- Soaring green coffee costs are squeezing roasters’ margins, forcing them to raise retail prices to stay in business.
- The demand for matcha, functional and RTD drinks, and drinking chocolate is skyrocketing, fuelled by customisation, wellness trends, and new beverage experiences.
- As it becomes harder to operate a coffee brand, roasters can look beyond coffee to diversify their offerings, securing new revenue streams.
- Success hinges on maintaining quality, offering new experiences, and staying true to brand identity.
The coffee industry is undergoing rapid and drastic changes. Driven by ever-changing consumer tastes, economic pressures, and a new generation of drinkers, more roasters are beginning to look beyond coffee to diversify their offerings and generate new income.
From ready-to-drink (RTD) innovations to functional beverages and an expanded focus on matcha and drinking chocolate, the coffee industry is in the middle of a significant strategic shift. But it signals an evolution to stay relevant and competitive, rather than a genuine pivot from core coffee offerings.
Megan Conceição at Finlays Solutions, Kyle Newkirk at Westrock Coffee, and Ryan Moore at Blendsmiths share their insight.
You may also like our article on whether matcha has become the new espresso.
How RTD kick-started diversification in coffee
The story of modern diversification in the coffee industry arguably begins with the cold coffee boom.
Cold brew became vastly popular in the mid-2010s, and it opened up new opportunities for RTD coffee – a market projected to be valued at almost US$44 billion by 2028, with growth outpacing that of the global coffee industry.
The RTD format has become somewhat of a cultural phenomenon, forever altering the way people experience coffee. Gen Z consumers are driving the trend, demanding convenience, quality, and customisation. Their desire for on-the-go options and a variety of flavour profiles has made RTD a powerhouse in the coffee industry, catering to the demand for both.
Roasters, recognising this shift, couldn’t afford to miss out. Many started to offer their own RTD cold brews and canned lattes, thereby extending their reach to a wider audience beyond their cafés.
“While RTD coffee remains a core category, we’re seeing broader exploration within the functional beverage space, including products like matcha and functional energy drinks,” says Kyle, the Chief Commercial Officer at Westrock Coffee, a manufacturer of private label coffee, tea, flavours, extracts, and RTD products.
This is a clear signal that consumers are looking for a wider variety of options. The success of RTD, therefore, isn’t just about a new way to experience coffee; it’s about demonstrating that roasters could expand their offerings, even beyond coffee, and still thrive.
Matcha and functional drinks become more prolific
As the RTD trend grows and diversifies, we’re seeing a shift away from coffee. Consumers, especially Gen Z, increasingly want new and exciting beverages and more options to choose from.
“Expectations among younger generations have shifted,” says Ryan, the co-founder and managing director at Blendsmiths, a plant-based drinks blend brand, offering products like matcha, chai, and drinking chocolate. “These demographics are driving cafés to broaden their menus, and this evolution is fuelled by several key factors: increased global travel, the growth of expat culture, and a heightened confidence to explore new flavours.
“All of this is amplified by social media and our ability to access global trends in an instant,” he adds. “If I want to see what layered drinks are trending in top Japanese cafés, I can immediately.”
The coffee industry’s economic challenges are another key driver. Sustained high coffee prices are squeezing roasters’ margins, and diversifying into other products helps hedge against these market fluctuations.
The desire for novelty is also pushing brands to innovate beyond their core, default coffee products. A growing number of roasters are expanding their offerings to include beverages like matcha and functional energy drinks, tapping into a broader cultural interest in health and wellness.
“Consumers are seeking more than just low-calorie or low-sugar options; they’re increasingly interested in functional ingredients that support specific health goals, from adaptogens that enhance cognition to probiotics that promote gut health,” Kyle says.
This is where products like matcha and functional RTD drinks have found their footing. Matcha boosts similar levels of caffeine, but combined with L-theanine, it provides sustained energy without the sudden spike and subsequent slump.
Functional ingredients, meanwhile, including adaptogenic mushroom powder, MCT oil, and L-theanine, are said to boost productivity and mental clarity.
“We anticipate that more coffee brands will diversify their offerings to include functional beverages,” Kyle tells me. “The most successful strategies prioritise ingredient transparency and clearly communicate the product’s functional benefits”.
However, this doesn’t suggest a hard, permanent transition away from coffee.
“These products complement coffee, rather than being a move away from it, and address different needs and occasions,” says Megan, an insight analyst at Finlays Solutions, a B2B beverage innovation company specialising in tea, coffee, and botanical solutions.
“Refreshers and matcha, for example, are often consumed outside of the typical morning coffee occasion, and are seen as more refreshing alternatives, whereas coffee tends to be seen as more indulgent,” she adds. “As a result, demand for RTD coffee remains high”.
The desire to explore new flavours and experiences, amplified by a need for customisation and unique drink experiences, is creating a new competitive landscape that business operators are adapting to.
“We will likely see more retail launches, especially led by quick service restaurant brands looking to replicate their foodservice successes on shelves,” Megan says. “Taste and product experience will be critical.”
Will more coffee roasters diversify their products?
As the operational challenges of running a coffee business persist, expanding product offerings becomes a strategic necessity. With coffee prices not expected to retreat until late 2025 – and the ripple effects likely to be felt for at least four years – diversifying into new categories is a remunerative way forward.
“Roasters already have a captive audience, and from a business standpoint, diversification makes sense, provided they align with the right brand partners,” Ryan says. “Both consumers and café owners are increasingly time-poor, so a one-stop shop approach not only adds convenience but enhances the roaster’s appeal even further”.
Authenticity and brand integrity, however, are key to success. Roasters that prioritise ingredient transparency and clearly communicate a product’s functional benefits are best positioned to thrive.
“Brands also need to integrate functional ingredients without compromising on taste,” Kyle says. This means using clean-label formulations and natural sweeteners to appeal to the growing wellness movement.
When it comes to flavour innovations, roasters have a range of options, but striking a balance between the familiar and new is often the most lucrative.
“The most successful innovations elevate the familiar with premium or unexpected twists that feel fresh, not foreign,” Kyle suggests.
Tapping into seasonal trends, such as warming spices in colder months and citrus notes in spring and summer, and global influences can help roasters appeal to loyal consumers and attract new ones. Southeast Asian flavours in particular, including ube, pandan, and durian, are gaining popularity, driven by demand for unique flavours, multiple textures, and novel indulgence.
Ultimately, the goal isn’t to replace coffee but to build a more resilient and dynamic industry.
“I see alternative drinks not as standalone products, but as complementary to what coffee roasters do,” Ryan says. “It’s about working together to elevate the industry and deliver the best possible experience for today’s evolving consumer”.
As it becomes more challenging to operate a coffee brand, roasters are likely to look beyond coffee to diversify their offerings and secure new revenue.
This comprehensive approach encompasses the full spectrum of experiences and choices that coffee brands can offer. Ultimately, this level of strategic expansion enables the industry to adapt and thrive in a market where consumers increasingly seek convenience, health, and a continuous stream of new and exciting beverage options.
Enjoyed this? Then read our article on how roasters can stand out in the RTD market.
Photo credits: Westrock Coffee, Victoria Greenwood
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