Indulgent Beverages: The Coffee-Flavored Elephant

I think that in order to have an intelligent discussion about the smash-or-trashability of indulgent beverages, we have to agree on the definition of these products. After all, what’s indulgent to someone who only drinks water is very different than what’s indulgent to someone who knocks back a few Cokes every day. Some consumer work I did about 5 years ago indicated that the majority of people at one time or another use beverages as a mid afternoon pick- me-up or “treat.” However, some people “treat” themselves with a different type of soda – a root beer or a Dr. Brown’s, while others may only be having a juice, cup of coffee or tea.

But let’s narrow this into something meaningful. By eliminating regular sodas and juices from the definition of indulgent beverages, we can speak explicitly about the category in which countless manufacturers have tried – most unsuccessfully – to find the indulgence “sweet spot” in milk based beverages.

So, when you talk milk-based, there’s already a Mocha-flavored elephant smelling up the room. The irrefutable success story in the indulgent beverage arena is the meteoric rise and continued growth and staying power of the Frappuccino. This product’s growth has been widely envied and unsuccessfully mimicked countless times by players across the industry. Interestingly, some of the unsuccessful wannabes have been as good and at times better than the good ol’ Frap, but were still unable to steal more than a coffee bean’s worth of their business.

So what does Frappuccino have that the other guys don’t?

Well, for starters, let’s look at the obvious: there are more than 13,000 Starbucks stores worldwide, and they generate a gajillion* consumer impressions annually for the Starbucks name, along with nearly 8 billion dollars in annual revenue. But in addition to that, the aura of the Starbucks cafes had created a consumer ritual with their Lattes, Grandes and Frappuccinos long before the Ready-To-Drink version ever hit the shelves. At the heart of Starbucks’ success is not just good coffee, but that “third place” idea they created for consumers. A place that isn’t work or school and isn’t home, but where they go to relax, socialize, work, surf the internet, hear extravagantly priced “best of” CDs or just be alone with their thoughts. Starbucks created a mystique of emotional indulgence far beyond a “cup of Joe,” a rarity in our supercharged daily lives.

So when the RTD version was introduced in the late 90s, it had more than great name recognition and an undeniably creamy delicious taste, it was like an emotional escape in a bottle. On the broad spectrum of beverages that consumers drink for a “treat” or “personal reward,” Frappuccino is practically synonymous with well-earned indulgence.

So the question then becomes, how big does this category of indulgent beverages have the potential to be? Well, basically as big as Starbucks lets it grow to become.

I believe that other than Starbucks, which will continue to grow, the category has limited potential. As consumers become increasingly health conscious, they spend more time than ever reading labels and actually considering the “bang for the buck” they get out of their calories. And while those practices aren’t necessarily so evolved that they are trying to rationalize the nutritional value of a latte to a comparable number of baby carrots, they are more educated and more selective about how and when they indulge.

And while the obesity epidemic is a good indication that indulgence is alive and well in the U.S., unless they’re Homer Simpson (frosty chocolate milkshakes, anyone?) when people really want to indulge they don’t typically want to drink their calories (unless it’s in the form of hops and barley or some other libation), but rather the want to have the gratification of chewing on something they can really savor. So while what works for out-of-home indulgence may be a convenient creamy RTD beverage, at home, indulgence is more likely to take some other shape or form.

So unless another indulgent beverage steps up with the relevance and resources of a Starbucks, I’d say the category is out of steam.

* Source: made up by Maura Mottolese, but it’s probably even bigger than that.