CPG Playbook   //   June 25, 2024

Why craft brands are warming up to decaffeinated coffee

Specialty roasters are tackling decaffeinated coffee to fill a growing gap.

The decaf caffeine craft movement is growing, with a number of companies trying to elevate the long-ignored option. One recent milestone exemplifies this: Houston-based coffee maker Weihong Zhang of BlendIn Coffee Club won the U.S. Brewers Cup — one of the most prestigious prizes in the industry — for his decaf pour-over. It marked the first time in the competition’s 20-year history that a decaf brew won the top prize.

Overall, demand for decaf is strong across the country, with about 26 million Americans drinking it daily.

To be sure, decaf only drives a small portion of sales for many coffee brands. But, some companies like Explorer Cold Brew and Verve say they are seeing an increase in sales in the category. They attribute this to a few factors, but a common thread is that many people are trying to be more conscious of how much caffeine they put in their bodies as part of an increased focus on health and wellness. And, as coffee roasters experiment with different brewing techniques and flavor profiles, there’s been a greater variety of innovations in the category.

The boom also comes amid a threat to the conventional decaf coffee many Americans currently drink. In March, the FDA received a call from advocacy groups to ban a popular European decaf brewing method that uses a chemical called methylene chloride, which OSHA considers a potential carcinogen. The European method is used by many popular coffee brands, including Starbucks, and is considered safe by the National Coffee Association (NCA).

Still, many specialty coffee roasters, including chains like Peet’s, use another method known as the Swiss Water Process — which omits methylene chloride and removes 99.9% of caffeine through water and heat — to decaffeinate their beans. According to these companies, using the method requires heavier investment but is a long-term growth bet as more people look for healthier alternatives to their favorite decaf blends.

In a statement to Modern Retail, National Coffee Association president and CEO William Murray said the trade association’s research shows that coffee consumption is up across the board. “While it is not possible to know exactly what impacts decaf coffee’s popularity, growing interest in coffee’s health benefits may play a role,” Murray said.

As for the proposed restrictions on European Method decaf, Murray said they are “completely unjustified and would significantly decrease decaf availability in the United States, depriving consumers for no reason of a safe product that is associated with health benefits.”  

‘The future of decaf coffee is craft’

Coffee brands that have invested in premium decaf coffee are seeing growing demand across various demographics.

This week, the New York-based Explorer Cold Brew brand launched a new line of low-caffeine ready-to-drink cold brew due to rising interest and customer requests. One of the new products is a canned version of its “half caf” cold brew, which contains 65 milligrams of caffeine. The other ready-to-drink SKU is a 99.9% caffeine-free cold brew. Like other specialty roasters, Explorer carefully sourced premium beans and used the Swiss Water Process.

Explorer Cold Brew founder Cason Crane said the company has positioned itself as a “caffeine-conscious” brand since its founding in 2020. “The decaf customer is ever-changing,” he said. 

“When I first started Explorer Cold Brew, the decaf customer was much narrower than it has shifted into over the last four years,” Crane said. In the beginning, the company’s decaf customers “skewed female and slightly older,” in addition to a strong base of pregnant moms. 

Over the last few years, Crane said, “I’ve noticed a rise in fitness and wellness-oriented people who are more conscious of what they’re putting into their bodies and actively trying to manage — rather than just solely decrease — their caffeine intake.” This has been trending as people settle back into their post-Covid routines.

“Over the next few years, I anticipate a continuation of avid coffee drinkers reaching for half-caff and decaf regularly to continue their daily habit without increasing their caffeine intake,” Crane said. 

Coffee lovers seeking better-for-you decaf

Explorer Cold Brew’s sales have grown significantly this year, thanks to its bet on low caffeine. Since its launch, Explorer has generated over $5 million in sales at an annual 81% year-over-year growth rate. “We’ve also witnessed a 129% growth rate in our decaffeinated products year-over-year,” Crane said. “Decaf is our top seller, with a very strong interest from retailers as well as online.” 

Colby Barr, CEO of craft coffee roaster Verve, said the company started out with its Vancouver decaffeinated beans back when Verve launched in 2007. Over the last few years, Verve expanded its decaf offerings to include ready-to-drink nitro cold brew and single-serve instant coffee packs.

“[Decaf] has always been about 5% of sales, including on DTC,” Barr said. But demand has picked up for Verve’s decaf business in the last year in particular. “We’ve grown decaf sales 15% year over year,” Barr said. “Decaf is also 12% of instant coffee sales.” He explained that this is usually because many customers prefer the ease of making a single instant cup instead of committing to a whole bean bag.

Barr said that when it comes to decaffeinated craft coffee, Verve’s customers include both people who don’t drink caffeinated coffee and those who love the taste of coffee but want to reduce their caffeine intake.

Indeed, specialty roasters want to position their decaf offerings as a better-for-you substitute for drinkers who still want a premium brewing experience. 

“Decaf options have long had a bad reputation, largely because the quality has been bad,” Explorer’s Crane said. “I view the caffeine-conscious movement as very similar to the early days of the no- and low-ABV movement a few years ago.”