As the ready-to-drink coffee market gains popularity among consumers, West Michigan roasters are diversifying their business models to reflect a shift in how consumers approach the product.
For La Colombe Coffee Roasters, a Philadelphia-based company that opened a facility in Norton Shores in 2017, ready-to-drink products already have helped boost revenues, said co-founder and CEO Todd Carmichael.
Carmichael expects the popularity of the new products will continue to grow over the next three to five years, driving change among players of all sizes in the coffee industry.
“It’s kind of the next generation … for coffee,” Carmichael told MiBiz. “There are a number of ways for reaching the consumer. The newest way — the ready-to-drink way — is the one that is getting the most pull from the consumer than anything else, (and) it will continue to do that for next three to five years.”
La Colombe’s plant in Norton Shores employs 120 people and cans ready-to-drink “draft lattes,” a product now sold in 42 percent of all U.S. stores. Carmichael said a quarter of all sales at the company come from ready-to-drink products.
“The business is cranking,” he said. “Considering that we have been growing this company for 23 years, it took one year for this to catch up” to other coffee categories that La Colombe sells.
La Colombe generated annual sales of more than $100 million last year, split evenly between brick-and-mortar cafes, hospitality, e-commerce and consumer packaged goods, Carmichael said.
He sees growth accelerating for the ready-to-drink products, which are portable — an important feature for consumers who are increasingly dependant on easily accessible goods. As a result of that growth potential, La Colombe has been scaling up production to meet consumer demand.
“For this generation, for us, it’s portability,” he said. “You can take something that is a crafted, authentic, pure beverage with all of the nutrients you could want out of it, and you can find it anywhere. It’s a Silicon Valley sort of way of looking at coffee, rather than just convenience.”
Carmichael argues the current industry shift to ready-to-drink products goes beyond the traditional model of a frappuccino in a bottle, which offers convenience but not authenticity.
La Colombe’s ready-to-drink coffees, on the other hand, reach an audience that appreciates high-quality coffee and has the same expectations from a draft latte, he said.
The growth of ready-to-drink coffees has coffee roasters of all sizes paying attention. That includes Grand Rapids-based Ferris Coffee & Nut Co., which is set to release its first-ever ready-to-drink nitro cold brew early in 2018. The company invested in its own custom cold brew equipment and a canning line this year.
“This will be the first canned product for us in what will hopefully evolve into a product line,” said Mark Van Tongeren, director of marketing at Ferris Coffee.
Sam Mirto, director of coffee at Ferris Coffee, spearheaded the cold brew project in 2017. The Ferris Coffee team is comprised mostly of millennials, “so it’s second nature for us to create products geared toward this demographic,” Van Tongeren said.
Like La Colombe, Ferris Coffee describes the ready-to-drink market as portable or convenient, fitting with the customers’ demands.
“I like to think Millennial motivations include quality/taste, experience associated with the product and convenience,” Van Tongeren said. “Our ready-to-drink nitro cold brew provides all three of those. It provides our customers with a convenient, great tasting coffee that will hopefully enhance their life experiences.”
Ferris Coffee, which employs about 150 people, is introducing the canned cold brew product through its current distribution channels and wholesale partners, which are mainly grocery and specialty stores.
“We initially considered outsourcing the canning process, but we need to be able to control the process for a few reasons — mainly food safety and being able to meet the demands of our customers without relying on a third party,” Van Tongeren said.
According to a report from the National Coffee Association, 62 percent of Americans drink coffee on a daily basis, up from 57 percent in 2016. Part of that growth can be attributed to the availability of gourmet coffee varieties — including products at La Colombe and Ferris Coffee — and an increase in the consumption of coffee from a younger demographic, according to the study.
The report also notes that 37 percent of people ages 13 to 18 consumed coffee in 2017 compared to 31 percent of that age group in the prior year.
Another element of the industry-wide growth is the gourmet coffee market. According to the report, “more than half of all cups of coffee consumed” by survey respondents in the past day were gourmet.
At Ferris Coffee, the move to can its nitro cold brew product was twofold, Van Tongeren said.
“Our mission as a company is to build relationships that thrive through specialty coffee and plant-grown foods,” he said. “We are always looking at innovative ways to make specialty coffee more approachable and accessible.”
Van Tongeren added that implementing ready-to-drink products is not going to replace local coffee shops.
“We view our ready-to-drink products as line extensions, not replacements,” he said. “It’s important not to lose sight of the people and process that make specialty coffee possible. I don’t think anything will ever replace meeting someone for coffee at your local shop.”
Conversely, not all local roasters are jumping on the ready-to-consume bandwagon. Grand Rapids-based Schuil Coffee Co. LLC has no current plans to enter the market yet, although owner Tim Volkema said ready-to-consume coffee “clearly has traction.”
In July, Volkema told MiBiz “consumers are migrating up the curve with the quality of coffee they want to drink.
“That’s all good for all those players.”
From cow to can in a day: Why La Colombe chose West Michigan
When La Colombe Coffee Roasters scoured the country for a place to locate a new production facility, the company had three criteria: the availability of milk, a suitable building and a qualified workforce.
“And I found them only in Michigan,” said CEO and co-founder Todd Carmichael.
“I wanted to go from cow to can in the same day,” he said of the company’s draft latte product. “You’re looking for a surplus of milk and milk farmers you could work with, and I found that (in West Michigan). We want to go from the udder right to the plant and into the can that same day. That’s tough to do anywhere else.”
La Colombe also wanted to source milk with the right nutritional properties, which the Muskegon-area location also offered.
The company now boasts more than $100 million in annual revenue and has more than 120 employees at its Muskegon-area facility. The main supply of milk at La Colombe comes from a farm in nearby Coopersville, according to Carmichael.
The presence of retailers like Meijer Inc. and SpartanNash Co. also influenced La Colombe’s move to Michigan, where the products are popular with local retailers, he said.
“You’d like to be near the people you want to make happy,” Carmichael said. “It was a part of the equation, but it wasn’t the reason. It’s really about being a slave to the produce … and having the clients nearby is always helpful.”