KDP is already a coffee powerhouse: but what’s key to the company moving forward is to take that strength and use it to broaden the interest of coffee to new consumers and new consumption occasions.
That’s why the company has set out to be a ‘pioneer’ in the flavored coffee space: bringing in the big guns with collaborations with General Mills and Mars and much more besides.
KDP is big in coffee... but it could be bigger...
Coffee is a cornerstone of Keurig Dr Pepper’s business: with the US coffee segment representing around 30% of total net sales in 2022 (the rest of the company’s portfolio – created as a result of the combination of Keurig and Dr Pepper Snapple in 2018 – covers a set of non-alcoholic drinks including soda, water and energy drinks).
“The Keurig system has continued to see success among American consumers: in part because of its ability to offer a wide range of choice among brands and varieties. Therefore, the introduction of exciting new coffee flavors is incredibly important to our coffee strategy,” explained Christine van den Broeck, Senior Director, Brand and Product Management at Keurig Dr Pepper.
“Looking forward, KDP sees a significant, multi-year opportunity to continue modernizing consumers’ coffee brewing habits, gaining adoption in new homes and increasing usage as coffee consumption continues to expand to new occasions throughout the day. With Keurig’s presence in less than 40 million of the 90 million US coffee consuming households, there is significant runway for continued growth.”
As part of that, increased demand for at-home flavored coffee has created what KDP identifies as a $2.8bn growth opportunity in the category.
Flavor profiles
“Importantly, the concept of flavor is diverse," continues van den Broek. "For instance, flavor can delve into consumers’ evolving preference for premium quality natural ingredients – a need which we’ve met most recently by renovating our seasonal Green Mountain Coffee Roasters flavor portfolio of products – including Maple Pecan and Dark Chocolate Hazelnut."
“Flavor also allows us to meet important ‘treat’ occasions among coffee lovers.
"Our The Original Donut Shop Coffee brand has deepened its connection among consumers through that occasion by introducing dessert-inspired flavors such as Sundae Fundae Latte.
"Lastly, flavor can help meet the growing need of cultural exploration through beverages.
"McCafé At Home, for example, expanded its coffee portfolio this year with the debut of McCafé At Home Café Styles of Latin America. Three varieties – Horchata Latte, Café de Olla, and Café con Leche – pay tribute to the incredible taste of Latin American café beverages.”
Gen Z and millennials are integral to the category's growth
Flavored coffee resonates strongly with younger generations: a category well-known for being particularly excited by novel combinations and luxury tastes.
“Gen Z and Millennial coffee drinkers are driving the rise in flavored coffee’s popularity and boosting overall category growth," said Scott Christenson, who is the Senior Marketing Director for Keurig coffee brands Green Mountain Coffee Roasters and The Original Donut Shop.
"We have found that Gen Z started drinking coffee earlier than previous generations: age 15 versus 17-19. With this knowledge, we’re bringing new and younger coffee drinkers onto our platform to inform our treat occasions to help drive category growth.”
Collaborations have been a key way of doing this: drawing on KDP’s know-how in flavored coffee, alongside well-known brands who have ‘treat’ equity to create sweet offerings.
“We know consumers love indulgent and recognizable brands and flavors," continues Christenson.
"The Original Donut Shop Coffee recently collaborated with General Mills to launch Cinnamon Toast Crunch One Step Latte. This partnership came on the heels of a successful partnership with MARS with the launch of Snickers, Twix, and Milky Way flavored single cup coffee varieties.
"In fact – The Original Donut Shop Snickers product is the fastest growing branded flavor in the single-serve category in 2023. The Original Donut Shop’s recent partnerships offer coffee enthusiasts a new way to experience iconic treat flavors.”
The Original Donut Shop has outperformed the flavored coffee category as the #1 fastest-growing brand by share basis in 2020 and the Snickers K-Cup became a Top 10 branded flavor variety in 2023.
That provides an ‘innovation platform’ to continue to capitalize on its strength moving forward and meeting consumers’ evolving tastes.
Flavor fanatics
Seasonal flavors are important to the portfolio: providing a point of interest and excitement that matches up with the season.
“Flavor trends are impacted by the holidays when our seasonal flavors are offered," explained Christenson. "Some of the most popular ones are Green Mountain Coffee Roasters Pumpkin Spice, hot or brew over ice, Green Mountain Coffee Roasters Cinnamon Sugar Cookie, and Green Mountain Coffee Roasters Holiday Blend.
“Looking forward, we’re excited about some new Spring Seasonal flavors coming to our Green Mountain Coffee Roasters collection in early 2024. We’re always looking for new flavor innovations, partnerships, and collaborations that will be popular and resonate with our consumers.”
But while seasonal flavors are always a hit with consumers, the company also ensures it has an attractive set of year-round offerings.
“Caramel, Hazelnut, French Vanilla, and Mocha are always staples in the flavored coffee category that we see people returning to again and again,” says Christenson.
“While offering seasonal favorites such as Pumpkin Spice and Cinnamon Sugar are table stakes, we see opportunities to meet flavored coffee occasions year-round.
"In fact, it’s one of the reasons we created five new K-Cup pods this year (The Original Donut Shop ICED Duos Cookies + Caramel, McCafé At Home ICED One Step Mocha Frappe, McCafé At Home ICED One Step Hazelnut Latte, Green Mountain Coffee Roasters Iced Vanilla Caramel and Green Mountain Coffee Roasters ICED Hazelnut Cream) for our K-Iced coffee maker.
"With increased demand for iced coffee occasions at home year-round and heightened cravings for flavored coffee innovations, we’ve been able to meet consumers’ needs and tap into multiple coffee occasions at once.
Does the coffee even matter any more?
Flavored coffee offers a lot of fun. But do these products eventually becoming all about the flavor – and nothing to do with the coffee?
Van den Broek assures us this is not the case.
“Our expert R&D team spends a lot of time in the lab testing and working on the balance of flavor and coffee," she said. "We develop the highest quality coffee blends specifically for flavored coffee that allow the flavor to shine when applied to the coffee.
“Flavor is the star of the show while ensuring the coffee behind the flavor is smooth and balanced. No matter what the flavor profiles, our main priority is producing high-quality pod drinks that all our consumers will enjoy.”
