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How Cold Brew Became America's Latest Coffee Craze

By Daniel B. Kline – Jul 18, 2016 at 9:15AM

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It's different, but familiar, which has helped the drink become a huge success.

Before Starbucks (SBUX 1.61%) began offering cold brew coffee  across much of the United States in March 2015, very few people knew what it was.

Aside from posh coffee shops and maybe a few upscale markets, the beverage barely existed. Starbucks changed that and now cold brew has found its way into Whole Foods Market  (WFM) and it's coming to Dunkin' Donuts (DNKN), a chain that has decidedly blue-collar roots.

It's a phenomenon that took a little-known brewing process and pushed it into something now sold in packaged versions at nearly every supermarket. And, like Greek yogurt before it, it's a food trend that went from 0-60 seemingly overnight, with no signs of slowing down.

Starbucks started the cold brew phenomenon. Image source: Starbucks.

What is cold brew?

Cold brew is coffee over ice, but it's not traditional iced coffee, which generally involves making double-strength hot coffee and pouring it over ice or chilling traditional brew in the refrigerator. Making cold brew involves using cool water to steep the coffee for at least 12 hours. This produces a smoother final product that is less acidic.

"Our Cold Brew is smooth and rich, it's very refreshing with chocolate and light citrus notes," said Michelle Sundquist, a Starbucks research and development employee, who worked on the company's initial foray into the iced beverage, in a 2015 press release.

Starbucks Cold Brew is steeped for 20 hours and sold until it runs out. The chain now sells a nitrogen-infused version of the beverage in select locations while also offering kits to make the drink at home. The nitrogren, according to the company, gives the drink a "smooth, creamy texture."

"Our goal was to find the perfect spot where the coffee was rich, dense and slightly sweet," Sundquist said in 2015. "We found that 20 hours was the right balance of sweetness with citrusy and chocolate notes."

Why is cold brew so popular?

"Cold Brew is a newish method of making coffee, and the fact that it's new and a little different is seductive to buyers," wrote "relationship and etiquette expert" April Masini, who writes the Ask April column, in an email to The Motley Fool. "People are naturally interested in what's new. The change in coffee is not so great that customers are put off by say, yellow coffee or coffee in pill format -- it still looks basically like what they're familiar with, but it's trendy."
 
Louise Kramer, Communications Director for the Specialty Food Association, sees the success of cold brew as part of a bigger trends toward healthier foods.
 
"Specialty foods and beverages such as cold brew coffee are on the rise as brands add innovation to the category with techniques such as nitro brewing and using plant-based milks and creams," she wrote in an email to The Motley Fool. "... By fusing artisanal techniques more closely associated with beer brewing, coffee-drinking has become an entirely new experience. Our latest research says refrigerated and ready to drink teas and coffees are among [the] fastest growing categories in the $120.5 billion specialty food industry."

It's new, but familiar

Essentially cold brew has moved beyond Starbucks and Whole Foods into Dunkin' Donuts and the coffee-drinking mainstream because it's new, but familiar. The drink seems a little hip and trendy, but it looks like an iced coffee -- it's not even as big a leap as a latte or cappuccino over ice for skeptical customers.

For Starbucks, the beverage has helped the company make a strong move into cold drinks when previously iced coffee was less than a priority. For Whole Foods, cold brew is decidedly on brand while for Dunkin' it's a bit of an indulgence, but offering it helps protect a niche the chain has long been successful with, iced coffee.
 
Cold brew has shown that it's not a fad, but a permanent menu addition -- at least at Starbucks and Whole Foods. The public does not seem likely to tire of it anytime soon and its peak does not appear to have occurred yet. That should leave room for new consumers to try it, perhaps even pushing coffee sales overall higher.
 

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Daniel Kline has no position in any stocks mentioned. He drove nearly 800 miles the day he finished this. The Motley Fool owns shares of and recommends Starbucks and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Starbucks Corporation Stock Quote
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