Those familiar with the ‘lipstick index’, a theory that sales of inexpensive luxuries, such as lipstick, increase during economic downturns as consumers buy more affordable treats to lift their mood rather than splashing out on bigger ticket items, will know that it is now being referred to as the ‘matcha index’ in certain circles. Such is the popularity of the Instagram-friendly green tea drink among Gen Z despite its premium price tag; it’s what people are putting between their lips rather than on them that has come to signify the current consumer mood.
In fact, sales of matcha drinks in UK cafés more than doubled in June and July this summer compared with last year, according to data from payments company Square, making up 4% of all drinks sold in its sample of cafés, equal to 1.6 million matchas and more than £7m in sales. Brands such as Blank Street have built huge loyal followings on the back of its popularity and the QSR sector has started to take note. Burgeoning healthy eating brand The Salad Project, for example, recently opened a site in Notting Hill that has its own dedicated matcha bar, as the group looks to capitalise on the rising popularity of the green tea-based beverage. For The Salad Project, the future is green, and not just for the colour of its salads.
Thanks to its purported health benefits, serving matcha alongside a salad offer has obvious synergies, but for many QSR brands targeting a Gen Z demographic - whether they be Nando’s, Wingstop, KFC or McDonald’s - putting matcha on the menu makes less sense. Instead, some brands are looking at how they can create equally appealing drinks offers to entice people through their doors.
The most recent example of this is Kwench, the drinks brand from KFC. Unveiled at the start of the year, the Kwench range of drinks includes the Caramel Krunch Shake, Iced Koffee Krunch in Iced Caramel, Iced Mocha and Iced Latte options, sparkling raspberry; and hot honey mango lemonades; and Cherry Poppin’ and Watermelon Poppin’ Refreshers. Initially available at selected restaurants, KFC has now upped its game with the opening of a standalone Kwench bar at its new restaurant in Liverpool in what it describes as a ‘world first’.
The move has echoes of what KFC’s fast food rival McDonald’s attempted in the US with its CosMc’s brand. Launched in December 2023, it was created as a snack and coffee/drink concept rather than a fast-food restaurant serving a range of drinks including a sour cherry energy burst, chai frappe burst, churro frappe, s’mores cold brew, blueberry ginger boost, and an island pick-me-up punch.
KFC has made no bones about what it is trying to do with Kwench, saying that it was created specifically to target its Gen Z customers. KFC believes that drinks choice is a key factor among Gen Z when deciding which restaurant brand to visit and has made Kwench appealing to that specific cohort with ‘craveable, visually stunning flavours’ and packaging that it hopes will be shared widely across social media.
the rise of bubble tea and matcha has taught us anything it’s that drinks mean big business
It’s a bold move, one that shows how important Gen Z customers are to brands but also the lengths required to capture their attention. A recent insight report from PwC described what it called ‘The Gen Z paradox’ with the age group spending less but expecting more. In it is says that Gen Z has become a riddle that many retailers can’t quite crack.
‘Their arrival in the consumer marketplace coincided with the explosion of smartphones and social media — and with economic headwinds like inflation, rising interest rates, a tough job market and the resumption of student loan payments,’ it says. ‘The result is a generation defined by contradictions. Gen Z is digitally native yet drawn back to physical stores. Fiercely brand aware, yet ready to abandon brands for private labels. Cautious with money, yet quick to spend when the purchase carries emotional weight.’
What the creation of CosMc’s and Kwench highlights, however, is that when it comes to targeting Gen Z brands often seem keen to take an all or nothing approach. Rather than just expand its existing drinks offer at its restaurants, McDonald’s went all out with a new brand, and Kwench is moving along similar lines. There is a cautionary take here: despite being initially well received, McDonald’s called time on CosMc’s just two years later, instead introducing some of the drinks on the menu into existing McDonald’s restaurants.
A look at the current drinks offer of many QSR brands shows a lack of innovation or ideas, with the power brands of Sprite, Fanta, Coca-Cola and Pepsi often the only options alongside a smattering of other options. In the UK, McDonald’s has a McCafe ICED brand, but the offer currently comprises just a frozen strawberry lemonade, ice latte, caramel iced frappe, and mango and pineapple smoothie - it has introduced a Sakura X Sprite drink as part of its World Heist menu - and it’s the same story elsewhere. If the company brought to bear even a fraction of the innovation at CosMc’s to its UK restaurants it might make Gen Z take a bit more notice.
Focusing on drinks rather than food might sound misplaced, especially given the challenges around forthcoming regulation on the promotion of certain foods and drinks that are high in fat, salt or sugar (HFSS) that will impact on free refills of such drinks, but when dealing with such a fickle customer drinks innovation could be an easy win for brands. Many in the industry consider Five Guys’ use of the Coca-Cola Freestyle machine, which offers more than 100 drink options and allows customers you to mix and match various soda flavours, as a key part of its success in targeting a Gen Z demographic looking for that more expensive yet still inexpensive luxury - by contrast the drinks offer at rivals such as Burger King and McDonald’s looks mean and unimaginative.
Does this mean that restaurant groups need to create whole new brands and drinks-led concepts to get in front of a younger audience. I don’t think so. But if the rise of bubble tea and matcha has taught us anything it’s that drinks mean big business, and QSR restaurants need to look more closely at how their drink offers stack up.