good for your liver, reduces risk of Alzheimer’s disease etc).

But, despite all these positive indicators, why is the iced coffee category having such a hard time achieving any kind of marked consumer support and recognition?

I have heard iced coffee described as a global phenomenon, but is it? Sure, there are pockets of demand in a number of countries, but more often than not, consumers are just flirting with the concept, seeing it as an indulgence for special occasions rather than for regular consumption.

Iced coffee is one of the smallest of all soft drink categories. It is entirely dwarfed by CSDs and bottled water, and is even overshadowed by iced tea. On a global volume scale it is on a close par with energy drinks, with which it can be seen to be competing. But, whilst energy drinks are still seeing exponential growth, iced coffee, on a macro level, is still struggling to step beyond the barrier of its niche identity.

Despite its thirst-quenching advantage, iced coffee lacks the universal appeal of both hot coffee and energy drinks. Demand remains heavily concentrated in Asia - more specifically, in Japan, where an iced coffee culture has been popular for decades; and there lies its weakness. As new generations are inclined to reject the habits of their elders, so young Japanese consumers are exhibiting less interest in iced coffee compared to their parents. This is inhibiting category progress at the very hub of global consumption. Japanese producers have been striving to overcome the unfashionable image of iced coffee with new flavours and more upbeat (PET) packaging, but with limited lasting effect. 

Category progression outside of Asia is heavily dependent on the US. Volume demand here is fairly high, although per capita consumption is only a fraction of the 30 to 40 litres-per-head consumed in Japan. More importantly, it is a market that is open to new ideas (frozen coffee drinks is a recent fad), and its consumer support is not age restricted.

Young Americans actually have a predominant preference for iced coffee, and demand is rising as the range of products on offer expands. These are all excellent indicators for the future success of the product, at least in the US, but how does this compare with competing energy drinks? With the impact of the recessionary years fading and, despite bouts of negative publicity supplemented by calls for legislative control, energy drinks are still managing to record double-digit growth here. That’s a claim that iced coffee would be hard to match.

Looking back at the macros market, some might say that it is the high cost of iced coffee that is hampering its progress. But, premium pricing has not curbed the advances made by competing energy drinks. A lack of tradition in drinking iced coffee rather than hot coffee could also be a stumbling block. That said, outside of their Asian home ground, the same applies to energy drinks; and this has not inhibited their spectacular rise to fame on the world stage. The taste of iced coffee could be posed as an issue, but then how many people actually drink energy drinks for their taste?

Besides their premium pricing, iced coffee and energy drinks have other attributes in common. Both provide a measure of caffeine and each has adopted the single-serve can as a major packaging medium. There are also low calorie options of both available.

One obvious difference, however, and to me this is a key sticking point, is that, whereas energy drinks have the likes of Red Bull and Monster as international ambassadors, the heavyweights within the iced coffee category tend to be country-specific.

The Georgia brand from Coca-Cola, or Boss from Suntory, may be amongst the top brands in Japan but are largely unheard of elsewhere. The nearest that iced coffee comes to achieving a figurehead is with Nescafe. But, despite the brand name’s international connotations virtually all sales of Nestea iced coffee come from Asia.

Consumer interest may be fuelled by increased sophistication in respect of flavour and ingredients, but to my mind, until a global champion can be established, the iced coffee category will inevitably retain only a niche identity outside of its two Asian and North American strongholds.