Starbucks' cold beverage boom led by Gen Z

Starbucks, the coffee house chain, has seen demand for cold beverages surge, with members of Gen Z driving this trend as they personalise their drinks then share images on social media.

The background

• Cold drinks accounted for approximately 75% of total beverage sales in Starbucks’ US company-operated stores in its last trading quarter.
• Howard Schultz, the firm’s CEO, said the “modifiers” for these drinks – like syrups, purée and fruit pieces – yield a “virtually unlimited range of taste, flavor and colour profiles”.
• This means the brand can serve many “different need-states while creating opportunities for customers' self-expression”, he told investors on an earnings call.

The Gen Z connection

• Cold beverages are very much “a Gen Z product”, Schultz reported. “That is a key customer cohort for Starbucks.”
• Iced Shaken Espresso, launched last year, has been “wildly” popular with members of this cohort, according to Schultz, and has witnessed sales double over the to date.
• This offering has effectively created “new customer occasions” around midday and the afternoon, helping drive traffic for the brand.

The role of social media

• Personalising cold drinks is not only popular with Gen Z, but members of this demographic often post images of their favourite brew on digital platforms, too.
• “The modifiers are raising the ticket [price], and the modifiers produce colour and excitement to the Gen Z audience and they immediately put it on social media,” Schultz said.
• The impact of this trend is significant: “We have never been, in our history, more relevant than we are today to Gen Z,” he said. “And to me, that cohort is so powerful and the attachment rate that we have with them and the loyalty is just building.”

Sourced from Seeking Alpha