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Canada pursues tea marketing ideas.

Canada pursues tea marketing ideas

The task given to us by the Tea and Coffee Association was to develop a new retail brand of tea.

Our approach was to first analyze those aspects of the market that we anticipated would shape tea's commercial success in the coming years. Our research comprised interviews with key personnel in the North American beverage market and the examination of various private and published findings on the topic. Next, we developed six new tea products, and performed primary research to assess the viability of these concepts.

Trends and Issues

According to Nielsen data, market share of tea and coffee declined from 61.4% to 51.3% between 1980 and 1988. If this trend continues, tea and coffee shares could lose a further 15% of volume in the next ten years.

In 1985, tea consumption represented 33% of the hot beverage market, which in turn represented 29% of the total beverage market. Tea's retail sales index declined by 25% from 1980 to 1989(1). Per capita consumption of tea has also declined, from 1.02 kg in 1980 to 0.22 kg in 1986(2).

Compared to coffee, tea's image is not as dominant in the marketplace due to the fact that the former has a more exciting and visible profile in terms of its "morning pick-me-up" status, blend variety, technological innovations, and specialty niches (i.e., Cappuccino, Espresso). In addition, according to Gordon Reynolds, executive director of the Canadian Tea Council, "the image of tea with young people unfortunately at this time is that it is old and boring and sedentary and staid, and it's bound up in tradition."(3) Instead, in a consumer study conducted by Chatelaine, tea was described as a calming, soothing, conservative drink(4).

Tea is thus a mature segment of the beverage market, and as such is characterized by stable demand, heavy price competition (and commensurately lower profits) and a near-commodity status with modest brand name loyalty between brands. Although the market has expanded somewhat through herbal and flavored teas, little progress has been made in terms of efforts toward increasing consumption or product innovation.

Thus, when one looks at the market, sales, consumer perceptions, or competitive activity the primary conclusion is that tea's volume is declining and has very few vitalizing dimensions which will mitigate market erosion.

Canada's population is projected to grow slowly (at less than 1% annually) to the year 2000, when it will reach 29 million persons. The declining birth rate is causing this slow growth in population and may result in increased immigration to obtain growth.

The declining birth rate and the increasing number of one-person households will reduce the average size of Canadian households from 2.8 people in 1986 to 2.4 people by 2000. Despite this decreasing family size, the number of families in Canada is increasing. Further, traditional families are changing, in that two wage earners per family is now the norm.

Canada's population is also aging. Seniors will represent 13.5% of the population in 2000, up from 10.7% in 1986, and all of the population growth is projected to occur within the 40 + age groups. Consequently, the median age in Canada will increase from 32 in 1988 to 37 in 2000.

Although the proportion of teenagers as a percent of the total population may be declining, their economic power is increasing. Not only do teens influence a wide range of purchase decisions, but more and more household shopping is being delegated down to them.

Another major trend in the nature of the Canadian population is the steady increase of women in the labor force. In 1984, the female participation rate in Canada reached 54.3%, and it is projected to reach 73% by 2000.

Finally, with regard to Canada's cultural mix, the traditionally strong representation from Europe is diminishing. Recent immigration patterns have shifted to include a greater variety of cultures; in particular, Asians(5). The changing ethnic mix in Canada has contributed to the current popularity of international/cosmopolitan/ethnic products.

The implications of these demographic shifts for the tea market are: softening in the youth segment, seniors will influence market trends, and cultural variety may need to be addressed more directly.


Convenience is one of the dominant trends in the grocery market. The single serving segment (tetra paks, cans, and other 250 ml packaging) has almost doubled since 1980. A.C. Nielsen's September 1988 reports shows that single-serving fruit juices and soft drinks were growing by 27 and 10% respectively, while growth of non-single serving sizes of the same products was only 12 and 5% respectively. Notably, single serving sizes have not cannibalized their larger counterparts, but instead have caused the entire market to grow. Duncan Greenshields believes a major reason for the rising success of cold drinks is the fact that they have capitalized on the "public's love affair with single serving containers."(6)

The average number of people in Canadian households is declining and two-wage earner couples are now the norm. These factors, coupled with a heightened importance of leisure time, combine to increase the importance of convenience, smaller servings, and ease of preparation in food products. In fact, tetra paks have contributed to growth in the fruit juice and fruit drink segments because of the convenience of being able to throw them into lunch buckets - complete with straws!(7) Similarly, as the population ages, and as the elderly find themselves on their own, demand for smaller, easy-to-prepare servings will increase.

Tea's packaging and preparation have remained largely unchanged for centuries. Two exceptions do stand out. In Italy, the convenience niche is being exploited with the introduction of a liquid tea beverage available in a 200ml brick pack and a 1L carton. In the U.S., a recent market entry is extra-large tea bags, which make 8 to 10 cups of iced or hot tea at a time.

In light of the evidence of the popularity of single-serving and ready-to-serve packaging, a possible growth opportunity for tea appears to exist for the manufacturer who can exploit the market's desire for enhanced convenience in food delivery.

Shift From Hot to Cold

ISL has documented the decline in consumption of hot drinks in all age categories (3%) with the sharpest decreases (6%) in the 20-29 and 40-59 age groups(8). The younger generation (10-20 years) in particular is `turning cold,' as 93% of the beverages they consumed in 1988 were cold, compared to 86% in 1985(9). It is important to note that this segment represents tomorrow's consumer, one who is not being initiated to the pleasures of tea at an early age. The declining interest of the youth segment represents a serious problem for the tea industry. Failure to capture a core of today's youth will ensure the continued decline of the tea market as maturing youth retain their attachment to substitute beverages.

In the cold drink market, the most intense competition comes from flavored soft drinks and ready-to-serve juices and drinks, consumption of which increased by 50% and 77% respectively(10). The recent explosion of `all-fruit' sodas, featuring blends of carbonated water with 70% fruit juice, represent part of the broad consumer movement to natural/healthy ingredients. Tea's image and "natural" character put it in a good position to take advantage of this trend. Canadian Grocer's 1989 survey pointed to a 10% overall increase in carbonated beverages, made up of juices, soft drinks, and bottled waters. In fact, bottled water is the fastest-growing segment in the beverage industry, with Canadian sales up over 25% in the last three years(11). It has been estimated that almost one in five Canadians have tried bottle water, and one per cent drink it on a daily basis. (1) Canadian Grocer. November, 1989. pp. 19-23. (2) "Food Expenditure Patterns of Canadian Consumers." Food Market Commentary. 1986. Vol. 11:3. pp. 42-69. (3) "Sales of Coffee and Tea Cooling Off." Marina Strauss. The Globe and Mail. December 12, 1988. (4) "Beverages," The Chatelaine Research Department, Maclean Hunter Ltd., 1986. pp. 62-63. (5) All of the information in the previous section was obtained from "Tomorrow's Customers," 22nd Edition, Clarkson Gordon/Woods Gordon. (6) "Sales of Coffee and Tea Cooling Off." Marina Strauss. The Globe and Mail. December 12, 1988. (7) "The New Wave of Bottled Waters," James Careless, Canadian Grocer, November, 1989, pp. 24. (8) "Hot Drinks VS. Cold Drinks," ISL International Surveys Ltd. April, 1989. (9) Ibid. (10) "The New Wave of Bottled Waters" James Careless, Canadian Grocer, November 1989 pp. 19-23. (11) Ibid, pp. 21.
COPYRIGHT 1990 Lockwood Trade Journal Co., Inc.
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Publication:Tea & Coffee Trade Journal
Date:Aug 1, 1990
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