Philadelphia-based coffee roaster La Colombe has entered an exclusive 10-year partnership with Molson Coors Beverage Company to distribute the brand’s ready-to-drink coffee products in the drug and convenience channels starting in 2021, with plans to eventually transition distribution for all channels to the Molson Coors network over time.
The deal marks the latest addition to Molson Coors’ growing portfolio of owned and partnered non-alcoholic beverage brands and is the third announcement this month — following news that it will soon launch four new product lines developed through its partnership with L.A. Libations as well as a distribution agreement with sustainably-packaged water brand ZenWTR and Topo Chico.
“This is one more way we’re innovating beyond our traditional product lines to deliver what consumers want,” said Molson Coors president of emerging growth Pete Marino, in a press release. “It’s a mutually beneficial partnership for all; La Colombe will enhance its reach through our established distribution network, our distributors will benefit from access to another fast-growing, high-demand product they can offer their retailer customers, and Molson Coors adds an above-premium offering to the top of our non-alcohol roster of brands.”
La Colombe previously partnered with Molson Coors last year for the launch of its alcoholic Hard Cold Brew Coffee line, which was produced by the coffee roaster but distributed through Molson Coors’ wholesale distribution network.
Todd Carmichael, founder and CEO of La Colombe, said the brand views itself today as a top player in the ready-to-drink coffee space, competing directly with strategics such as PepsiCo (which distributes Starbucks), Coca-Cola and Nestle. The new partnership now gives La Colombe the distribution muscle and support network it needs to dominate within the brick and mortar retail sector.
According to market research firm IRI, La Colombe RTD coffee sales have outpaced the category, growing 59% year-over-year for the 52-week period ending September 6, compared to 22% growth for the category. But despite the growth, which is primarily in MULO grocery accounts, Carmichael said the brand has a long runway to expand in the drug and convenience channels. The Molson Coors partnership is expected to more than double the brands presence in those retail sectors.
As well, Carmichael hopes to grow the brand’s presence in the club channel, where it currently has a long runway to continue growing.
“It’s been a real big climb,” Carmichael said. “You climb in the hopes that you connect with people and then you find there’s a David and Goliath scenario, but now the Goliath is your best friend — and that’s what I’ve done. You know, David and Goliath are besties.”
Though La Colombe has continued to experience significant retail growth this year, Carmichael said the brand faced significant headwinds from the COVID-19 pandemic. Initially founded as a cafe business, he said the brand had to shut down its more than 30 stores in the spring and also took a hit when nearly 5,000 food service and hospitality accounts closed. Though the initial impact of lockdowns was like “falling from the sky,” he said the company opted to “goose the two engines” it had and focus on RTD coffee sales in retail and online.
Since March, La Colombe’s ecommerce sales have grown over 400% and the brand weathered the distribution challenges of the early pandemic environment by taking extra measures to ensure all deliveries made it to stores on time. Though its cafes have since reopened, Carmichael said they’re only taking in about 35-40% of their previous revenue, but at the same time RTD sales have continued to “ramp up.”
“We do a lot of direct business, so the retailers could recognize that no matter what happens out there in the world, you can count on La Colombe,” he said. “That was really helpful, and we used that to take space. Because we’re there, so we’re going to fulfill.”
Over the summer, La Colombe has continued to launch new innovation on its RTD line, including multi-serve bag-in-box products. Carmichael said since the pandemic, demand for at-home use occasions for cold brew coffee has risen and by expanding its presence in the space the brand is able to grow in multiple sections of the store.
The U.S. market for RTD coffee is currently valued at over $4.6 billion, but Carmichael said he sees the space as a fragmented market filled with multiple subcategories which don’t actually compete with one another — including standard coffee (either black or strongly coffee flavored), plant-based lattes and functional coffees and dessert-like “sugar bomb” drinks that are popular with younger consumers. By focusing on the former, Carmichael said La Colombe plays in a less crowded space than it might appear, as top selling products such as Starbucks Frappuccino or Dunkin’ lattes are not drawing from the same pool of consumers.
“You kind of imagine when you roll out something like our Draft Latte that you’re going to pull everything from the Frappuccino, but then you realize you don’t,” he said. “You do when the consumer ages out [of that subcategory], but you don’t really crater that SKU. So each [subcategory] is behaving a little bit differently now.”
Though La Colombe’s new focus on the drug and convenience channels will primarily include grab-and-go products, Carmichael said he has a long pipeline of innovation focused on both single-serve and at-home occasions, but some of these products may be years away from a launch. As the Molson Coors partnership expands, the conglomerate will handle all new RTD product distribution.
“The awareness of the consumer is just starting,” he said. “I think that this is going to be an incredible elevator ride and it’s still got five to 10 years left of serious [growth] left. Sometimes the winner is the last one standing, and we intend to be the last one standing here.”