Starbucks (SBUX) has been focusing on the cold to produce hot results.
In the coffee seller’s fiscal third quarter results, its cold beverage business reached 75% of total drink sales. Rachel Ruggeri, the company’s CFO said that cold drinks were “an increasing trend,” especially among the younger generations such as Gen Z and millennials, whose “taste and preferences tend to be more cold.”
She noted that cold is “a big opportunity” for the coffee giant, with cold beverage sales growing by 8% last quarter, while hot drinks only grew 2%. She said that cold “has a position across all day parts,” selling more all throughout the day.
She added that it is “why you see us continuing to innovate in areas like espresso and refreshment, even with the new blended lemonade refreshers.”
Starbucks just added the frozen lemonade refreshers in late June, while items like the Iced Shaken Espresso helped cold beverage sales increase by 13% year over year last quarter.
Ruggeri said that after the performance of colder drinks, consumers can expect more, adding, “it’s definitely not going away.”
Shares of Starbuck have risen off the trend, gaining almost 5% year to date.
Meanwhile, even the ice is being perfected, as regular cubed ice is giving way to the nugget, a smaller, pellet shaped ice which is similar to that served at Sonic.
Ruggeri said, “We’re in the early journey of our nugget ice,” which the company is testing at its highest-volume cold beverage locations “to support the capacity of cold.”
She notes that both employees and customers are reporting that the testing is going well.
“Early on, it’s better for partners, it’s easier in terms of overall, it blends faster … it creates a better experience … at the same time our customers love it,” she said. “The combination of that gives us confidence we’ll continue to fuel the cold growth that we see with improvements and advancements.”
She notes the ice nuggets will eventually be rolled out across all of its stores, although it will take time to be implemented completely. She said, “Eventually, it will be piped into the stores, so [employees] no longer have to carry buckets of ice.”
