The story of Snapple.
It was flattering to receive your invitation to speak at this world-class meeting of industry experts.I was also gratified to learn so many people in the tea industry are intrigued by the story behind Snapple and its all-natural ready-to-drink iced teas, fruit drinks, juices, sodas and seltzers.
But, fresh as our flavors are, the Snapple story itself is really a very old story..a classic American success story. The facts are simple. Snapple was started 22 years ago by myself and two close friends.
We did not have any real experience in the beverage industry or a huge amount of capital behind us, or any detailed master plan before us, and we certainly never thought of our business as having national or even international potential!
What we did have was: A belief that people wanted something new and natural in beverages ... A lot of trust in each other as partners, and confidence that any entrepreneur who developed a product people really liked would be well rewarded.
Again, those are all the ingredients of a traditional American success story. Of course, we never dreamed our enterprise could have the momentum to go beyond geographic and cultural barriers. Yet, thanks in good part to iced tea, it seems that we do have an opportunity to "Snapple-ize" the world.
So Snapple is very much a tea success story as well.
While Snapple began with fruit drinks, in the last seven years, tea has been a major factor in our success.
We at Snapple were the first to realize that American consumers would eagerly buy ready-to-drink iced tea if it was even better than the iced tea they brewed at home. We were the first to realize that iced tea could be a year-round favorite -- not just a seasonal drink for hot weather. We were the first to realize that all-natural fruit-flavored iced teas had the potential to lure away loyal cola drinkers. And we think that iced tea has enormous potential in markets worldwide. So we are indeed a tea success story.
Now, as you well know, tea throughout history has been one of the world's most popular drinks. As you also know, there are many other beverages out there competing for their share of the marketplace. An example of this battle is in the United Kingdom, where tea consumption fell almost 10% in the past decade as sales of soft drinks grew. I would suggest that our innovation of readily available all-natural iced tea offers a fabulous opportunity both to defend and to grow tea's territory.
Until recently, of course, iced tea has been thought of as mainly an American beverage -- one brewed at home and served in hot weather only. The development of good tasting ready-to-drink iced tea, though, has made iced tea a year-round favorite in the U.S. More importantly, ready-to-drink iced tea now has tremendous international potential and is already the fastest growing beverage category in the world today.
We at Snapple are proud to have identified that potential a few years back and to contribute to its iced tea business; we have really, I believe, only just begun.
Today, I'd like to look at the reasons why. Here, specifically, are the topics I'll cover:
First, what Snapple is as a company;
Second, how Snapple got into the tea industry and got so lucky.
And third, why we think success will continue both for us and other ready-to-drink iced tea providers around the world.
So, what is Snapple and how did we get into the tea business?
Well, for starters, we're one of America's fastest growing companies. Last year (1993), our first as a truly nationwide competitor in the U.S. -- we sold over 55 million cases of Snapple, or more than one billion, three hundred twenty million (1,320,000,000) bottles. That's well over twice as many as the year before. In fact, our annual volume has more than doubled each year since 1990. Iced teas have been largely responsible for that growth ... now accounting for nearly 50% of our volume.
That tremendous rate of growth reflects a lot of careful preparation -- that's why we call Snapple the "Overnight success story that took over two decades to happen." We started small, very small.
The company was founded in New York City in 1972 by myself, my brother-in-law Hyman Golden, and a childhood friend, Arnold Greenberg, who ran a natural food store in a trend-setting area of Manhattan called the East Village. We got the idea for the company from Arnie's customers, who began asking him for all-natural products, free of artificial ingredients and preservative. Now, as every beginning marketing student is told, the "trend is your friend" -- so we decided to make this trend our friend by starting an all-natural fruit juice company. We built up the company by making independent bottlers and distributors our partners.
Today, more than 30 independent co-packers produce Snapple beverages to our exacting specifications ... And that list is expanding this year to include a handful of offshore bottlers, as well. The products then reach the marketplace through a network that now includes over 300 independent distributors worldwide.
The common thread to this company's success is this: We have consistently defied conventional wisdom. This certainly wasn't intentional when we first started out. We just didn't know a heck of a lot about the beverage business!
At any rate, here are some of the rules we've broken.
First, conventional wisdom says that in the U.S., at least, you need massive TV advertising to establish a brand. But we relied on word of mouth and inexpensive radio advertising to build brand awareness for years before starting a big TV ad campaign.
Building Brand Image
Second, conventional wisdom says that you have to segment your products and build a brand image for each. But we've put our focus on creating one unified brand name capable of encompassing many different products. That means the name "Snapple" spreads like an umbrella over all we do expressing the same image of all-natural freshness, purity, and great taste. This allows us to introduce new flavors quickly and economically in any product category.
We now have a total of 52 flavors under the Snapple name -- including 12 iced teas -- and introduce as many as eight new products a year. Our current tea varieties include lemon, cranberry, mint, orange, peach, raspberry, strawberry and mango. With those flavors there is, quite literally, something for everyone.
I should also note that we bring new flavors to the market with almost no marketing investment -- let alone the hoopla that a typical softdrink company uses for a product launch. We figure our customers can decide for themselves whether or not they like a new flavor. This low-key approach limits our risk and minimizes our costs if a new flavor fizzles.
Finally, conventional wisdom also has a lot to say about tea -- all of which we've ignored since starting our fantastically successful iced tea line in 1987.
Number one, conventional wisdom told us that Americans drink iced tea only during hot weather. We sure proved that wrong! Consumers also enjoy drinking Snapple iced teas in the winter.
Number two, conventional wisdom also told us that cola drinkers and tea drinkers were two entirely separate groups. Wrong again. We found cola drinkers would indeed become tea drinkers if they were given a good reason.
Number three, conventional wisdom told us that the market for ready-to-drink iced tea was too small. Well, yes and no. Yes, there is a definite limit to the market for ready-to-drink iced teas that are loaded with preservatives. But no, there is a huge market for all-natural ready-to-drink iced tea that taste great.
Of course, getting that great taste isn't so easy.
We spent two to three years figuring out how to make ready-to-drink iced tea as good as the homebrewed iced tea that grandmother made. The only way, we decided, was to use hot packing.
People thought we were crazy when we first came on the market with iced tea packed in wide-mouth glass bottles. But these distinctive bottles provide the only way that we could pack tea hot, and hot packing, in turn, provided the only way that we could avoid using preservatives. One taste of the contents, and people stopped laughing at our bottles; they're now as much a trademark of the company as Snapple's logo.
In short, the innovation of a fresh-brewed product without preservatives proved that the market for ready-to-drink iced tea was anything but small. Summing up, we've proved conventional wisdom consistently wrong, at least in the U.S.
Will we be as fortunate worldwide?
More to the point, on this occasion, is this question, "Can real-brewed, all-natural iced tea actually break through cultural barriers and do as well internationally as it does in the U.S.?" In all candor, no one can say for sure.
Our old friend, conventional wisdom, would suggest that, in many countries, ready-to-drink iced tea is too foreign a concept to succeed. For instance, The Wall Street Journal recently ran an article on that great tea-drinking nation, Great Britain, as a market for iced tea.
The article included quotes from two British construction workers who had sampled somebody else's canned iced tea. No doubt it was loaded with preservatives: Said one, "It was bloody awful." Said the other, "It tasted like stewed tea that had been left in the pot." The point is this: Those fellows weren't offering a cultural reaction. They were expressing a chemical reaction. Nobody in any culture likes something that doesn't taste good.
To make iced tea that tastes great, you have to brew it hot and pack it hot and free of preservatives the way we do. Also, and I certainly don't have to tell this audience, you have to use tea of truly superior quality.
It also doesn't hurt to use a little creative flair.
Since good tea complements a wide variety of other flavors, the natural extracts we add to many of our teas can excite the taste buds of even the most jaded consumer. The bottom line is: If the product tastes good, people will drink it.
This brings me to my final point: What Snapple sees for the future, for itself, and the tea industry overall.
Now, please don't misinterpret me. I don't want to stand up here and challenge the conventional wisdom that cultural barriers make iced tea hard to sell. That would be arrogant. It's just that this view isn't for us. After all, defying conventional wisdom is part of our heritage. So, we may prove foolish in venturing overseas ... Or I may be back at this gathering in another couple of years to report on our great success.
Either way, I'd like to share our thinking and show you why we're optimistic about our plan for international expansion.
The first reason I'd cite is the similarity of significant market trends in the U.S. and elsewhere. For instance, just like Americans, Europeans are showing an increasing preference for healthy food and drink and cutting down on consumption of alcoholic beverages. They're also showing a desire to try alternatives to the preservatives and other chemicals in colas. So far as the prospects for iced tea are concerned, these trends are all good news.
Now, apart from these broad trends, our own market research has given us reason for optimism. As you can imagine, we've conducted taste tests all around the world.
And in nation after nation, culture after culture, the results are always the same no matter what the familiarity with tea: There is always at least one Snapple flavor that each individual on any taste panel enjoys.
In that context, you can see the strategic advantage that having a variety of products offers us.
So, in entering a new market, we have an opportunity to start people off on a beverage that's familiar to them, then lead them onto something new. Then, having sampled and enjoyed it, that consumer might be willing to try lemon iced tea.
Then, having enjoyed that, the consumer might decide to go wild and try an exotic flavor like Snapple's Mango Madness or Guava Mania.
In short, our thinking has been this: When people get turned onto just one flavor of Snapple, they'll have real incentive to try others. Yes, that's our theory, and events in the real world have tended to confirm this.
So, turning to another reason for our optimism, let me point to our actual performance in the marketplace. This is only our second year as an international marketer. But, by the end of this year, we will be selling in over 30 countries in Europe, Latin America, Asia, and the Middle East.
And I'm happy to report that our international sales volume is growing significantly, both versus last year and as a percentage of our total volume.
Needless to say, tea has been a major part of this success.
The final reason why we're optimistic is the clear evidence that cultural barriers to iced tea are coming down everywhere.
Just consider these facts: Ready-to-drink iced tea is already Europe's fastest growing soft-drinks segment by far. For this year as a whole, it's expected to grow 10 times faster than any other segment. In total volume, iced tea in Europe is now about two and a half times bigger than sports drinks.
Here are other signs of iced tea's growing popularity abroad: In Italy and France, thirsty consumers are now buying ready-to-drink iced tea in 1.5 liter bottles. Spotting strong potential in the German market, one giant chain there is offering its own house brand of ready-to-drink iced tea. In Switzerland, sales of ready-to-drink iced tea already exceed those of fruit drinks.
As the fastest-growing segment of all iced tea consumption worldwide, ready-to-drink iced tea is expected to be a major factor in iced tea's total growth into the next century. Last year, 2.6 billion liters of iced tea of all types were sold worldwide. Projections show this reaching 6.2 billion liters worldwide by the year 2000.
So, what does all this mean for the tea industry as a whole? Simply put, our success is your success. The Snapple brand is a powerful locomotive that will help pull total demand for tea to new levels, as more people internationally become aware of how great ready-to-drink iced tea can be, and how adaptable iced tea can be in terms of different flavorings.
I can't predict the future, but I know one thing for sure: The potential market for high-quality ready-to-drink iced teas across Europe and the world is big enough to keep Snapple and our competitors busy and prosperous for many years to come.
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| Title Annotation: | Snapple Beverage Corp. co-founder Leonard Marsh speech |
|---|---|
| Publication: | Tea & Coffee Trade Journal |
| Article Type: | Transcript |
| Date: | Oct 1, 1995 |
| Words: | 2456 |
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