American Consumers Are Thirstier Than Ever

Hydration Generation

Gen Z might not enjoy alcohol as much as older generations, but that doesn’t mean its members aren’t thirsty.

Even though Gen Z drinks roughly 20% less alcohol than millennials on average, the younger generation is making up for its relatively low alcohol consumption by doubling down on fancy coffees, energy drinks, and other specialty beverages. The world’s biggest fast-food chains have taken note, and are doing their best to keep Gen Z properly hydrated.

New Chain Concepts

A handful of major fast food chains are leaning into specialty drinks to help drive revenue growth:

•   McDonald’s (MCD) launched CosMc’s, a spin-off restaurant specializing in drinks.

•   Taco Bell (YUM) recently started selling specialty coffees such as Mexican Chocolate.

•   Jack in the Box (JACK) is one of the first major U.S. fast-food chains to serve boba drinks.

Fast food chains often prefer beverage chains as they require less labor and space, while also producing a higher margin per item.

Drinks Drive Sales

Novelty beverages contribute roughly $1 billion to Starbucks’ (SBUX) annual sales. Other fast-food chains are hoping to replicate this success by offering their own sweet, syrupy concoctions. And the willingness to try new drinks is high among Gen Z, especially compared to other new packaged products.

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