- Kraft Heinz is partnering with Diageo's Baileys on a coffee line, including non-alcoholic RTD cold brew, ground coffee and K-Cup pods.
- Cold brew beverages will be available in 11-ounce cans of Irish Cream and Salted Caramel flavors with new flavors hitting shelves in 2020. The ground coffee will come in 11-ounce bags and K-Cup pods will come in 10-packs, both in Irish Cream and Chocolate Cherry flavors.
- "Consumers have been adding Baileys Irish Cream to their coffee for years, so this partnership is a natural fit for those looking for a delicious coffee experience," Tina Bletnitsky, senior associate brand manager at Kraft Heinz Coffee, said in a statement.
During the last two decades, consumers have moved from viewing coffee as merely a pick-me-up to an indulgent, experience-driven occasion — a shift that has given Big Food new paths to growth. Kraft Heinz is taking advantage of the trend with this new drink partnership with Baileys.
About 64% of American adults drink a cup of coffee each day — the highest penetration since 2012 and up 2% from 2017, according to a survey from the National Coffee Association cited by Reuters. Years ago, this would have meant a mug of drip coffee, but today's younger coffee lovers gravitate toward super-premium ready-to-drink or cold brew options. The segment skyrocketed 580% between 2011 and 2016, Mintel research found.
The response to this trend from companies has been swift. Last year, investors poured more than $600 million into startup coffee brands — four times the funding in 2017. That's not to mention the established legacy brands that CPGs have been doubling down on. Nestlé paid $7.15 billion last year for the right to sell Starbucks-branded beans and products at grocery stores around the world. J.M. Smucker revamped its Folgers brand with its 1850 line that caters to younger consumers with iced coffee and K-Cups, and will release ready-to-drink variations this fall.
With such potential in the coffee segment, Kraft Heinz is smart to forge this partnership. This positions Kraft Heinz squarely in front of millennials and Gen Zers, who are looking at both coffee and cocktails for on-the-go formats and gourmet flavors. At the same time, choosing to step into this space puts the new RTD drinks directly in competition with other big name brands like Bulletproof, Starbucks and Nescafé.
Even with the fierce competition it will face in this segment, Kraft Heinz seems to be confident in its plans to bolster its coffee strategy. The launch comes months after the company backed out of a reported plan to sell its Maxwell House brand in favor of reimagining how the powerhouse brand could work to the company's advantage. Maxwell House, which is considered to be worth $3 billion, is already showing signs of slipping to more premium, fresher and better-tasting products.
By offering an innovative product with qualities consumers are asking for, Kraft Heinz is aiming to grab back some of that market share. On the company's most recent earnings call, CEO Miguel Patricio told investors this was his strategy to grow Kraft Heinz's iconic brands. Patricio took the helm at the legacy company in July after a rollercoaster start of the year. In February, the company posted a $12.6 billion net loss following a $15.4 billion write-down of its Kraft and Oscar Mayer brands. Its stock immediately plunged about 28%, and the company's has not yet recovered.
Diageo is also going deeper into franchising its perennially popular Baileys with this partnership. The company has been looking at the Irish cream liquor from the perspective of its flavor profile rather than its alcohol content. Last year, it released a new product in collaboration with Clabber Girl: Baileys Original Irish Cream baking chips.
The success of these two unions could very well catalyze a waterfall of partnerships as the brand looks to branch out of cocktails and boozy beverages.