TEA-ING UP

CHAPIN CLARK

SEBASTOPOL, Calif. -- Traditional Medicinals here, a maker of medicinal herbal teas that does most of its business in specialty health-food stores, is trying to change the way supermarkets think about this growing but unexploited segment.

Currently partnering with Raley's Supermarkets, West Sacramento, Calif., and Star Market, Cambridge, Mass., to help manage their natural-food sections, Traditional Medicinals is "offering supermarkets the opportunity to say to shoppers, 'We're a place for you to come for better health,' " said Michael Langenborg, director of marketing.

A report by the General Merchandise Distributors Council, Colorado Springs, Colo., "Growing Opportunities in Do-It-Yourself Health," released earlier this year, predicted that sales of nutritional supplements and natural remedies, including herbs and homeopathic treatments, will nearly double -- to $11.7 billion -- by the year 2000.

While dollar sales overall in the loose-tea/bag category have shrunk 1% in the last year, consumption of herbal supplements and other do-it-yourself health treatments is fast on the rise. Information Resources Inc., Chicago, estimated that supermarket sales of herbs and minerals -- a $779 million category -- were up 27%, to $152.4 million, for the year ended March 2.

For the 52 weeks ended July 20, Traditional Medicinals' supermarket sales were $3.3 million, according to IRI. In contrast, Lipton had supermarket loose/bag sales of $187.3 million over the same period, and Celestial Seasonings took in $69.9 million.

Expanding supermarket distribution is the key to accessing larger markets for Traditional Medicinals teas, said Lynda Sadler, president. The company currently does 40% of its business in the supermarket channel, 50% in specialty health-food stores and 10% in drug stores.

"Grocery is the next arena for medicinal herbal teas," Sadler said. "We've seen a lot of our growth in the last five years in the grocery store area, and from a bottom-line point of view, supermarkets are looking for growth segments."

A big obstacle, however, is uncertainty among buyers as to whether they should categorize the products -- some, like Gypsy Cold Care, Throat Coat and PMS Tea, with Food and Drug Administration over-the-counter status -- as food items or medicinal remedies.

"Grocery buyers have been more hesitant in the past because they've had so little information," noted Sadler. "Even five years ago there were grocery chains that wouldn't make an appointment to see us."

Traditional Medicinals began working with Raley's about a year ago and with Star Market six months later, developing customer profiles, conducting category analyses and resetting shelves.

"They want that customer entering the store to think everything in this store is a good-for-you product."

Along those lines, Traditional Medicinals helps Raley's and Star Market target consumers with direct mail, using the manufacturer's data and information gleaned from frequent-shopper programs. Mail-in cards offering, say, a free 50-count bottle of vitamin C with the purchase of a box of Echinacea Plus tea -- or vice versa -- are sent to customers likely to buy into a "cold solution" concept aimed at uniting the supermarket chain, Traditional Medicinals and wellness in the minds of the cards' recipients.

Langenborg said, however, overall grocery sales had been hurt by supermarkets' segregating Traditional Medicinal teas from their tea sets. "The problem is often we've been put into a low-traffic natural-products set over in the corner."

Sadler said she ideally would like to see supermarkets expand their tea sets to make room for her products and those of competitors like Good Earth and The Yogi Tea Co.

"I think where medicinal herbs are really attractive to first-time users is the familiar delivery system. It's an easy entree, and the price point is an easy entree."

She admitted, though, that Traditional Medicinals' price points, higher than those of most other teas, had been a stumbling block with supermarket buyers. A 16-bag box of Traditional Medicinals tea typically retails for between $3 and $3.30 in grocery stores, compared with $2 for a 100-count box of Lipton black tea and $2.89 for a 24-count box of Celestial Seasonings tea.

"It's slowed us down, it's taken us longer to get in there," she said. "But we don't want to compete on price; we want to compete on quality."

Traditional Medicinals reaches out to consumers through advertising, but with an ad budget of $1.5 million, the company must be "extremely intelligent in how we spend our dollars," said Langenborg.

In addition to buying space in specialized consumer publications like Health, Natural Health and Vegetarian Times, Traditional Medicinals does co-op ads two or three times a year with each of its supermarket accounts, which, in addition to Raley's and Star Market, include Safeway, Albertson's, Publix and Wal-Mart Supercenters.

Traditional Medicinals also distributes free, three-panel minibrochures, including coupons and tea bags, to stores.

"Putting a sample in front of shoppers is absolutely essential," said Langenborg, citing a recent company study in which 40% of a group of sample recipients bought the product within 90 days of trying it.

In 1996 Traditional Medicinals added 12 new teas to its line, which now comprises 30 stockkeeping units. It plans to introduce at least three more by the end of 1997, including a black, spicy guarana tea and a tea containing St. John's Wort, which is said to relieve mild depression.