Tea for Ten

JULIE GALLAGHER

After years of brisk ready-to-drink tea sales, the category has lost some steam.

Single-serve varieties, with their quick and easily consumed health benefits, helped lead the charge toward double-digit growth year-over-year. But in 2008, sales began to simmer.

That's when tea drinkers, steeped in economic woes, sought more practical means to consume antioxidant-rich tea.

Unwilling to give up benefits linked to tea like cancer prevention, bone health, improved memory, immunity and heart health, many abandoned their on-the-go RTD habits, turning instead to larger quantities to save money on a per-unit basis.

The trend has taken shape with both multipacks of single-serve bottles, and family-sized jugs, observers note.

More than one-quarter (29%) of tea users polled by Mintel, Chicago, are purchasing RTD tea in multipacks comprised of single-serve bottles, while nearly half (45%) have begun buying tea in family-size containers to save money.

Big Y beverage category manager Bill Eichorn has not only noticed the trend, he's made gallons of RTD tea the centerpiece of a new non-carbonated drink planogram. Space for the larger sizes will be taken, in part, from areas that became available after Big Y's CSD selection was reduced last year because of waning demand.

A SKU rationalization effort is also under way.

“A year or two ago we took on quite a few teas, but now we're paring down our variety,” Eichorn told SN.

Although he wouldn't elaborate on which SKUs draw enough sales to justify placement, best-selling teas from Lipton (including a new gallon size), Snapple and Arizona Iced Tea will likely make the cut.

Thanks to 10 for $10 promotions, single servings of Honest Tea, Sweet Leaf Tea and Lipton tea also sell well.

Meanwhile, sales of a new line of store-brand RTD teas are being monitored closely. The 16.9-ounce bottles are sold individually from a refrigerated cooler in the front of the store, and in 12-packs, in regular and diet varieties of green tea, black tea with lemon and raspberry tea.

“They've only been out for a month-and-a-half so it's hard to get a true gauge there,” said Eichorn.

The beverages will face competition, not just from other RTD teas, but bagged teas, as consumers take the brew-it-yourself route.

Sales of tea bags “are up a few points here, which is definitely higher than what we've seen during the past few years,” Eichorn said.

The trend is in line with newfound consumer habits.

Close to two in five (37%) tea users say they've started brewing more tea at home as a less expensive alternative to RTD teas, according to Mintel.

True, price is a strong catalyst for these tea drinkers, but an even greater number are using their teapots to combat ecological concerns.

Just as shoppers have turned away from bottled water in favor of tap, they're turning to homemade iced tea, noted Garima Goel Lal, senior consumer analyst for Mintel.

“Growing awareness of environmental issues are hurting RTD tea sales, even more so than the economy, since 42% say they are brewing tea at home rather than drinking RTD tea that comes from plastic bottles” due to environmental implications, she said.

Consumers concerned with the large quantities of high fructose corn syrup contained in many RTD teas also like making tea at home since it gives them control over sweeteners.

Shoppers at Food Lion, Salisbury, N.C., are opting for larger sizes of RTD tea. So much so that the retailer has rearranged its selection to make room for larger sizes, spokeswoman Christy Phillips-Brown told SN.

“We expect that consumers may be looking for improved value and have decided to turn from single-serve to multi-serve,” she said.

The trend is giving grocery retailers, with their greater availability of space, a leg up on the convenience store competition.

Driven by an increase in consumption by younger consumers, tea sales at c-stores climbed 49% between 2006 and 2008, according to Mintel.

But last year sales lagged overall. In 2008, there was a 1.3% sales drop in RTD tea in food, drug and mass channels (excluding Wal-Mart), according to Mintel.

But two stand-out conventional brands managed to defy the odds and draw a greater number of shoppers vs. the previous year.

They are the Arizona Beverage Co., whose sales grew 7.2%, and private labels, which climbed 9.9%, according to Mintel.

The common denominator is value pricing.

Arizona's website touts 25 flavors of RTD tea priced at $1 or less.

The brand's healthy products and unique packaging also contribute to its success. Its new 100% organic green teas, for instance, include antioxidant-rich superfruits like yumberry and pomegranate.

Teas touting additional antioxidants like these are hitting the mark with consumers, as half of tea users agree that the antioxidants in tea are a major reason why they drink it, according to Mintel.

As is evidenced in a spike in store-brand teas beginning in 2006, price is also a priority.

Private labels “are usually 42% cheaper than the average price of RTD tea; that's why they grew 46% in food, drug and mass channels (excluding Wal-Mart),” noted Goel Lal.

Indeed, as consumers compare pricing on larger bottles of tea, they're finding it hard to pass up gallons of store brands priced at almost half of the cost of national brands. A gallon of private-label tea averages about $2.36, while brand names ring in at around $4.15.

Despite the larger-bottle demand, and introductions of 64-ounce sizes by companies like Honest Tea, many retailers are making their store-brand debut with single-serving sizes.

Food Lion's RTD Green Tea is currently only available in 12-packs of 16.9-ounce bottles, noted Phillips-Brown, but that could change.

“We review customer comments and trends, and will consider additional options based on consumer demand,” she said.

Last week, the retailer offered a $2-off coupon for the tea.

Big Y carries Full Circle organic RTD teas, but only in six- and 12-packs, Eichorn said.

Focusing exclusively on single-serve private labels could be risky, since branded offerings have a better shot with those looking for fast refreshment, said Clayton Christopher, founder of Sweet Leaf Tea. The tea marketer aims to emulate homemade tea with its line of organic RTD teas, sweetened with cane sugar. Last year, it joined other premium and super-premium brands that showed growth such as Honest Tea, Tradewinds and Gold Peak. Sweet Leaf Tea experienced a 12% increase in sales.

Christopher told SN that private-label marketers are finding success with larger containers, since those are enjoyed at home. But when they're out and about, on-the-go tea consumers are concerned with their image, and are therefore more likely to choose a branded tea.

Goel Lal agrees that this is a factor, especially with consumers aged 18 to 24, but she's quick to say that retailers have already considered that.

“The packaging of some private labels is very impressive since they're trying to compete with national brands so consumers don't feel as self-conscious carrying their product,” she said. “Even innovation-wise they're improving that perception.”

Laura Corser, who is senior marketing manager for Cliffstar Corp., the largest U.S. provider of private-label beverages, noted that some retailers choose to mask the private- label status of their RTD teas, while others do not.

She added that many grocers are opting for multi-serve teas that are mixed with superfruits, and contain EGCG extract, for additional antioxidants.

Tea Time

Retailers like Giant Eagle, Pittsburgh, are heavily promoting ready-to-drink teas. Earlier this month it featured:

• Giant Eagle Southern Style Sweet Tea, 0.5 liter 12-pack, two for $10.
• Lipton Iced Tea, 0.5 Liter 12-pack, $4.99 each when you buy two (regularly $5.99 each).
• Giant Eagle Iced Tea, 64-ounce, selected varieties, four for $5.
• Market District Organic Green Tea With Honey, 16-ounce, 10 for $10.