Acquisitions have been rampant within the espresso trade in recent times. From the likes of Nestlé and Blue Bottle, Peet’s Espresso & Tea and Stumptown Espresso, and Coca-Cola and Costa Espresso, market consolidation doesn’t seem like slowing down.
One of many newest and most distinguished acquisitions was in July 2023, when Keurig Dr Pepper bought a US $300 million minority stake in La Colombe. As a part of its 33% stake, KDP now sells and distributes La Colombe’s ready-to-drink (RTD) espresso drinks, and likewise manufactures, sells, and distributes La Colombe-branded Okay-Cup espresso pods below a licence settlement in North America.
Extra not too long ago, nevertheless, iconic US Greek yoghurt model Chobani purchased La Colombe for US $900 million. The 2 corporations have an in depth historical past, with Chobani CEO and founder Hamdi Ulukaya typically publicly stating his curiosity within the pioneering espresso roaster.
So it’s clear that Chobani needs to develop much more into the RTD espresso section, and La Colombe is decided to take care of its grip available on the market. However what does the acquisition imply for the way forward for RTD espresso — and what does it say in regards to the alternatives for smaller specialty espresso roasters?
To search out out, I spoke to Tony Dreyfuss, co-founder and co-president of Metropolis Espresso Firm.
You might also like our article on whether or not Keurig Dr Pepper’s minority stake in La Colombe is an indication that acquisition is inevitable in specialty espresso.
Chobani & La Colombe: A historical past
Given how influential each manufacturers are, the explanations for the latest acquisition are fairly clear. However it’s additionally vital to think about that the connection between Chobani and La Colombe dates again some years.
Based in 1994 by Todd Carmichael and JP Iberti, La Colombe was one of many first roasters to assist set up third wave espresso tradition in North America, with the imaginative and prescient “to make the world higher by espresso”.
With this deal with craft and high quality – alongside a dedication to supporting each native and coffee-growing communities and enhancing sustainable practices – La Colombe rapidly turned a pioneer within the trade.
Quick ahead 9 years and it had began manufacturing RTD chilly espresso drinks, together with chilly brew and its revolutionary draft lattes. The latter embody a valve mechanism on the base of the cans which injects the liquid with nitrous oxide – mimicking the creamy mouthfeel of steamed milk.
Across the identical time, Chobani CEO and founder Hamdi Ulukaya expressed curiosity in investing in La Colombe. Between 2014 and 2015, Ulukaya has beforehand supplied La Colombe US $60 million for a controlling stake within the firm. And since then, the manufacturers have collaborated a number of occasions – starting from initiatives supporting refugees to chilly brew creamer drinks.
It’s additionally simple to level to this as a pure partnership between the 2 manufacturers. Chobani’s historic deal with various milks and La Colombe’s pioneering RTD drinks each align with the place specialty espresso goes — making it an ideal match.
What does the acquisition imply for RTD & the broader espresso trade?
There’s little question that this acquisition will see La Colombe’s operations develop and proceed to push gross sales for its wildly profitable RTD draft lattes. Inside 18 months of their launch, the draft lattes already comprised greater than 1% of the entire US RTD espresso market share.
Most notably, the acquisition reveals simply how vital RTD actually is for espresso roasters. This can be a landmark, high-value acquisition in a section that the trade has lengthy since heralded as being fast-growing.
For roasters who’re in a position to deal with RTD and diversify their beverage portfolio, this acquisition reveals the sheer quantity of potential within the section. It’s additionally vital to acknowledge that it displays the course of client behaviour.
Most fashionable specialty espresso shoppers have an interest in the beginning in elements like comfort and customisation quite than chasing down increased high quality micro heaps at any prices. In different phrases: RTD is a key section for specialty espresso manufacturers seeking to diversify and attain a wider viewers. This understandably presents an enormous alternative for manufacturers who can entry the market.
Nonetheless, consolidation like this does inevitably imply that it may be difficult for smaller roasters to compete on this market — particularly in comparison with distribution networks like Chobani’s and La Colombe’s.
Metropolis manufactures and sells canned chilly brew, kegs, and concentrates in partnership with co-packers, so Tony has an in-depth understanding of the market.
“Distribution of RTD espresso merchandise could be very difficult as a result of it’s all chilly chain,” he says. “Until you’re backed by an enormous firm which specialises in chilly chain distribution, it’s troublesome to have entry to that form of community.
“What’s extra, most specialty espresso corporations aren’t serious about shelf-stable RTD merchandise as a result of they are typically decrease high quality, so that they need to promote and distribute on a smaller, extra native scale for a better value,” he provides.
How can smaller manufacturers sustain?
This acquisition is simply one other signal that the funding into RTD espresso is just persevering with to develop. As we’ve stated, it may not be simple, however for the businesses who can attain this client base, there’s an immense quantity of potential.
Regardless of the deal with comfort and customisation, it is very important meet the standard requirements that buyers have come to anticipate — particularly as increasingly more gamers recognise how invaluable this section is.
“Gross sales of our RTD chilly brew are greater than 5 occasions the quantity they had been over three years in the past – largely by kegs and focus gross sales, in addition to by meals service distributors,” Tony says.
Finally, nevertheless, it’s about extra than simply utilizing high-quality espresso and creating revolutionary RTD drinks.
“Advertising and marketing is important,” Tony tells me. “Customers don’t actually know lots of the smaller RTD espresso manufacturers exterior of their residence market, so it’s good to make investments some huge cash on advertising and branding.
“It’s essential to contemplate a mix of things, together with manufacturing availability and prices and distribution points,” he provides. “However there’s nonetheless an enormous marketplace for smaller gamers.”
By delving deeper into the connection between Chobani and La Colombe, the latest acquisition makes a whole lot of sense. However the trade positively must keep watch over how this strategic partnership influences the RTD espresso market within the coming months.
We will absolutely say that it’s going to solely drive RTD espresso high quality even additional – and specialty espresso roasters might want to keep forward of the sport in the event that they need to sustain with the larger manufacturers.
Loved this? Then learn our article on why acquisitions have gotten extra widespread within the espresso trade.
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