Starbucks (SBUX) is doubling down on the cold, which is currently really hot. In the company’s fiscal third-quarter earnings, its US cold beverage business accounted for 75% of total drink sales. CFO Rachel Ruggeri described cold as “an increasing trend,” particularly among younger consumers such as Gen Z and millennials, whose “taste and preferences tend to be more cold.”
In an interview with Yahoo Finance, she saw cold as “a big opportunity” for the global coffee company. Cold beverages increased by 8% last quarter, while hot drinks increased by 2%. Cold “has a position across all day parts,” she noted, encouraging business throughout the day.
It’s “why you see us continuing to innovate in areas like espresso and refreshment, even with the new blended lemonade refreshers,” she explains.
Starbucks introduced frozen lemonade refreshers for the summer in late June. Cold espresso beverage sales grew 13% year over year last quarter, thanks to items such as the Iced Shaken Espresso.
Consumers may expect more from Ruggeri, who added, “it’s definitely not going away.”
Starbucks stock is up about 5% year to date. (August 1st)
Of course, the ice is at the root of the cold trend. Starbucks may phase out cubed ice in favor of nugget ice — or smaller, pellet-shaped ice similar to those sold at Sonic.
“We’re in the early journey of our nugget ice,” Ruggeri explained. The ice is presently being tested in the company’s busiest cold beverage stores “to support the capacity of cold.”
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According to Ruggeri, testing is proceeding well with both personnel and customers.
“Early on, it’s better for partners, it’s easier in terms of overall, it blends faster … it creates a better experience … at the same time our customers love it,” she explained. “The combination of that gives us confidence we’ll continue to fuel the cold growth that we see with improvements and advancements.”
The nugget ice will be available at all of the company’s outlets. However, it may take some time to integrate the new ice fully.
“Eventually, it will be piped into the stores, so [employees] no longer have to carry buckets of ice.”