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    Online Exclusives

    Tea, Sweet Tea

    Even in a down economy, consumers still thirst for brewed and RTD teas.

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    Joanna Cosgrove07.01.09
    Despite the increased incidence of consumer belt-tightening, the tea market reached more than $4 billion in 2008 in FDMx and convenience stores, according to "Tea and RTD Teas-US, May 2009*," a new study from Chicago, IL-based Mintel. The study attributes the explosion to two macro trends-healthy eating and the need for convenience, combined with a high level of product innovation in the tea market. More consumers are choosing ready-to-drink (RTD) tea over carbonated soft drinks thanks to tea's perceived health benefits and in response, tea suppliers have introduced hundreds of new RTD tea products, including a variety of better-for-you offerings-organic, natural and superfruit-flavored teas-which have helped drive consumption.

    Although Mintel confirmed tea sales from 2003-08 rose 102% (in current prices, or 73% when taking inflation into account), the recession has played a role in the slowed growth shelf-stable canned/bottled RTD tea sales in particular. After several years of strong growth averaging 19% per year during 2003-07, sales of RTD tea declined more than 1% in the FDMx channel in 2008, with budget-conscious consumers turning to more economical options, including private-label brands, brew-at-home teas and carbonated soft drinks. Mintel, however, forecasts the market will grow 28% in current prices and 18% in inflation-adjusted prices from 2008 to 2013.

    "The category is off its double-digit growth rate but is still expected to be the most vital segment in the U.S. due to its broad appeal to a wide demographic profile," commented Joe Simrany, president of the Tea Council, New York, NY. "RTD tea has barely scratched the surface of consumer popularity due to its numerous attributes targeted to specific long-term consumer trends, such as concern for health, a desire for natural approaches to good health, the importance of keeping adequately hydrated especially on the go, portability, convenience, and great taste."

    In 2008, the relatively mature bagged/loose tea segment comprised 29% of category sales and grew only 2% from 2003 to 2008. Unlike RTD tea, Mintel said bagged/loose teas actually benefited from the economic downturn, as consumers began brewing tea at home to save money.

    Rounding out the category, instant tea mixes accounted for 12% of category sales. The segment grew 9% from 2003 to 2007 and then declined 4% in 2008.
    Mintel data pointed to Unilever/PepsiCo, whose joint venture Pepsi/Lipton Tea Partnership (PLP) was formed to market Lipton and other RTD teas, the tea market leader with a 28% share of FDMx tea sales in 2009 for the 52 weeks ending February 22, 2009.

    Nearly all of the leading tea companies, however, experienced declines in 2008 due to the troubled economy. Even market leader Unilever/PepsiCo -which had experienced a long run of strong growth from 2005 to 2008-posted a decline of nearly 3% in 2008 over 2007. Snapple and Nestl/Coca-Cola, the number three and four companies in the tea market, saw declines of 10% and 18%, respectively, in 2008.

    Private label has thrived due to its low pricing, and actually grew almost 10%. On average, a gallon of private-label RTD iced tea costs $2.36 versus $4.15 per gallon for brand-name teas.

    One national brand that managed to beat the odds in 2008 was AriZona Iced Tea from Ferolito, Vultaggio & Sons, which grew 7%. AriZona continues to spearhead innovation in the RTD segment by marrying unique beverages formulations with unique packaging. One of the hottest trends in RTD tea is the inclusion of antioxidant-rich "superfruits." AriZona recently launched a line of 100% organic green RTD teas available in three flavors: Yumberry Green Tea, Pomegranate Green Tea and Green Tea with Ginseng & Honey.

    AriZona also worked to attract value purchases by pre-pricing 25 flavors of its teas at $1.00 or less.

    In March, AriZona partnered with Fairfield, CT-based Bigelow Tea to produce a new line of organic green teas for the RTD marketplace-they showcase Bigelow's innovation in the specialty tea industry and AriZona's prowess in RTD. As for the timing of the partnership, the companies pointed to the fact that specialty green hot tea has grown 36% over the past five years, with Bigelow being the top-selling green tea brand in the country.

    The pair's product line spans four products: Organic Green Tea Acai White Cranberry, Organic Green Tea Original Green, Organic Green Tea Lemon Ginger, and Organic Green Tea Mango Lychee. The teas are rich in antioxidants, loaded with vitamins C, B3, B5, B6 and B12, have no artificial flavors, colors or preservatives, and are sweetened with organic sugar cane.

    "Working with AriZona is refreshing and fun," said Cindi Bigelow, president of Bigelow Tea. "Instead of following the standard business model, they run their business according to their own rulesand that means making a delicious product for great value in outstanding packaging. They never release a new product without the owner truly liking it! I think that is unusual in today's marketplace but it's exactly what we do at Bigelow. That is our entire focus-to make the best tasting teas at a price people can afford in attractive and protective packaging."

    In addition to innovative partnerships, the category has also broadened its appeal to a previously untapped consumer base: children.

    In January, Novato, CA-based Republic of Tea broadened its product offerings to include a new lineup of herbal brewed teas for children. Little Citizens' Herb Teas can be consumed hot or iced and are naturally caffeine-free and Fair Trade Certified by TransFair USA. The collection is comprised of three flavors: Strawberry Vanilla Tea, Tangerine Tea and Apple Cherry Tea. This line is made from organic rooibos. Also known as red tea, the naturally caffeine-free, antiallergenic herb from South Africa is recognized for its antioxidant properties and, according to the company, as an aid to the immune system. The products pair rooibos with "only the highest quality herbs (not standard commodity tea herbs)" and all-natural ingredients.

    "The segment is clearly dividing into sub-segments, one favoring health and another appealing to America's long-term desire for a sweetened beverage," surmised Mr. Simrany. "There are even further divisions beginning to appear in the areas of fortification and even in the areas of energy, organics and alignment with social causes. Of course, not all of these sub-segments will ultimately blossom into viable business opportunities, but the universe for portable beverages is immense and many will likely catch on."

    Mr. Simrany added that the Tea Council is currently working on a global initiative to create a set of tea standards designed to "improve the quality of tea through the establishment of minimum standards while raising the importance of adherence to important social issues such as concern for people, the environment, operational standards and the sustainability of the business." Although in its early stages, Mr. Simrany said there's been an "extraordinary level of cooperation relative to the implementation of these initiatives from the International tea community."
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