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Black is back, green means go, and white is looking bright. Tea just keeps getting stronger as new varieties and specialty brands pile up, links to health keep surfacing, and convenient options for consumption multiply. With RTD leading the charge, tea is becoming the beverage of choice for many, and deserves premium attention at retail.
While many consumables banner their good-for-you qualities, few can back up their claims from a scientific perspective as well as tea can. With a sophisticated audience of upscale, educated consumers, the specialty tea segment in particular not only attracts consumers who are concerned about what they eat and drink, but also offers products that verifiably help contribute to a healthy lifestyle.
Tea is on a path of growth akin to another beverage category now central to many grocers: wine.
The drinking of the green
"The tea market is not too different from how the wine market was 15 years ago," observes Seth Goldman, president and "TEO" of Bethesda, Md.-based Honest Tea. "First there was just red and white; now they're far more sophisticated. Today tea consumers understand that green teas have a lighter color and taste profile, and are well known for their antioxidant properties. Therefore, it's not surprising that the five best-selling varieties of bottled tea in the natural foods industry are all green teas."
While green tea has been a staple in the Asian diet for five millennia, and is widely credited with extending the life expectancy rates there, it was AriZona that first made the green tea craze popular in the United States. Before then, green tea was known to be loaded with antioxidants and recognized for its health benefits -- but was always brewed or steeped, served hot, and didn't taste all that great.
Now green's just the tip of the iceberg. The variety available in ready-to-drink, bagged, and boxed form is exploding. But with all the choices before them, ranging from traditional black to "new wave" varieties (although there's nothing "new" about them) such as green, oolong, and the latest hot button, white, what consumers want to know is whether there's really much difference between teas.
"They're all derived from the same plant," explains Brian Keating, founder of Seattle-based Sage Group International, LLC, publisher of Specialty Tea Is "Hot" Report, 6th Edition. "Post-harvest processing -- oxidation, and the part of the plant picked for processing -- determines which type of tea shall be produced. There is some disagreement in the specialty tea industry as to what really constitutes white tea. Black tea is fully oxidized, white tea and green teas, minimally. Oolong is partially oxidized."
Lance Collins, president of Englewood Cliffs, N.J.-based Fuze Beverage, LLC, maker of several varieties of RTD tea and other good-for-you beverages, tries to put some perspective on the relevance of varieties. "In nature, flavor nuances often come with maturation time, the specific part of the plant used, and how the plant is handled in harvest," he says. "White tea is picked only in the early spring, and it comes from the very tips of the tea leaves or buds, whereas green and oolong tea come from the upper leaves and are picked later in the season. Oolong is picked later, and black is the latest picked. Green and white teas also contain the highest amount of antioxidants of all teas, because of their early harvesting and the manner in which they're converted for consumption. Antioxidants are what make tea so helpful in fighting the ravages of stress and age on the body."
Rye Brook, N.Y.-based Snapple, for one, seems to be particularly excited about the potential of white tea. The brand, a division of Plano, Texas-based Cadbury Schweppes Americas Beverages, recently rolled out a line of white tea beverages with fruit essences, the first products to support the brand's consumer education initiative regarding the health benefits of tea. "The white tea category is poised to be an important sector for Snapple, and the tea category, as more and more consumers seek beverages with health benefits," noted Snapple v.p. Holly Mensch. "As the market leader in the premium tea and juice drink category, we saw a unique opportunity to grow the tea category by educating and exciting consumers about our new Snapple White Teas." Brand manager Vinay Sharma sees the new items as appealing to those consumers "who want it all, and want something out of it, too," in terms of great taste and superior nutrition. He also lauds the new white tea beverages as eminently "chuggable."
While there may be subtle taste and nutrition variances among the varieties, does that mean anything to the average consumer? If not now, perhaps sooner than we think, say some industry players.
"Devotees of tea seem to be aware of the differences," says Francie Patton, marketing manager of Lake Success, N.Y.-based AriZona Beverages. "The average consumer may not be, but they are becoming more interested in what they put into their bodies."
"The tea category continues to be very hot, so people are learning more about tea, especially when it comes to tea's many health benefits," adds John Clarkson, brand manager at Englewood Cliffs-based Pepsi-Lipton Tea Partnership. "In the current marketplace, products that deliver taste and refreshment, while also contributing to a healthy, active lifestyle by providing 'health attributes' such as antioxidants, really drive repeat purchase."
According to Clarkson, a combination of health-and-wellness trends and overall innovation is driving sales in the RTD segment. "Consumers are making healthier choices when it comes to nutrition and hydration, and therefore recognize tea as a natural complement to their health regimen," he says. "For an active lifestyle, RTD tea is a convenient source of replenishment."
A longtime player in both in the bagged and bottled markets, Lipton later this year will launch a new line of premium "pyramid" teas featuring pyramid-shaped tea bags. Lipton will support the new bagged premium teas with an integrated marketing effort.
Tea expert Keating thinks the wine industry analogy is an apt one for tea's current trajectory.
"Like the wine industry in the 1960s through the '80s, it's incumbent on tea marketers to try and educate consumers about specific varietals, regions, origins, and the special attributes or benefits of each," he explains. "It's a very long process."
Without question, most consumers view RTD tea as a healthy alternative to many drinks on the market today, including carbonated beverages. That perception is fueled by abounding media coverage on the antioxidant qualities of the product.
Keating feels that the move underway by soft drink companies to reposition their portfolios and highlight the attributes of non-CSD offerings (bottled water, energy drinks, fruit beverages, etc.) has served to heighten consumer awareness overall. "It's all driving tea," he says. "Factor in 76 million baby boomers facing midlife health and lifestyle decisions, and tea wins again."
Most RTD brands today have followed the lead of the rest of the beverage categories by heading into the low-calorie segment. Many offer artificial sweeteners. Others, like Honest Tea, merely offer lower amounts of natural sugar and no high-fructose corn syrup (which is widely used to sweeten soft drinks). That, says Goldman, gives Honest Tea a lower-calorie option while maintaining the healthy profile consumers are looking for.
While many still consider tea to be a hot beverage either brewed or steeped and then sipped from a cup, current data suggests that the category has been transformed into one that mirrors the soft drink and bottled water categories, characterized by packaged product primarily sold in multipacks of single-serve units. Indeed, according to ACNielsen, RTD tea sales outpace bagged tea by 63 percent, making RTD tea the primary driver for tea sales in the grocery channel.
For the 52-week period ending Feb. 25, RTD tea accounted for $528.7 billion in sales at supermarkets with $2 million or more in annual sales. The entire tea category, including bagged tea, packaged tea, and instant tea, generated $1.8 billion in supermarket sales over that same period.
Perhaps even more significantly, RTD tea sales have grown by double digits for the past two years, and have been the prime driver of the overall tea category's 8.8 percent growth.
"Convenience is the main reason why RTD tea is performing better than bagged tea," explains Gary Hemphill, v.p. information services for New York-based Beverage Marketing Corp. "Many time-crunched consumers prefer the convenience of RTD tea over bagged or loose tea."
Multipacks have made RTD tea an option for family purchases in supermarkets. Indeed, since Coca-Cola (Nestea) and Pepsi-Lipton entered the category, two-liter bottles and multipacks have become standard operating procedure.
"We're selling a lot of 12-packs," says Goldman. "AriZona is definitely interested in multis these days."
As with any center store category, effective merchandising is key in growing the tea business. "Retailers should attempt to merchandise the products at multiple locations in the store," advises Beverage Marketing's Hemphill. "For example, take-home packages in the soft drink aisle and cold single-serve merchandisers at checkout, just to name a couple of possibilities. In-store sampling is also an effective means of encouraging trial, especially with new flavors."
Sage Group's Keating agrees that tempting consumers to try new flavors and varieties is a crucial in driving future growth. "Demos," he advises. "Somehow the premium brands seem to undervalue the good old-fashioned American store demonstration -- product sampling. Today they seem to put most store-level promotion dollars into coupons, point-of-purchase displays, and similar tools. Bottled and bagged teas are foods, and manufacturers sometimes forget this core fact."
According to Keating, the biggest per capita RTD market in the world, Japan, effectively uses taste-sampling ops to grow the category. "And they do it quite successfully," he adds. "It's an ongoing environment, with plenty of free store-level trial."
Keating contends that share of stomach -- and, thereafter, mind and dollars -- is more often than not won by trial near the shelf, and not through static media promotion.