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Ready to drink teas and new alliances: the race is on for market share.

Iced tea--sweetened or unsweetened, with or without lemon consumers drink it. Whether continuing an iced tea tradition learned as a child or embracing it as a "new" beverage alternative to soft drinks, consumers are spending millions buying, brewing and drinking it. The dollar value of tea as a beverage category has recently increased with the emergence of ready to drink (RTD) tea and the partnerships between major players in bringing this new product to a thirsty consuming public.

Major categories within ready to drink products include soft drinks, juices, tea and bottled water. There is fierce competition for market shares within this category because consumers can only drink so many RTD products in one day. Of these four categories, many industry specialists predict that RTD teas will show the most dynamic growth in 1992 and 1993.

Sales of carbonated soft drinks are flat or showing minimal growth at best, juice and bottled water categories are growing at a steady pace but RTD tea is showing consistent double digit volume growth. It is estimated that the current dollar volume in the category is over 400 million dollars and shows no sign of slowing down. Many nationally known tea companies are entering their products into the RTD tea arena and have formed alliances with major soft drink or bottled water companies to further insure product success. These alliances make good business sense.

Soft drink and bottled water manufacturers have production facilities and distribution systems already in place, marketing departments and advertising agencies savvy in what it takes to sell ready to drink products, trained sales staffs, and equally important, existing relationships with retailers to ensure retail shelf space and prominent positioning.

Although an average shopper may not notice what brands are positioned in prominent places on shelves or how much room is allotted to each manufacturer, people in the business regard shelf space and positioning as make or break factors in introducing new products. With all these factors in mind, alliances between tea companies and soft drink and bottled water manufacturers make perfect sense.

Pepsi/Lipton

The Pepsi/Lipton Tea Partnership is one such alliance. These two giants combined resources in January 1992, formed a separate company and in early May began producing, selling and distributing two new Lipton ready to drink product lines.

Richard Kundrat, vice president of marketing & sales for the Pepsi/Lipton Tea Partnership, said that the alliance was formed because Lipton considers Pepsi to have the "best production, sales and distribution network." Lipton sees their new RTD tea products as revolutionizing the U.S. iced tea business and further strengthening Lipton's leadership position in tea. According to Neilson 1992, Lipton already commands over a 45% share of total tea sales.

The two new RTD Lipton tea products are Lipton Original and Lipton Brisk and are aimed at different consumer segments. According to Kundrat, "Lipton Original is aimed at an audience that enjoys a stronger tea taste in their tea beverage and it is a real brewed product. It is as close to the way you prepare tea at home as tea you can get on a commercial basis. Brisk is positioned as more of a tea beverage, The consumer who drinks Brisk may never have gone to the trouble to prepare fresh brewed tea at home and may prefer a tea beverage as opposed to a fresh brewed product. It is a lemon sweetened tea product."

Brisk is available nationally in 12 ounce cans. Lipton Original is available in 16 ounce glass bottles in key market areas and expects to be national by the first quarter of next year. It is available in five varieties, sweetened with lemon, sweetened with peach, sweetened with raspberry, sweetened no lemon, unsweetened no lemon.

Kundrat feels that Lipton Original will be a hit with consumers not only because of its taste but because it is brewed from tea leaves, not powder and it is also preservative free. "The consumer is certainly looking for alternatives to carbonated beverages and tea is not carbonated and therefore will fill that position. With the growing lifestyle of just being busier, RTD 100% natural tea, brewed from tea leaves the way you would do it at home in a convenient form certainly fits the trend of 'I want the best, I want it now, and I don't want to work for it.' Tea in general, from the research we have, is showing more awareness from the consumer than it has had in a long time."

Coca Cola /Nestle

Other tea companies believe that consumers are more aware of tea than they have been in a long time and to that end, Nestle, in a relationship with Coca Cola, has formed the Coca Cola/Nestle Refreshment Company.

Susan Storey, public affairs director for this new company says it "was a natural alliance, with the expertise and the trademark of a Nestle with its Nestea trademark and the marketing and the distribution system of the Coca Cola Company. Distribution is very important, especially in grocery stores where shelf space is a premium. If a system already exists and those relationships already exist, of course it would be easier."

According to Storey, the public has been very receptive to their RTD tea products. "Sales are doing very well; we launched the product in the U.S. in January of this year and we are currently in a little over 80% of the U.S. and expect to be in all of the U.S. by the first quarter of next year."

The Coca Cola/Nestle Refreshment Company has two products, Nestea sweetened with natural lemon flavor and diet Nestea with natural lemon flavor available in 12 ounce cans and in 16 ounce wide mouth glass bottles. In addition to the cans and bottles, Nestea is available in refrigerated cartons (as in milk cartons) in the refrigerated sections of grocery stores and convenience stores. The tea is made from a brewed product but then it is taken back down to a tea powder and according to Storey, it is preservative free.

Nestea has also introduced a new RTD tea, Nestea with natural Raspberry flavor that is available in New York, Philadelphia,and Pittsburg and will be rolled out in further markets next year.

Celestial Seasonings/Perrier

A tea company known for its decidedly "celestial" approach to tea products and a company who is synonymous with bottled water seems like a natural alliance. According to Dave Robertson, Celestial Seasonings marketing manager for Ready To Drink Products, the two companies concern for healthy, natural refreshments is what formed the basis for the relationship. "One of the reasons for the partnership between Celestial and Perrier is we feel that Perrier shares our desire for 100% natural products. The teas are made with pure spring water from their domestic springs and it is not carbonated.

The RTD teas in Celestial's lineup are Lemon Zinger, Cranberry Cove, Raspberry Zinger and ice Box Tea. The teas are 100% natural, preservative free and with the exception of Ice Box Tea, caffeine free. The products will be available in 16 ounce glass bottles available in single serve and four pack. It will not be available in cans.

According to Robertson, the teas will "cut across a lot of demographics. The consumer who will drink this product is someone who wants healthy, natural alternatives. Someone who is fired of all the carbonation and artificial ingredients in soft drinks and is finding that there are not enough natural, healthy, and still flavorful choices out there."

Another advantage to Celestial's RTD tea products is the herb tea versions give parents a selection of 100% natural, caffeine products to offer their children.

The product will be available in the San Francisco and Sacramento areas in the next two months and there is a possibility of it going a little more broadly on the west coast. ucts are available as a result of recent alliances between tea companies and other RTD beverages. Redco with its Red Rose and Salada RTD teas have been around a while and according to Gerry Doutre, president of Redco, a privately owned company, "If we're not the first, we're around the first."

Doutre's company has been selling RTD teas for the better part of two decades. It comes in a varied assortment of containers and targets food service as well as retail. Doutre's long term involvement in sales of RTD tea has given him unique insights into the growth of the category.

"There has been an awful lot of publicity about ready to drink tea in the last year which is automatically attracting all kinds of new people into the market beyond those who are already established, some large and some very small. I will expect that over time there will be a fairly significant shakeout of what brands actually survive and are considered to be commercially successful."

In a saturated ready to drink market, a new product is as valuable as gold and taste alone will not determine the leaders in this category. With ready to drink tea, the taste has to be desirable to the consumer but distribution is important, the advertising and marketing money is crucial, the product's positioning in retailer's shelf space is critical. All of these factors will combine to determine success or failure of the new products. Which ones will emerge victorious? Only time and revenue generated will tell.

Shea Sturdivant is a consultant and writer. You can contact her c/o GROUNDS FOR DISCUSSION, 717 Pratt Avenue, P. 0. Box 100061, Huntsville, AL 35801-6210, TEL/Fax: (205)539-5237.
COPYRIGHT 1992 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Sturdivant, Shea
Publication:Tea & Coffee Trade Journal
Article Type:Column
Date:Oct 1, 1992
Words:1596
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