For Teas, It's Zero or Bust

By Ray Latif

In the sweltering summers of Anytown, U.S.A., the scene is a familiar one: the proud homeowner, gazing at a freshly-shorn lawn, wipes his brow, plops into a porch chair and gently sips at a tall, perspiring glass of chilled sweet tea. Surrounding crackling ice cubes, the light brown liquid, lemon wedge afloat, is as American as apple pie and has long been a staple of traditional summertime drinks.

Over the past two decades, however, iced tea has grown to become a beverage for all seasons, and, today, ready-to-drink tea is a Goliath of a category, with over $3 billion in annual sales. Yet while the beverage industry continues to enjoy sustained and year-round demand for sweetened iced tea, many consumers are the midst of an overall transition toward healthy lifestyles – gradually shifting buying habits to lower sugar and lower calorie options.

But here’s a question that you might want to consider for your product assortment: Will that growth ultimately result in unsweetened products taking off, or those products that are just un-sugared – i.e. sweetened, but with zero calories? It’s a point that many companies will have to wrestle with in the future: sweet teas drove the growth of the category, and non-caloric sweetener technology is improving. Nevertheless, any product with the whiff of artificiality, be it in taste or formulation, runs the risk of being seen as inauthentic.

In other words, that sweet tea might not be sweetened with sugar – and it just might not even be sweet.

For now, the sweetener-based products seem to be winning the race, with experiments taking place via a range of natural and artificial sugar-alternative sweeteners including sucralose, stevia, Acesulfame Potassium (Ace K) and erythritol. In some cases, companies are simply reducing overall sugar content as a way to retain an all-natural formulation. Case in point: Snapple’s line of “Lightly Sweetened” bottled teas, which the company launched last year. The drinks contain less than half the sugar content than regular Snapple varieties.

A new report from Mintel, a global research supplier, found that when it comes to a variety of common food and beverage options, most consumers are focused on reducing the total number of sugars in their diet, as opposed to seeking out or avoiding a particular sweetener. The study – which, it should be noted, was commissioned by the Corn Refiners Association – surveyed 2,400 primary household grocery shoppers, and found that consumers’ buying habits are simply tilting toward an overall decrease in high sugar and high calorie products.

“Consumers aren’t responding to product formulation or menu item adjustments based on specific sweetening ingredients,” said Sara Martens, vice president of The MSR Group, a business insights provider.

But the revelation that consumers are not particularly choosy about sweeteners – as long as they are low-calorie – also comes during an uptick in sales of unsweetened tea products.

Tea, unlike many other beverages, has a taste profile that, for some, does not necessarily require the addition of flavoring, and, slowly, but steadily, American consumers are beginning to embrace the idea of bottled tea, sans sweeteners.

Based in Japan, Ito En is the world’s largest manufacturer of green tea, and in 2002, the company made its North American debut with Teas’ Tea, a brand of natural, unsweetened bottled teas.  While Ito En has since launched a number of new sweetened varieties of Teas’ Tea, Rona Tison, Senior Vice President-Corporate Relations, ITO EN (North America), said that its core unsweetened line has long been its top seller, and is gaining momentum as natural products increasingly gain acceptance among mainstream consumers.

“Our core product is our unsweetened tea line, which is doing incredibly well,” Tison said. “We’re getting amazing placements and we’re seeing it work it the tech and Silicon Valley areas, where a lot of the corporate dining rooms are shifting and demanding those products.”

For manufacturers, a sweet, all-natural, zero-calorie formulation remains the “holy grail” for tea. Despite constant innovation in flavorings and sweeteners, consumers are increasingly shunning mid-calorie, and even low-calorie, drinks in favor of zero-calorie products, according to Seth Goldman, the co-founder and “TeaEO” of Honest Tea.

“In our experience, when people do make the decision to move toward low-calorie… it’s interesting to see how many are looking for that clear zero,” Goldman said. “We know that zero-calorie is the number that consumers want to see. And for the consumer looking for a zero-calorie drink, there’s a big difference for them between zero and 10 [calories].”

Goldman’s company has been on both sides of the divide. While Honest Tea has long been at the forefront of lightly sweetened, lower calorie tea offerings – and it has experimented with non-chemical sweeteners like stevia and Lo Han Guo – Goldman also pointed out the success of Honest Tea’s Just Green Tea variety, an unsweetened, zero-calorie product. The beverage is the company’s fastest growing variety in the natural channel, which, in recent years, has proved to be a critical incubation conduit and pipeline for mainstream retailers. The growth of its Just Green Tea showed that unsweetened in any form is a powerful draw – it was a significant reason behind Honest Tea’s decision to launch a new, unsweetened lemon tea as part of its 16.9 oz. PET bottle line, which is aimed at conventional accounts.

Still, doing sweet well can be important:  Founded in 2002, Steaz sells a range of natural and organic Fair Trade tea products, and four years ago, as an early adopter of stevia (along with erythritol), launched a line of zero-calorie flavored, sparkling teas. The popularity of those drinks gave way to a zero-calorie line extension of its non-carbonated teas that the company debuted in 2011.

Steven Kessler, co-founder of the Healthy Beverage Company, which markets the Steaz brand, said that Steaz’ zero-calorie drinks now represent 41 percent of overall sales volume for the company, and expects that number to rise. He credits the company’s use of natural, “healthier” sweeteners as the biggest draw for its customers.

“Today’s consumer continues seeking low to no calories in their beverages while still wanting that sweet taste,” Kessler said. “This same consumer is also choosing the healthier, sweetener alternatives whenever possible.”

At least for now.