2013 Beverage Report, Part 5: Iced Tea

The three tiers of a growing category

OAK BROOK, Ill. -- Those little bags of tea that need to steep in water and then be refrigerated in pitchers? Their days may be numbered. Instead, "ready-to-drink tea has accounted for virtually all of the growth in the U.S. tea market" since 2006, according to Beverage Marketing Group data. And RTD tea "now accounts for over 30% of the total volume," up from 24% in 2006.

The boom, including an 8.6% increase in RTD tea unit sales in c-stores in 2012, according to SymphonyIRI Group, is two-pronged: 1.) a reflection of consumer demand for convenience, and 2.) the increasing focus on health and wellness.

Major suppliers have noticed and reacted by creating full complements of brands; call them the "three tiers of tea." As two major suppliers--Coca-Cola Co. and Nestle Waters North America--solidified their iced-tea lineups in 2012, their three-tiered products will receive strong pushes from sales representatives and heavy marketing and advertising campaigns designed to draw their relevant consumers.

For Coca-Cola, its triumvirate includes Honest Tea on the high end, Gold Peak in the premium-to-popular range, and an expanded Fuze product line in the popular-to-value play.

"Tea is a huge platform," Mel Landis, chief customer officer at Coca-Cola Refreshments, Atlanta, told CSP Daily News. "Over the last five to seven years, we've been in the [tea] category but probably not in the way we would have liked to have participated, given the growth. So you're going to see a hard push this year--as we've ended our Nestea relationship--a hard push around Fuze, Gold Peak and Honest Tea.

"We want to dive into tea, which is an untapped category for us."

Nestea, meanwhile, is now in the hands of Nestle Waters North America, which, after years as a water-only company, has a trio of iced tea brands of its own.

"We're trying to do the same thing that we did in water. We've created [three tiers]," said Jim Donker, director of national accounts at Nestle Waters, Stamford, Conn. "We've got the mainstream tier, where Nestea's going to play. Stepping up, we're creating a premium category, where Tradewinds will play. And in the specialty category, we've got Sweet Leaf."

Retailers can expect promotions around all three of those brands "as we attack the category and build our brands and our business for the long term," Donker said.

Between the refocused brands and the growth in the category, retailers may want to review their tea sets. To that end, Donker recommends retailers consider dedicating a full door to tea.

"With the predicted growth of over $1 billion in the next four years, it's important to make sure they are capturing this trend," he said. "By doing so, they will be able to offer their customers the variety they are looking for, particularly in the premium (fresh-brewed teas) and specialty teas that are providing some of the greatest growth."

CSP's complete 2013 Beverage Report.

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