Coffee drinkers tend to savor their brew in the morning and switch to soda or water as the day goes on. But the world’s largest beverage companies want to turn that morning cup of joe into an all-day staple and an heir to the sodas that consumers have soured on.
Last week, coffee giant Keurig Green Mountain acquired Dr Pepper Snapple, the maker of 7 Up, Hawaiian Punch and other popular drinks. The reason? They’re trying to reach consumers “throughout the day,” according to a company news release.
Analysts say the new firm, to be named Keurig Dr Pepper, is far from alone in its quest to reinvent America’s favorite breakfast drink. Over the past two years, many of the country’s largest coffee chains and beverage-makers have pushed aggressively into new product lines intended for consumption in the afternoon and evening.
Several of those firms, such as Panera and Stumptown, are already owned by Keurig’s corporate parent, JAB Holdings.
“They seem to really want to branch out beyond breakfast,” said Zoe Leavitt, a senior retail analyst at CB Insights, a market research company.
At first glance, Dr Pepper Snapple seems an odd target for a growing coffee empire. The maker of more than 40 sodas, fruit juices and energy drinks has nonetheless been a perpetual third runner-up, behind Coca-Cola and Pepsi.
Meanwhile, JAB Holdings — a German firm owned by a family of secretive billionaires — has spent the past six years snapping up not only companies that make coffee but also restaurant chains that sell large volumes of it. In addition to Keurig Green Mountain, maker of K-Cups and coffee machines, JAB owns or invests heavily in Peet’s Coffee, Panera, Caribou, Au Bon Pain, Krispy Kreme, Stumptown Coffee Roasters, Intelligentsia and Jacobs Douwe Egberts, the world’s largest coffee-only company.
But as incongruous as Dr Pepper may seem in a lineup of trendy, third-wave coffee roasters, analysts say the acquisition fits into the push to transform your morning cup of java into a worthy soda alternative. Since mid-2015, when Starbucks rolled cold brew out to all of its U.S. stores, beverage companies have been jousting to invent a coffee drink that clearly telegraphs as “afternoon refreshment.”
The reasons are twofold, said James Watson, a Rabobank senior beverage analyst.
For starters, young people are less likely to make their own coffee at home before heading out, which has shifted back the hour of the average coffee break.
In 2010, for instance, the National Coffee Association found that only 1 in 10 coffee-drinkers had a cup at lunch. That figure had risen to 1 in 4 by 2016.
On top of that, consumers of all ages have begun turning away from soft drinks — creating both a crisis for soda-makers and an opportunity for virtually everyone else in the caffeinated beverage industry.
“We’re seeing these coffee drinks now that actually resemble soda,” Watson said. “It’s a way to get into the segment, because coffee is natural and healthy and tracks with consumer trends.”
Among the firms getting in on all-day coffee, Watson said, are some of the world’s largest soda brands: Pepsi makes Starbucks’ ready-to-drink coffees, and Coca-Cola last year launched versions of Dunkin’ Donuts and McDonald’s coffees.
The action isn’t limited to bottled drinks, either: Analysts see the rise of cold brew as the cafe’s play for afternoon customers. In the future, Watson predicted, some chains will also offer sparkling and flavored coffees as lunchtime pairings, right next to their soda fountains.
It’s still far too early, of course, to guess what direction the new Keurig Dr Pepper will follow. In a statement, Keurig’s chief executive, Bob Gamgort, said the company would focus on “address[ing] today’s consumer needs.”
But a recent launch from elsewhere in the JAB empire may offer a glimmer of what’s to come.
Last February, Stumptown Coffee Roasters released a Sparkling Cold Brew in aluminum cans, which it promoted as a summer “road soda.”
By Caitlin Dewey
The Washington Post
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