At NACS, it was Tea Time in Vegas

Concerns that the tea category might have peaked were ground under the wheels of big business semi-trucks last week at the National Association of Convenience Stores convention, as three of the country’s largest beverage companies showed new strategies based around tea lines.

Anheuser-Busch InBev is using the tea category as a jumping off point for what the company anticipates could be a broad array of non-alcoholic beverages, all affiliated with good-timey rock star and entrepreneur Jimmy Buffett. While the sailing balladeer pulled into the Hard Rock Hotel in Las Vegas to serenade retailers at the brewer’s annual party, Bud executives – many from the recently re-jiggered 9th Street Beverage unit – tried out a siren song of their own on wholesalers and distributors.

What they were singing about were six SKUs of the all-natural Paradise Key teas, which recently rolled out in Florida and the rest of the southeast at a suggested $1.59 price point at retail for varieties like Diet Peach, Red Tea Peach, Lemon Sweet Black, Pomegranate White, Citrus Green and Tropical Black. With a national launch scheduled for next year, most of the action will be through Bud wholesalers but independents and smaller regional chains will get a shot through DSD, according to Steven Freant, the key account manager for the Southeast.

With an effective rollout will come even more products, according to former 9th Street Marketing Director Tom Burkemper, who is now part of the national sales organization for the larger company. Burkemper said that 9th Street hasn’t been abandoned, but has changed its orientation.

“We’ll be looking at major partnerships, and have a focus on those brands that have long-term staying power rather than niches,” which comprised much of 9th Street’s original focus, Burkemper said. The small “innovation shop” had the key role in developing Paradise Key, which could eventually include lemonade, coconut water, even CSDs, according to Burkemper.

“Once a brand is established, it’s a lot easier to do a big rollout,” he said.

Another established brand looking for a big rollout is Hansen’s, which produced its first samples of its value-oriented 23.5-oz. Peace Tea for the masses at NACS. In a move designed to rein in category leader AriZona’s dominance in the big can line, Hansen’s will attempt to get the four-SKU line into the Coca-Cola system that is already distributing category volume leader Monster Energy. It should be noted that the cans were so new they weren’t on display in the Coca-Cola booth just a stone’s throw from the traditional Monster show of skin and latex – although Coke’s better-known tea partner, Honest Tea, did have a small tasting shelf at the mother ship.

“Somebody should be in that space,” said Geoff Bremmer, the brand manager for Monster, explaining the rationale behind Peace Tea as an instant competitor to AriZona. The four cane sugar-sweetened SKUs — Green Tea, Sweet Lemon Tea, Imported Ceylon, and Razzleberry — all carry a huge peace symbol, hippie imagery, and, more important from a distribution and competition point of view, a big old $ .99 pre-pricing label right on the can. 

So what was bringing out all this tea competition? Marketers see opportunity to once again leverage its high-end feel and healthy aura, but they also see that, of late, tea is simply what consumers seem to want.

“Of every category in beverages in the past 52 weeks, only two have really grown,” said David Smith, the co-founder of Sweet Leaf Tea, which displayed four big cans of its own, 16 oz. versions of its established Original, Raspberry, Peach and Mint & Honey flavors geared toward the convenience market. With a big partner in Nestle Waters North America now on board through a minority ownership and distribution arrangement the idea is to make the brand “more affordable and more available” to the general public, Smith said.

Sweet Leaf’s involvement with Nestle has given Smith and co-founder Clayton Christopher newfound confidence in the strength of their brand, he said – mostly because the pair now have information on product development and reach that they’ve never had the opportunity to see before.

“It’s a big learning curve, but the data makes you a lot more comfortable with the decisions that we used to really agonize over in the past,” he said.

But the company won’t be doing drop shipments a la the Nestle Waters system itself anytime soon, Smith added.

“We’re committed to a DSD network,” he said. “We want to control who we are and where we are.”

 Meanwhile, three other tea companies appeared poised for new directions at the show, as well. Lots of chatter centered around fast growing all-natural players New Leaf and Xing Tea, while Dr Pepper/Snapple Group displayed three pre-priced, 79-cent, 16 oz. cans of cold-filled Snapple tea. With Xing passing 40 states in distribution and New Leaf aiming to hit all 50 in the next 18 months, the stream of strong brands onto the trails blazed by Honest Tea and AriZona seems to be generally moving the category away from cold-fill stalwarts like Nestea and Lipton, neither of which were featured prominently in Coke’s or Pepsi’s displays.

“We’re just plain selling a lot,” said New Leaf CEO Eric Skae. “We were kind of the unknown, but now I’ve gotten a lot further than most guys on a lot less money.”

Photos from NACS 2009

BevNET’s coverage of NACS 2009 is sponsored by Crystal Cooler, makers of customized beverage coolers. 

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