Cold brew coffee isn't a fad, it's a big part of Starbucks future

  • Starbucks partnered with Joyride Coffee Distributors to bring draft cold brew coffee to its foodservice accounts at hospitals, bookstores, college and university campuses and offices.
  • Cold brew is one of the fastest growing products on Starbucks' menu, and can cost as much as 20 percent more than Starbucks' regular iced coffee.
  • Joyride creates and delivers non-alcoholic beverage kegs to commercial locations in New York, San Francisco, Los Angeles, San Diego and Boston.
  • Its kegs can also be used for other cold beverages such as tea and kombucha.

Starbucks is placing an even bigger bet on one of its fastest growing products: cold brew coffee.

The Seattle-based cafe chain will partner with Joyride Coffee Distributors to bring draft cold brew coffee to Starbucks' foodservice accounts at hospitals, bookstores, college and university campuses and offices.

Joyride, which was founded in 2011 by brothers David, Noah and Adam Belanich, creates and delivers non-alcoholic beverage kegs to commercial locations in New York, San Francisco, Los Angeles, San Diego and Boston.

In this deal with Starbucks, Joyride will make the cold brew using Starbucks' beans and package it into its kegs, which ensure the quality and freshness of the coffee, and deliver the kegs to the company's foodservice accounts. The company did not disclose the financial details of this deal with Starbucks.

"Cold brew coffee is not a fad," CEO David Belanich told CNBC. "And Starbucks is actually forward looking enough to see that and seize on it in a big way without compromising their quality and standards."

Cold brew is one of the fastest growing products on Starbucks' menu, the coffee company said during its fourth-quarter earnings conference call in November. The premium coffee beverage can cost as much as 20 percent more than Starbucks' regular iced coffee and features a bolder, richer flavor that is less acidic.

The coffee giant sells two types of cold brew in its cafes, regular and nitro. Nitro cold brew is cold brew coffee that has been infused with nitrogen to give it a more velvety texture.

While regular cold brew is available nationwide, nitro cold brew is available in about 1,500 stores. This is because nitro cold brew is poured from a tap, which can take up quite a bit of space in a cafe, especially if it wasn't built to contain a keg.

When Starbucks first added nitro to its menu in 2015, sales in the cafes that offered it jumped 25 percent, according to Forbes.

That's why expanding to these new locations is so important.

This is, perhaps, why the company said late last year that it expected cold coffee beverages to grow to nearly half of its beverage revenue in the next five years. At the time, Starbucks forecast that by 2021 nearly 50 percent of its beverage mix would be in cold, up from 35 percent in 2013.

Starbucks' partnership with Joyride isn't just about the cold brew product, but the kegs. Joyride uses its kegs to package tea, kombucha and seltzer. As Starbucks continues to grow its cold beverage product line, having a platform to dispense it can only be a boon for the company.