UK iced beverage market continues to grow despite a disappointing British summer

Estimated at £265 million, the UK iced beverage market continues to grow, accounting for a 3.3% share of the total UK coffee shop market turnover according to Project Iced2016 UK, the latest report from Allegra World Coffee Portal.

With 8% sales growth YOY, the iced beverage category is an important sales driver for the coffee shop market. However, keeping the same rate of growth proves increasingly difficult with seasonal volatility.

Despite the 30%+ growth seen in 2014, poor weather in 2015 led to single digit decline for a few operators, impacting the strong growth seen in previous years. Nevertheless, the introduction of iced beverages by food-focused and non-specialist coffee shops, together with a wider menu range, has contributed to the measured growth observed.

Market Trends

The main consumption period for iced beverages is summer, with the majority of consumers purchasing iced beverages from May to September. However, after the disappointing summer of 2015, 69% state that they only purchase ice blended beverages during hotter temperatures.

Healthy living remains a key trend in the UK and people now expect healthier options in coffee shops. In fact there is a higher incidence of requests for milk alternatives, such as coconut and almond milk, with iced beverages than hot beverages.

Although iced beverages are still seen by many as an indulgence or a treat, the need for stores to offer sugar-free and low-sugar options is becoming more important, with over one third of people stating they would purchase a low-calorie beverage. The most successful stores offer handmade iced beverages using fresh ingredients rather than pre-prepared off-the-shelf options.

Challenges and Opportunities

Although the unpredictable nature of the weather is the most difficult challenge for the industry, cold beverages are becoming central to the coffee shop menu, with many chains offering iced beverages all year round.

The key industry operational challenge is space, especially for smaller outlets. Ice machines take up a lot of room and as the popularity of iced beverages increases, larger machines are required.

Speed of service is also an issue, as iced beverages take a long time to prepare, especially when using fresh ingredients. Stores need to ensure that staff are well-trained and beverages are simple to prepare to avoid lengthy wait times for consumers in peak consumption periods.

The Future Marketplace

Innovation within the iced beverage market is slow to develop with nothing ground-breaking in the industry since Starbucks introduced the Frappuccino™ in 1995. Allegra predicts that the next key industry development will be the widespread integration of cold brew into the branded chains, and increasing availability of nitro coffee in artisan independents.

Other future trends will be an increased use of fresh fruit and vegetables, milk alternatives and sugar-free options in iced blended beverages to respond to the demands of the health and wellness focused consumer and their desire for beverage customisation.

With other channels closely following the branded chains’ lead, Allegra predicts that there will be continued measured growth of 14% CAGR in the iced beverage market over the next five years.

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