Japan is still the biggest market for ready-to-drink coffee, but a confluence of consumer trends has made it a beverage industry star in America.

Ready-to-drink (RTD) canned coffee originated in Japan, and has been a mainstay there for decades. Japanese consumers drink half the global total, but in the five years to 2019, domestic sales shrunk by 12.5%. This has Japanese beverage companies looking abroad, particularly to the U.S., where the margins are higher and the market for RTD coffee has grown by 78% since 2014.

One reason for the ever-rising popularity of RTD coffee amongst American consumers is that it is replacing sugary carbonated beverages. Apart from modest growth stemming from consumer stockpiling during lockdowns, the carbonated soft drink market has seen years of decline in volume sales. “The unhealthy perception of carbonates will only accelerate among consumers, leading to falling consumption rates”, said Aga Jarzabek of market research firm Euromonitor International.

In RTD coffee, health-conscious American consumers see a “clean” label as well as a convenient energy boost – a functional benefit at a time when functionality is a major consumer trend in the beverage industry. Another trend driving RTD coffee sales in the U.S. is premiumization. This is most apparent in the case of cold brew coffee, which uses a different process and has a craft sensibility.

And yet, Japanese purveyors of RTD coffee have hardly been pouring into the U.S. market. Suntory, which dominates the market for pre-packaged coffee in Japan, is completely absent from it. Matthew Barry of Euromonitor points to fundamental differences between RTD coffee consumers in the two countries. In the U.S., it is most popular with younger people, especially women. Most customers in Japan are older, working-class men who buy it from vending machines.

Another obstacle is the highly concentrated market for premium coffee in America, where Starbucks accounts for 63% of canned coffee sales by volume. And, according to The Economist, “The Seattle-based giant is now covetously eyeing Japan, where tastes and consumer habits are growing more similar to Western ones, with a lot more young female tipplers than before”.

Starbucks, which already has about 1,600 stores in Japan, is not the only foreign company moving in. Blue Bottle, a California coffee chain owned by Swiss group Nestlé, launched its first canned coffee vending machine in Tokyo earlier this year. Japan’s top RTD coffee, Georgia, is owned by Coca-Cola. The beverage industry titan is now launching packaged products from its British coffee shop chain, Costa Coffee, in Japan.

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