ICED TEA HEATS UP

RICHARD TURCSIK

It's shaping up to be a "tea-riffic" summer in the beverage aisle. Ready-to-drink iced teas are continuing their surge in popularity with consumers. Powdered and instant teas are in the midst of their summer selling season. And with the advent of electric iced tea machines, even tea bags are brisk sellers this summer, according to retailers.

"Our ready-to-drink iced teas are doing better in sales this summer and our powders are also selling well," said Chris Mintus, grocery buyer at Supervalu's Pittsburgh division, New Stanton, Pa.

"Our sales of ready-to-drink iced teas are still growing. We find the growth to be coming from all flavors of Snapple, Lipton and Nestea," said Mike Shultz, senior vice president at Hughes Family Markets, Irwindale, Calif.

"We are seeing healthy growth in the ready-to-drink iced tea area. We are looking at Lipton, Tetley and Polar [a regional brand] as our best sellers. Although we carry others, those three are showing the most significant growth," said Emily G. Holdstein, senior vice president at Wonder Market Cos., Worcester, Mass.

"Our sales of the ready-to-drink teas are very good. I expect that tea sales will continue to grow even more this summer. It just appears that people are drinking more tea," said Roger Burks, senior vice president at The Mad Butcher, a nine-unit operator based in Pine Bluff, Ark., where Lipton is the best-selling ready-to-drink brand.

"The whole ready-to-drink iced tea category is still growing. Manufacturers keep adding new flavors and they are all doing well," said Mark Polsky, senior vice president at Magruder Inc., Rockville, Md. Magruder stocks Snapple, Lipton, Nestea, Arizona "and a whole bunch more."

"Although they do sell 12 months a year, the iced teas are still a somewhat seasonal item and there is a very noticeable, sharp increase in the summer months," noted William Vitulli, vice president of government and community relations at A&P, Montvale, N.J.

"The variety is tremendous. We've got Lipton, Nestea, Savings Plus, Tetley, Trade Winds, Arizona, America's Choice, Master Choice. It just goes on and on," Vitulli said.

"Snapple is still holding up and sales of Trade Winds are doing well. In the Lipton iced teas, the flavors are what is driving the business," said Tom Roesner, buyer for beer, wine and liquor at Seaway Food Town, Maumee, Ohio.

Nick Wedberg, vice president of sales and marketing at Plumb's, Muskegon, Mich., also found flavors to be driving the growth in the category.

"There is more variety out there. Nestea, Lipton and Snapple all are doing quite well. But it's not just regular iced tea anymore. There is raspberry, strawberry. You name your flavor and you can get it in iced tea," he said.

According to A.C. Nielsen, Schaumburg, Ill., in the 52-week period ended Dec. 12, 745.9 million 16-ounce units of ready-to-drink iced teas were sold in supermarkets, an increase of 50.7% over the previous year.

Some retailers say the increasing popularity of the ready-to-drinks is leaving the future of the powdered and instant varieties somewhat cloudy.

"The instants are a dying breed today," Wedberg said. "The instant tea category has really, really declined since the advent of the new-age beverage."

"Powdered iced tea mixes is a very flat category for us," said Peter Dudis, director of grocery operations at Big Y Foods, Springfield, Mass. "It is very seasonal, peaks in July and is gone by September." "We find that powdered and ready-to-drink iced teas appeal to the same consumers, but the consumers are buying the ready-to-drink iced teas for convenience," said Shultz of Hughes Markets. "As a result, our powdered and instant teas are showing declines in sales." Sales figures supplied by Information Resources Inc., Chicago, support that claim.

For the 52 weeks ended March 26, IRI reports that ready-to-drink iced tea had sales in supermarkets, drug stores and mass merchandisers of $422 million, an increase of 44.6%. During the same period, powdered tea sales were $345.6 million, a decrease of 5.6%.

Polsky of Magruder finds powders to be under a two-pronged assault.

"Our powder and instant sales are down this year. It is due to the ready-to-drinks and people are making iced tea from tea bags now. They have the machines that brew the tea really fast and that is what people are using. Our tea bag sales are moving along pretty good as a result," he said.

"We find that the regular tea bags increase because of the die-hard people who want to make their own iced teas and use their own brands," said A&P's Vitulli.

While home-brewed iced teas may offer the best flavors, retailers find it is still convenience people crave.

"With the ready-to-drink teas, we picked up a section of the market that does not want to boil tea or make the instant -- they want it ready to go. I think this has all been plus sales and I don't think it has had hardly any effect on any of the other teas," said The Mad Butcher's Burks.

"Ready-to-drink iced teas are more of an impulse item. The single-serving cold sales are most impressive and are the highest impulse item," said Dudis of Big Y.

"The ready-to-drinks are convenience items, and possibly a trade-off to carbonated soft drinks," said Holdstein of Wonder Market Cos.

Because of the portability of iced teas, retailers are using a wide variety of merchandising tactics to stimulate sales.

"We try to cut some of the teas in the pop aisle," said Wedberg of Plumb's. "If we don't have room there, we cut them in the juice aisle. But normally in most of the stores we have coolers in which we have Lipton, Nestea and Snapple. We offer it warm and cold. Of course, we're going to appeal to the impulse customer if we have it chilled."

"We moved the ready-to-drinks out of the beverage section and into the tea section, and it just quadrupled our sales. It is about the same amount of selling space as we had in the beverage section," said Burks of The Mad Butcher.

"We have a separate section right next to the bottled water. It's our new-age beverage section, and I have just expanded it from 4 feet to 8 feet. This section contains the teas and the new-age beverages," said Roesner of Seaway Food Town.

"We merchandise some of our iced teas in with the soft drinks. Some are on display racks throughout the store, and some in coolers at the checkout," said Polsky of Magruder.

Holdstein of Wonder Markets said merchandising the ready-to-drink iced teas in the new-age section, alongside sparkling water and sports drinks, works best.

"We also sell them cold at the checkout in some stores, and also in the dairy, as well as through rack displays and off of the shelves," she said.

Even though iced teas are considered an impulse item, retailers said advertising is still key to building sales.

"Most of our member stores display the powder and liquid iced teas, feature them frequently and do co-op advertising during the summer months," said Mintus of Supervalu. "We frequently promote the ready-to-drink iced tea because many of them are tied into the big national soft drink companies. We usually promote an iced tea when we promote a national pop," said Plumb's Wedberg.

"Almost on a regular basis we will feature liquid and/or powder at a reduced retail price and they do a tremendous job. There is a certain amount of brand loyalty, but the featured items seem to take over when they are put in at a reduced retail," said A&P's Vitulli.

"The large-size powders lend themselves very well to displays," he added.

Holdstein of Wonder Market Cos. said price can be used to drive a powdered drinker to ready-to-drink, and vice versa.

"On a day-in and day-out basis, they may not appeal to the same consumers, but depending upon price points, promotion and advertising consumers may be steered toward the ready-to-drink," she said.

Retailers also find specific price points and multiple pricing works best to stimulate sales.

"We find that a price point of $2.49 for a six-pack works best for the ready-to-drink items," said Shultz of Hughes Markets.

"In terms of price points on the ready-to-drinks, we find that anything under $1 works best," said Dudis of Big Y. "For powders we use buy-one-get-one-free, and prices for a 32-ounce canister start around $1.89, and the 80-ounce is in the $3.99 to $4.99 range."

"We advertise the ready-to-drink teas frequently," said Roesner of Seaway Food Town. "Price is definitely a factor and multiple pricing works best at building sales." Polsky of Magruder said he also likes multiple pricing.

"We try to do multiple pricing and keep it on display, because with multiple pricing we'll get a multiple sale. But the pricing really has very little effect. People are buying ready-to-drinks like they buy water. They keep them in the car, and a ready-to-drink tea doesn't necessarily have to be drunk ice cold," he said.

While many retailers see the ready-to-drink iced teas continuing their meteoric rise, Roesner of Seaway Food Town sees sales hitting a plateau.

"I think the ready-to-drink iced teas are beginning to level off. I think we are in the same situation where we were 10 years ago with the wine coolers. Everybody bombarded the section and to this date only two manufacturers have fought the battle and won: Bartles & Jaymes and Seagram's. In my personal opinion, we are going to run into the same situation with the tea category as we did with the wine coolers," he said.