Starbucks (SBUX) is doubling down on cold, which is, well, super hot right now.
Its US cold beverage biz reached 75% of total drink sales in the company's fiscal third quarter results. CFO Rachel Ruggeri called cold "an increasing trend," especially when it comes to younger consumers such as Gen Z and millennials whose "taste and preferences tend to be more cold."
All in all, cold is "a big opportunity" for the global coffee giant, she said in an interview with Yahoo Finance. Cold beverages grew by 8% last quarter, compared to 2% growth in hot drinks. Cold "has a position across all day parts," boosting business throughout the day, she said.
It's "why you see us continuing to innovate in areas like espresso and refreshment, even with the new blended lemonade refreshers," she added.
In late June, Starbucks added the frozen lemonade refreshers for the summer. Meanwhile, cold espresso beverage sales increased 13% year over year last quarter with items like the Iced Shaken Espresso.
Ruggeri said consumers can expect more, adding "it's definitely not going away."
Year to date, shares of Starbucks are up nearly 5%.
Behind the cold trend, of course, is the ice.
Regular cubed ice may be a thing of the past as Starbucks looks to move to nugget ice — or smaller, pellet-shaped ice, like that served at Sonic.
"We're in the early journey of our nugget ice," Ruggeri said. The ice is currently being tested at its highest-volume cold beverage stores "to support the capacity of cold."
Testing is going well, per Ruggeri, according to both its employees and customers.
"Early on, it's better for partners, it's easier in terms of overall, it blends faster ... it creates a better experience ... at the same time our customers love it," she said. "The combination of that gives us confidence we'll continue to fuel the cold growth that we see with improvements and advancements."
The company plans to roll out the nugget ice across its stores. It may take some time to implement the new ice entirely, though.
"Eventually, it will be piped into the stores, so [employees] no longer have to carry buckets of ice."
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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