REALLY COOL

ROSEANNE HARPER

Refrigerated tea sales are heating up.

The convenience of ready-to-drink iced tea in gallons and half gallons has been key to pushing the category forward, SN's sources said. Green tea and other flavors perceived to be healthy have given the category a boost as well. In the South, where sugary tea is a tradition, gallons of chilled sweet tea are generating big sales.

Dairy departments are scrambling to accommodate the products. Some retailers are adding bunkers in the aisles because tea - and in a few cases, other non-milk, non-citrus drinks - are moving so fast.

"The numbers are getting so high, our retailers have to devote more shelf space to it to keep from having out-of-stocks," said Richard Iverstine, dairy category manager, Associated Grocers of Baton Rouge, La. The distributor, which supplies 246 independent grocers, has seen its sales of sweet, refrigerated tea in gallons quadruple in four years.

"Retailers are putting in bunkers and bays just for it," he said. "Customers run in to buy a gallon of milk and pick up a gallon of sweet tea at the same time. It's that popular."

Refrigerated teas showed huge growth in supermarkets this past year. Dollar volume shot up 25%, hitting $196 million, according to ACNielsen's Scantrack, which covered sales at total U.S. supermarkets for the 52 weeks ending Dec. 24, 2005.

The surge in growth has prompted more manufacturers to get in the game. Regional dairies have been bottling iced tea for years. In fact, they say it was a natural progression since they already had the packaging and bottling lines in place. The same is true for citrus juice producers who have launched refrigerated tea lines.

Florida's Natural Growers, Lake Wales, this year introduced a refrigerated tea line that includes flavor combinations such as iced tea with real lemon, a lemonade-iced tea combo and green tea with orange blossom honey. The company also plans to roll out unsweetened versions with zero calories, said Dan McSpadden, marketing director, Florida's Natural.

Meanwhile, a ShopRite unit in Pearl River, N.Y., supplied by Wakefern Corp., Elizabeth, N.J., is dedicating at least 8 feet of tiered dairy case to iced tea and other non-milk, non-citrus drinks. Florida's Natural green tea, in a colorful gable top carton, stands out, along with Turkey Hill-brand green tea in gallons.

In New York City, emphasis is on half gallons of refrigerated green tea and other teas viewed as healthy.

"It's the natural items that are showing real growth, the iced green teas and white teas," said a dairy buyer at Morton Williams Associated, a nine-unit Bronx-based independent. "People read about them, that they're full of antioxidants. As they get more and more educated about these items, sales will continue to grow. Regular iced tea sells well, but people are looking for the greens and whites. Turkey Hill's green tea does very well for us. The naturals, the lights, the diets. Those are going somewhere. Line extensions keep coming, too."

Conestoga, Pa.-based Turkey Hill Dairy, the nation's leader in sales of refrigerated drinks in gallons and half gallons, will bring to market a third green tea variety as well as a diet version of its pink lemonade in April. The new green tea - diet green tea mango - joins green tea and diet green tea in dairy's line-up. Among the 23 varieties of drinks it produces, the company's best seller is regular iced tea.

"Green tea has become our No. 2 seller in the last year, moving ahead of lemonade, which used to be in second place," said Marlene Weaver, marketing associate at Turkey Hill.

Morton Williams' dairy buyer stressed the importance of green tea and similar products with a healthy image in his market. Most of the retailer's stores are in Manhattan, where lots of consumers are diet- or health-conscious, he said.

That appears to be true in other parts of the Northeast.

"Turkey Hill's refrigerated green tea in half gallons is a big seller in Pennsylvania. In fact, it's the No. 1 seller among all the Turkey Hill [drinks] we carry," said a spokesman for Penn Traffic, Syracuse, N.Y., which owns and operates 110 stores in four states. Its banners include P&C Markets, Quality Markets, Bi-Lo and Riverside.

"Except for Pennsylvania, we don't do a huge volume [of refrigerated tea] and haven't kept close track of it, but overall it is increasing," he said.

In the Pacific Northwest, Central Market, a Shoreline, Wash., independent, has found that refrigerated Arizona-brand regular iced tea is a good, steady seller, but green tea is showing significant growth.

"We just added a second variety of Arizona green tea in gallons," said Michael Murphy, Central Market's dairy manager. "It's peach diet, no carb. Green tea has gotten good press for its perceived health benefits. We've shown huge growth in it. We have four facings of the regular green tea and three of the peach."

When it comes to tea, consumers want lots of options, Murphy said.

"Alternatives are important," he said. "A lot of people are looking for something that has a wake-me-up feel to it, but they want to drink something they feel is good for them."

If sales of shelf-stable, ready-to-drink green tea from Penn Traffic's grocery shelves are an indicator, it may just be a matter of time before the refrigerated products take off. Chainwide, sales of shelf-stable, ready-to-drink green tea at Penn Traffic are up 80% from last year, the spokesman said.

In the Midwest, one retailer has deliberately relegated popular green tea to the grocery shelves.

"Refrigerated iced tea is a very minor category for us," said Steve Zielinski, dairy category manager at Schnuck Markets, Saint Louis. "Shelf-stable is so much more cost-effective and saves space when compared to gallon jugs on our refrigerated shelves."

After Arizona brand came out with a variety of sizes of shelf-stable packages, Schnuck discontinued Arizona refrigerated tea. The 102-unit chain carries gallons of Red Diamond refrigerated, regular iced tea. During the summer months, the retailer adds its own private-label gallons to the assortment.

Chilled teas are not universally popular. For one independent, supplied by Associated Grocers of Salt Lake City, refrigerated iced tea represents an experiment that flopped.

"We tried iced tea, even did some demos last summer, but it didn't go anywhere," said Eric Larsen, dairy manager at Lee's Marketplace, Smithfield, Utah. "We were getting it from a local dairy in Salt Lake City and all summer we kept two facings, four deep, of their regular, sweetened, iced tea. We finally took it out."

Larsen said he believes it didn't do well because his market is in an area with a large Mormon population. "There are a lot of people who don't drink tea or coffee," he said.

However, Larsen said he's seeing significant growth in the other non-milk, non-citrus drinks in the dairy case.

"That's definitely a growing category," he said. "For us it is, anyway. In fact, when we remodeled here last year, we added 4 feet to the dairy case specifically for the punches, apple juices and other juice drinks that aren't citrus juice. We're carrying about 15 varieties, mostly in half-gallon gable tops. Two years ago, we had only about half that [variety]."

That category is pretty static at Morton Williams, the retailer's dairy buyer said.

"But that's because of where we are," he said. "It's the naturals and lights and diets our customers want. When they buy the others, the punches and other drinks, it's usually for the price."

The quest for green tea and other teas perceived to be healthy stands in contrast to what Iverstine at Associated Grocers of Baton Rouge sees. There, his sales of gallons of Red Diamond sweet tea have soared 40% in the last year. Sales of Red Diamond's unsweetened tea have grown nicely, too, but only by 10% to 15%, he said. Green tea is not on the radar.

"Sweet tea is a big thing in the South," Iverstine said. "I like it almost syrupy, and Red Diamond's is sweet enough for me. It's always been big here, but people used to brew it themselves, for picnics, family gatherings, for everyday. Now, they're not taking the time. Not when they can grab a gallon of fresh, iced tea from the dairy case. It's the convenience."

Up, Up and Away

Refrigerated tea's impressive performance in the dairy case reflects big growth for the tea industry overall.

Since the mid-'90s, tea in the United States has more than tripled from a $2 billion industry then to an estimated $6.8 billion in 2005, according to Sage Group International, a Seattle-based marketing research firm. What's more, Sage Group researchers predict the tea industry will hit $10 billion by 2010. Those figures represent everything from tea leaves to tea bags to iced tea served in restaurants. However, sales of ready-to-drink tea have soared, helped by the convenience of the product, and awareness of the health benefits of the beverage. The sharp, upward swing of the growth curve is just beginning, said George Jage, president of the World Tea Expo in Las Vegas.

"I tell people to buckle up because I believe we're just at the place on the growth curve where it becomes vertical," Jage said.

Spurred by the obvious burgeoning of the industry, Jage launched the World Tea Expo three years ago. Since then the growth of the trade show, attended primarily by retailers, has soared, much like sales of the beverage itself. In 2003, the Expo had 65 exhibitors. This year, the World Tea Expo will feature 220 exhibitors and 45 educational seminars. It's scheduled for March 27-29 at the Las Vegas Hilton. Attendance is expected to hit 3,000.