Fast-food brands see ‘no end in sight’ for cold beverage boom

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This article was published 29/07/2024 (778 days ago), so information in it may no longer be current.

When summer arrives, Paul Volk thinks the rich and creamy milkshakes Triple O’s churns out are an ideal way to beat the heat.

But even in the depths of winter, the sweet treats are just as big of a hit at the Vancouver-headquartered fast-food brand that’s in the midst of an Alberta and Ontario expansion.

“Our shakes are popular year round and I never really questioned why that is,” said Volk, director of operations for Triple O’s owner White Spot Ltd. “A consumer has so many options there in front of them now that I don’t really think the season matters as much.”

Triple O’s is not alone in experiencing the year-round cold beverage boom some attribute to social media, younger consumers and evolving palates.

Executives from the world’s biggest quick-serve and convenience store brands have touted growing all-season demand for icy drinks ranging from smoothies and slushies to cold brew coffee and carbonated juices in recent months.

Hot coffee is still the most common drink ordered in the country, but a recent Restaurants Canada report showed it’s slipped in popularity at quick-serve establishments between March 2022 and 2023. Cold beverage categories like iced and frozen coffee, milkshakes and smoothies, and energy and sports drinks have all gained ground.

In its first quarter ending March 31, Tim Hortons owner Restaurant Brands International alone saw cold beverage sales grow 12 per cent year-over-year. A quarter earlier, they were up 19 per cent, largely because of the company’s sparkling quenchers.

“Cold will for sure play a big role in our growth in the years to come,” Axel Schwan, president of Tims’ Canadian operations, said when the company was marking its 60th anniversary in May and the 25th birthday of its most famous cold beverage, the iced capp.

Earlier this month, the company added energy drinks to its evolving slate of flavoured iced capps and sparkling fruit beverages.

Meanwhile, Starbucks Canada brought spicy fruit drinks, lemonades and berry beverages to its roster of frappuccinos, iced teas and refreshers.

The collection of cold beverages now make up 70 per cent of drinks at the chain, said Danilo Gargiulo, a senior research analyst at Bernstein.

He ascribes the dominance of cold beverages to their novelty, along with their ability to be customized and act as a gateway.

“If you are not a fan of some hot beverages in the morning, you start to see a different way for you to be consuming (a drink when you see cold beverages), so it just opens you up to more options,” he said.

And there is no lack of choices when it comes to cold beverages.

Coffee shops have cold brews and frappuccinos, convenience stores will sell you slushies and burger-and-fries chains have milkshakes and carbonated beverages. Then, there are a slew of smoothie, juice and protein shake outlets.

Most of these places let customers mix drinks together or play around with flavoured syrups, whipped cream and different strengths of coffee, which keep diners coming back and racking up larger tabs.

Starbucks Canada now counts 170,000 different drink combinations, a giant leap from the low levels of personalization in 1989, when it first allowed milk customizations.

Back then, most consumers would switch back and forth between hot and cold beverages based on the season, recalled Jo-Ann McArthur, president at Nourish Food Marketing, a Toronto-based advertising agency.

“But younger consumers stuck with iced beverages year round for a few reasons,” she said. “When you don’t have a hot beverage … the cups are usually clear, the beverages have bright colours, different toppings and it’s more attractive in social photos.”

Trey Powell, Alimentation Couche-Tard Inc.’s senior vice-president of global merchandising, also notices customers seeking out cold drinks because many have “functional benefits” stemming from ingredients that provide lasting hydration, boost nutrition or deliver energy.

“I joined the industry approximately 20 years ago and the energy category was … fledgling. It was sort of an idea that a couple of folks had,” he said. “Here we are 20 years later and the energy drink category … is really the workhorse of the cold vault.”

McArthur expects companies to continue to build on the success of that category by experimenting with drinks packed with electrolytes, adaptogens, botanicals and even innovative ingredients like mushroom powder.

Triple O’s hasn’t delved into those spaces yet, but its menu has evolved a lot since it launched its first location in 1997.

The chain now sells blended coffee frappés and cold brew, both available in sweetened, unsweetened, caramel, mocha and vanilla flavours.

The frappés and cold brew launched as limited time offers a few years ago.

“When the promotion ended, we had a lot of guests saying, ‘Hey, you know what, why is this off the menu?'” Volk recalled.

Triple O’s listened and brought them back — permanently.

It also started to think more creatively about its milkshakes — one of its original menu items. This fall, it will offer the drink in a caramel pumpkin pie flavour and in winter, there will be a candy cane wafer milkshake, Volk said.

Planning is already underway for next summer and customers can expect plenty of cold beverage innovation then, too.

“I don’t think we are anywhere near finished with that,” Volk said of both Triple O’s dalliances with the category and consumer demand for cold beverages.

“I don’t think there’s an end in sight.”

This report by The Canadian Press was first published July 29, 2024.

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