In 2006 we set out to create “The Holy Grail” – an organic tea that had great taste and zero calories. And by almost all accounts we succeeded – Tangerine Green won best new tea of 2006 from BevNET.com and customers loved it. Yet by the end of the year the drink was discontinued.
Sometimes I wish we were a non-profit so that we could keep every item we’ve ever made on the shelf. We fall in love with the products we make. They are our babies. We spend months developing the formula, refining label and name ideas and by the time the product has hit the shelf, it will often have spent several months in gestation. Once the new product gets onto the shelf, we are proud parents, sending out our birth announcements and showing them off at trade shows to all our friends. So the idea of discontinuing an item is a painful one. It’s even more upsetting when we have to explain the decision to our customers. First they’ll send an urgent email trying to alert us that they can’t find the item at a particular store anymore, then when they find out that the item is discontinued, they berate, beg, plead, and finally offer to buy any and all remaining inventory.
When we finally made the decision to discontinue Tangerine Green, our consumers were not pleased. Here are some of the typical emails we received:
What happened to the 10 calorie Tangerine Green Tea?? :-( That was the best! I am trying to limit my calories so that one was great for that with a great taste, too. .. today I tried Tangerine Green for the first time. I’m shocked at how delicious it is (no weird aftertaste!) The low calories is a bonus on top of the great taste…. I’m SO disappointed that I’m no longer able to find your tangerine green tea. It was perfect for me in so many ways: great refreshing flavor, low in calories, not too sweet, and minimal caffeine. Have you discontinued it? I’ll be so sad.
I thought it would be a helpful lesson (not to mention therapeutic for me as I’m still lin mourning) to share some of the history of the experience and explain some of the thinking that went into the creation of the drink as well as into the decision to discontinue the item ten months later.
The Origins of the Tea
Since tea is the world’s second most popular beverage, there is no shortage of potential recipes available to us. In fact, our challenge at Honest Tea is disciplining ourselves to make sure that we don’t have too many varieties out in the market – not only is it expensive to maintain inventory of numerous items, but our salespeople, distributors and retailers need to focus on making sure we have the fastest-selling items on the shelf. And yet, as the company that produced the first certified organic bottled tea and the first certified Fair Trade bottled tea, we are always thirsty for beverage innovation. When we came upon a formulation for the first organic zero-calorie drink, we were intrigued.
We started with a clean-tasting, antioxidant-rich organic green tea from China. Since green tea has a natural bitterness to it, we balanced the taste with a nice tangerine citrus finish. Although some of us enjoyed the tea without any sweetener, we knew that mainstream consumers would expect the product to have some sweetness.
The challenge we faced was that the only zero-calorie sweeteners out there, like Nutrasweet or Ace-K, aren’t organic. Then, at the Natural Product Expo, we came across erithrytol, a naturally-derived sweetener that has zero (or close to zero – more on that later) calories. We found that when we replaced organic cane sugar with erithrytol we got a nice, clean, lightly sweetened tea. We did a lot of research on the sweetener and learned that it is found naturally in nature in fruits like pears and melons. Though organic erithrytol was quite a bit more expensive than non-organic erithrytol (which was already more costly than sugar), we realized we were on the brink of creating the world’s first organic diet drink. We have always thought that our low-calorie teas, some with as little as 9-17 calories per serving met this definition, but we knew there are folks out there who only buy zero calorie drinks and we wanted to have a product for them.
However, when we conducted some focus groups on the tea we quickly learned that though consumers were quite happy with the taste, they had a very strong negative reaction to the name “erithrytol.” Some thought it was a medicine, some thought it was an antibiotic, some thought it was a laxative. We talked with the supplier about whether we could use other names to describe the sweetener, such as fermented organic cane sugar, but we learned that was not an option.
From Zero to Ten in a Panic
We worked hard to design a front label that clearly communicated the zero-calorie nature of the drink without using the word “diet,” which we learned many consumers interpreted to mean artificial. Here is what we came up with:
When the label designs were at the printers we received an email from our supplier informing us that there was, in fact, a small amount of calories associated with the sweetener, approximately .2 calories per gram. Since our formula called for 15 grams per serving we would have 1.7 calories per serving, or 3.4 calories per bottle. According to FDA Standards, if a drink has fewer than 5 calories per 8 ounce serving, the nutritional facts can state zero calories per serving. But given that our company name is “Honest”, we decided that we could not knowingly put a big “Zero” on the front of the label when there were a few calories per serving. Once we gave up on having a zero-calorie drink, we added a touch of organic agave syrup and made it a ten-calorie drink. The taste went from good to great. Here is the label we brought to market.
The new drink was applauded by critics and consumers alike. Here is what BevNET.com had to say:
“Technically speaking, Honest Tea has done an amazing job with what’s inside this bottle. With only 10 calories per bottle – that’s right, per BOTTLE – Tangerine Green Tea is formulated exactly the way green tea should be: it has only the lightest flavors complementing the delicate taste of green tea. This is something that has really never been done before – green teas are usually unsweetened and taste like grass or are over-sweet•ened and taste like sugar. Throw in the fact that the product is organic and you’ve got a formulation that is second to none. As far as the package goes, they did a great job of incorporating two of the most important selling points of this product – its low calorie count and its organic certification.”
Great Taste, Less Billing.
But despite the rave reviews and promising initial sales, the margins on Tangerine Green were lower than any other item. The higher cost was due to the organic erithrytol, which was more than five times as expensive as the other organic sweeteners we use. When we were formu•lating the item we had worried about this possibility but decided to proceed with launching the tea because:
• The margins on the drink might have gotten larger when we produced it at full scale. We often find that the COGS projections we make based on kitchen batches shrink once we produce at a bottling plant.
• Tangerine Green might have served as a loss leader: i.e. it might not make as much money for Honest Tea, but if it served to introduce millions of new people to Honest Tea, that would make a useful marketing tool.
• If sales of Tangerine Green were extremely strong but the margins didn’t grow, we could have considered pricing the item higher than the rest of our line. The downside of this strategy is that our distributors and retailers would lose the ability to line price our brand.
In the end we found that though the sales of Tangerine Green Tea were strong – we booked $200,000 in annual sales for the item – they were not so strong that we were willing to develop a two-tiered pricing structure. Double that number might have been enough. The new drink did enhance Honest Tea’s reputation for innovation, but we decided we couldn’t financially justify keeping the item on the market.
So was Tangerine Green a failure? In terms of profits, it was, not only because the margins were low but because we invested promotional efforts into launching the product that we weren’t able to realize a return on. We knew the risks going in. However, along with Tangerine Green Tea, we introduced Honest Ade Pomegranate Blue, which today is one of our top-selling items. And that year we also brought out Just Green Tea and Just Black Tea, which continue to grow quickly in the natural channel. So we were three for four and on the one we missed, we scored points for innovation. If we can bat .750 again this year we’ll be happy.
They say you learn more from your mistakes than your successes. Tangerine Green was an inexpensive lesson. And when the price of organic erithrytol comes down to earth, we’ll be ready.