Ready to Drink Coffee (RTD Coffee) Industry: A Market Analysis

The ready to drink coffee industry is classified as a mature market with great potential for expansion. However, the market is still in its formative stages, with rising businesses trying to stand out. This analysis explores the competitive landscape of this emerging market, examining ready to drink coffee trends and growth opportunities for brands.

The vibrant market for ready to drink coffee

Overview of the RTD Coffee Industry

In recent years, the ready to drink coffee industry has experienced enormous development. A shift in customers has driven this expansion of tastes toward convenience and consumption while on the move.

Global market size and growth

Expert Market Research indicates that the ready to drink coffee industry is valued at USD 26.18 billion in 2023. A compound annual growth rate of 7.90% is anticipated for the period spanning from 2024 to 2032.

Product segmentation and sales

Ready to drink coffee can be classified according to product flavors, packaging type, and geography.

RTD coffee segment by product type

The ready to drink coffee market covers all types of coffee drinks , including café lattes, cappuccinos, espresso, mochas, flat whites, cold brew coffee, decaffeinated, and other beverages. The cold-brew coffee category was worth around $604.47 million in 2023, making it the most valuable RTD coffee segment overall.

In addition, by 2032, it is projected to achieve a value of $3,751.76 million. The fact that more and more people are learning that coffee beans include vitamins like niacin is helping to propel this market segment forward.

The Cappuccino segment is predicted to develop at the fastest CAGR of 9.1% between 2022 and 2027. It is driven by increased consumer awareness of its health benefits, including antioxidants that protect tissue and minerals that help insulin function.

RTD coffee segment by packaging type

Tetra packs, bottles, cans, and other packaging types comprise RTD coffee’s various market segments.

Industry ARC said the bottle segment led the RTD coffee category in 2021. The increasing usage of glass and PET bottles worldwide is fueling this growth. PET bottles, preferred for their improved utility beyond beverage containment, have a longer shelf life and are more cost-effective formats, contributing to category growth.

Furthermore, the Cans segment is expected to grow at the quickest rate of 8.3% from 2022 to 2027, owing to benefits such as flavour preservation and increased consumer convenience.

Various packaging options for RTD coffee

RTD coffee segment by region

Geographically, the RTD Coffee Market may be divided into five segments: North America, Europe, Asia-Pacific, South America, and the Rest of the World.

Mordor Intelligence says that by 2023, the Asia-Pacific area had become the most significant player in the RTD coffee market in terms of value and volume. The region’s value is expected to grow at 5.03% per year from 2024 to 2030. Japan, China, and South Korea are important markets. Together, they made up 82.53% of the region’s RTD coffee sales 2023.

North America is the second-largest market for RTD coffee because of its popularity among younger generations in nations such as the United States and Canada. In 2022, 30% of Americans preferred iced coffee, cold brew, or other chilled beverages, with millennials and Gen Z having higher consumption rates than baby boomers.

The Middle East’s RTD coffee market is estimated to develop at a CAGR of 14.4% in value between 2024 and 2030. This expansion is driven by rising demand for speciality coffees and government efforts to encourage coffee consumption. For example, the Saudi Coffee Company wants to invest USD 320 million to raise local coffee production from 300 to 2,500 tonnes annually.

Current growth drivers of the industry

The ready to drink (RTD) coffee industry is experiencing significant growth due to several key factors:

• Busy schedules and the need for quick refreshments drive demand for RTD coffee. Consumers seek convenient options that fit their fast-paced lives.
• Growing consumer awareness of coffee’s health benefits fuels demand. Brands innovate by offering low-calorie, low-sugar, and plant-based options.
• Effective marketing strategies, smart ads, and strong brand positioning contribute to RTD coffee’s popularity. Brands emphasize flavour variety and quality.
• Coffee exporting countries like Vietnam and Indonesia play a significant role in RTD coffee production. RTD coffee gains traction globally as a mental alertness and focus enhancer.

A hectic lifestyle is one factor that leads to the rise of ready to drink coffee

The convenience, health benefits, and variety of flavours offered by ready to drink coffee have made it a popular option among customers worldwide.

Competition in the RTD Coffee industry

Renowned companies and up-and-coming labels alike have noticed ready to drink (RTD) coffee due to its portability and popularity among busy people.

Market Consolidation and Barriers to Entry into the Market

The RTD market is not a saturated market. The number of young and start-up brands are still increasing. This means many there’s still very little market domination, and newcomers still have room to grow.

Furthermore, ready to drink coffee is relatively interchangeable, allowing consumers to easily switch between products or brands.

However, for newcomers and smaller companies attempting to carve out a place in this cutthroat industry, the consolidation trend is erecting enormous hurdles to entry. This is because many big brands like Starbucks, Dunkin and Boss are ramping up the competition.

• Robust financial backing provides a competitive edge in financing these high entry barriers.
• Exclusive agreements with major retailers make it difficult for new competitors to gain prominent shelf space and publicity.
• Have developed strong brand recognition and a dedicated customer base.
• Economies of scale in production, raw material procurement, and marketing expenses allow businesses to offer competitive prices while investing in product innovation, further cementing their market position.

Competition with other industries

The ready to drink (RTD) coffee market faces competition from various angles.

Instant coffee

When it comes to convenience at home, or the office, instant coffee is still a strong contender against ready to drink coffee. Instant coffee provides the same flavor profile with RTD coffee. It may take more time, but the feeling of making a fresh cup of coffee is a nice advantage.

And culturally speaking, instant coffee has been around for much longer than RTD coffee. Making a cup of instant coffee is still a big part of our daily routine. .

Coffee Shops

Nothing quite like the atmosphere, handcrafted mixes, and freshly brewed coffee at a brick-and-mortar coffee shop. People looking for great coffee, friendly service, and a place to hang out are the target demographic for these businesses.

Coffee shops attract customers and encourage loyalty with a carefully curated coffee culture, unique brews, and customisable concoctions, which justify the premium pricing. And the take-out option still beats RTD coffee in many respects.

Cafes offer a one-of-a-kind coffee drinking experience

Service Industry

Coffee is a staple in the service business, which includes many eateries and hotels, to boost sales and provide a better experience for customers. To take advantage of the allure of freshly made drinks and the chance to upsell premium coffee choices, these establishments frequently serve freshly brewed coffee either as an accompaniment to meals or as a beverage option in and of itself.

The most prominent brands of RTD coffee

PepsiCo

PepsiCo has been involved in the ready to drink (RTD) coffee market through its partnership with Starbucks. This is called the North American Coffee Partnership (NACP), which helped define RTD coffee beverages. This venture has introduced innovations inspired by Starbucks fan favourites, catering to coffee drinkers at home or on the go.

In addition to its collaboration with Starbucks, PepsiCo introduced Pepsi Café, a cola-coffee blend. It comes in Original and Vanilla flavours, offering nearly double the caffeine of regular Peps.

Pepsi Cafe is a novel beverage that blends cola with coffee

Coca Cola Company

The Coca-Cola Company introduced Coca-Cola with Coffee in the U.S. This innovative beverage combines the familiar taste of Coca-Cola with the rich flavour of 100% Brazilian coffee. This unique fusion caters to those who enjoy both soft drinks and coffee, providing a refreshing and reinvigorating option.

Coca-Cola introduces innovative tastes crafted from coffee

Nestle S.A.

Nestlé, through its Nescafé brand, offers a range of deliciously cold coffees in convenient ready to drink (RTD) formats. For example,

• Nescafé Smoovlatte, smooth as silk, is a delightful option for those on the go.
• Nescafé Shakissimo is a playful name for coffee lovers seeking convenience and flavour.

Nescafe ready to drink coffee comes in with a variety of flavors

Asahi Group Holdings, Ltd.

The Japan-based beverage and food conglomerate Asahi Group Holdings, Ltd. offers various brands across beer, non-alcoholic drinks, and food.

RTD coffee products are part of Asahi’s WONDA brand. Among these, Wonda Morning Shot stands out as a product that offers coffee connoisseurs a tasty and easy way to start their day.

Wonda canned coffees with a One Piece theme

McDonald Corporation

McDonald’s McCafé coffee is now available in various home consumption options. Supermarkets began stocking McCafé Frappé drinks after McDonald’s partnered with Coca-Cola. Mocha, vanilla, and caramel are just a few flavours in these ready to drink beverages.

McCafé Frappé launches multi-serve RTD bottles

Suntory Beverage & Food

The Japanese company Suntory Beverage & Food produces the widely consumed BOSS Coffee ready to drink (RTD) coffee brand. The famous BOSS Coffee brand has been around since its 1992 inception.

Flash Brewing is a unique technique that BOSS Coffee uses to make its coffee. To preserve the delicious smells and flavours, the beans are flash-brewed at very high temperatures and then cooled down rapidly.

BOSS Coffee is the most popular brand of canned coffee in Japan

Their dedication drives Suntory’s quest for the best-canned coffee to quality and innovation.

The latest trends in the RTD coffee industry

Consumer tastes are changing, and new technologies are causing waves of change in the ready to drink coffee market. Keeping up with the latest ready to drink coffee trends is crucial for brands to stay competitive and position themselves for future growth as they traverse this ever-changing landscape.

Cold brew flavours on the rise

Cold brew coffee is milder and creamier than its heated counterpart. Because it is brewed slowly, fewer bitter components are extracted, giving it a pleasant and refreshing flavour.

Cold brews are a great substitute for hot coffee, mainly because more and more consumers are looking for ready to drink alternatives. Their popularity can be attributed partly to how convenient they are.

Nitro-infused cold brews, like those from RISE Brewing Co., provide a creamy, frothy mouthfeel akin to stout beer. Flavours like Original Black, Oat Milk Mocha Latte, and Vanilla Oat Milk Latte have gained a loyal following.

Big brands offering a new option

Consumer preferences are evolving towards products that offer both convenience and quality. RTD coffee allows brands to meet these preferences by providing a convenient yet flavorful, high-quality coffee experience.

By consistently innovating with their products, they can appeal to a broader range of consumers who seek variety in their beverage choices.

In the ready to drink coffee industry, smaller, more agile businesses have been fast to innovate. To keep up with the competition and keep their market share, significant companies are responding by releasing their ready to drink coffee alternatives.

Dairy-free milk coffee

Dietary preferences, health considerations, and ethical concerns play a significant role. The increasing availability of delicious non-dairy alternatives has also contributed to this ongoing trend. Coffee enthusiasts all across the globe are increasingly opting for dairy-free varieties as more and more people learn about their benefits and variety.

For its ready to drink coffee line, Starbucks U.K. offers vegan cappuccinos varieties

Novelty coffee experience

Novelty coffee experiences can add excitement and creativity to RTD coffee.

Nitro coffee and the V60 pour-over are two examples of modern brewing trends.

• Nitro coffee is cold brew coffee infused with nitrogen gas, creating a creamy, frothy texture similar to a stout beer.
• The V60 is a cone-shaped pour-over brewer that allows precise control over extraction.

Also, there are creative flavours like salted coffee, apple fitter, s’mores, butter coffee, etc. The possibilities are endless!

A healthier caffeine intake

The trend toward reduced caffeine consumption reflects a rising consciousness of the importance of health in general. Many are looking for healthier energy sources that do not sacrifice performance.

• Health-conscious individuals want sustained energy levels throughout the day. They choose matcha or herbal teas with a gentler caffeine boost.
• Due to its higher caffeine content, traditional coffee can sometimes cause jitters or anxiety. Alternatives like decaf coffee or adaptogenic blends provide a smoother experience.
• Consumers consider not only caffeine but also other health aspects. Mushroom coffee, for instance, combines functional benefits with a moderate caffeine kick.
• People are more mindful of added sugars. Choosing unsweetened or naturally sweetened beverages aligns with health goals.

Conclusion

The U.S. ready to drink coffee industry is experiencing rapid growth due to changing consumer preferences and innovation trends. Brands can find a lot of room to grow in the ready to drink coffee industry because of the convenience and longevity of the product. This is a chance for new entrants to offer fresh ideas and cater to various customer demands.

Tan Do will be a powerful ally in your pursuit of creating the ideal coffee product that aligns with present market demands. Discover the potential of the ready to drink coffee industry now with Tan Do and seize the opportunity to make a lasting impact in this field.