Speaker 1: Between 2016 and 2023, consumer spending on cold coffee, which includes iced coffee, cold brew and frozen coffee drinks, more than doubled in the U.S. Hot coffee, on the other hand, grew about 20 percent.

Speaker 2: Lots of ice is key. We want it super, super cold.

Speaker 3: You know, I see an iced coffee being made on social media and they're shaking their ice around. I'm like, well, maybe I want an iced coffee now. Like, it truly works.

Speaker 1: You can see that iced coffee really is at the forefront of advertising for chains like Dunkin'. The company told CNBC that since 2019, it's grown its iced drinks by 50 percent and they now represent two thirds of its total beverage sales.

Speaker 2: It can be 10 degrees and snow will be falling and there will be people clutching their cold brew coffees as they walk to work. And that was not the case until relatively recently.

Speaker 1: So why do Americans love putting this traditionally hot beverage over ice? And will cold brew and iced coffee eventually take over? Americans spent nearly $88 billion on out-of-home coffee purchases in 2023. About 20 percent of that was on cold coffee. But tracking at-home cold coffee consumption can be hard.

Speaker 2: A lot of people are taking standard ground coffee, putting it in, you know, a pitcher or something and letting it brew overnight and making cold brew. And how on earth do you track that?

Speaker 1: And the answer is you can't. Sales at coffeehouse chains can help paint a clearer picture. Starbucks controls about 25 percent of the U.S. coffee and snack shop market.

Speaker 2: The way it usually works in the U.S. is that coffee trends start at the coffee shop and above all at the big chains like Starbucks. So the way to look at it is when did they really start pushing the cold beverages? That's about when cold brews start reaching those restaurant menus. And then that shapes what good coffee is thought to be like in the minds of consumers, which then in turn shapes things like their at-home consumption patterns.

Speaker 1: From 2013 to 2021, Starbucks U.S. cold beverage sales grew from less than 40 percent to 75 percent of all drinks sold. It's important to note that this includes non-coffee drinks as well. For Dutch Bros, a West Coast-based coffee chain, cold drinks account for about 90 percent of its beverage sales. About half of that is cold coffee. The rise of caffeinated alternatives like energy drinks may help explain the appeal of iced coffee as well. Americans love soft drinks in general, so the view is how can you make coffee in a soft drink? In the U.S., ready-to-drink coffee is almost always drank cold and consumption is up over 40 percent between 2019 and 2023. That is much higher than the global growth rate, even without Japan, who accounts for about half of the total market and disproportionately skews the data.

Speaker 4: When you look at the big chains, they shape consumer taste, but they also reflect consumer taste. And so I think there's a little bit of both happening there, right, where consumers clearly are asking more for cold beverages. That's driven largely by Gen Z, by millennials. The skew is pretty clear that the younger consumers prefer cold coffees, iced cold brew, etc.

Speaker 1: The divide between iced versus hot coffee drinkers is largely generational. Americans age 18 to 24 are the largest consumers of cold coffee. A survey found that about half of respondents had it within the past day. The second largest cold coffee drinking cohort was respondents age 25 to 39.

Speaker 2: And there was a big drop off then in Gen X and boomers. They'll drink cold coffees. They'll drink, in some cases, cold brews or iced coffee. But it's really more like a summertime thing that's hot. Whereas the millennials, especially Gen Z, really broke free of that seasonality. And that's the key difference, is that they view it as an anytime beverage rather than a seasonal thing.

Speaker 1: As a Gen Z coffee drinker myself, I almost always opt for an iced coffee. And for me personally, it's because it lasts longer than a hot coffee. If I'm at the office, I want something that I can sit at my desk and sip on for a few hours.

Speaker 3: I think there's there's definitely less exploration. There is less cravings for variety with those older generations. Since coffee has such an established background as this hot beverage, I think it's kind of hard to break that mindset with a generation that for so much of their lifetime, it has just been that hot beverage.

Speaker 1: A 2023 Mintel report found that 26 percent of U.S. teens consume cold coffee, while about 18 percent consume hot. One reason behind its popularity amongst younger generations is because it's an easier entry to coffee. It's highly customizable and you can add lots of flavors and toppings that help divert from the natural bitter taste of coffee.

Speaker 4: Increasingly, that younger consumer, that is not just asking for a very plain cup of hot coffee, right? They they want a coffee based beverage that has something more to it. And I think that's reflected in that marketing and promotions.

Speaker 1: Thank you. The clear plastic cups that cold coffee typically comes in lends itself very well to the age of social media. These new drinks are a Starbucks Wicked collaboration. So you can see that the foam on top is actually green. And as you swirl it around, it mixes into the drink. There are some like sparkles on top. All of these colors and aesthetics simply wouldn't be possible if it were a hot drink. Even though many younger Americans view cold coffee as an all year round beverage, companies like Starbucks have seen a clear dip in the winter months.

Speaker 4: One of the reasons Europe hasn't fully adopted cold coffee is because of, I think, the climate. And they're still largely driven by hot coffee. And, you know, especially in northern Europe.

Speaker 2: Americans as coffee drinkers are much more experimental, right? They don't have a very strong coffee culture. At least find a place like a Brazil, Turkey, Italy. There's that long historical tradition, a sense of here's how we make coffee. Traditionally, Americans are much more into trying new things in terms of the trends right now spreading around the world. Things like cold brew, like nitro. They're coming from the United States.

Speaker 1: Many coffee makers like Nespresso and Keurig are jumping on the iced coffee bandwagon, too. Nespresso released a ready to drink canned beverage for the first time this summer. And Keurig is now selling a coffee machine that brews hot and then flash chills it to make iced coffee. Still, cold brew and iced coffee have some ways to go before catching up to their hot counterpart. Hot coffee is still by far the most popular way Americans consume coffee.

Speaker 4: A big part of our growth expectation is just that more and more restaurants and food service operators are going to add this to the menu. And so our expectations are very bullish for growth of the cold coffee category over the next five years.