RTD Teas Gaining Popularity Convenience Stores

Convenience Store News recently published an article reporting that Ready-To-Drink (RTD) teas are gaining sales within convenience stores (link here).  The speculation is that the tea beverages are gaining sales not from new product introductions or increased shelf space, but rather from the emerging trend for healthier beverages.  It should also be noted that it is the trend is more related to consumer’s perceptions, that the tea itself may not actually be healthier, but the belief that is is healthier is driving the category’s growth in convenience stores.  And based on the similarity of price points against carbonated soft drinks and bottled water, RTD tea’s growth is sourced from these two other categories.

Since the emerging beverage trend has been around for the last few years, can all this growth really be attributed to the trend?  This isn’t to say that the trend of consumers looking for healthier drink alternatives is not relevant, but there are other factors coupled with this trend that are likely driving tea sales. After some quick though, two additional factors that may contribute to the tea’s growth are seasonality and price & promotions.

Given a convenience store’s limited cold vault space, a lot of vaults adjust their shelf space based on seasonality and popularity.  For example, winter’s months will see more juices and water to combat colds and flus, while summer months will see space expanded for teas, isotonics (sports drinks), and energy drinks.  The article reports that two of the convenience store retailers have not really had to adjust their shelf space to generate this growth, but there is also no mention of which season the growth is accounted for.  If it were the summer months of 2009 and 2010, then the shelf space for RTD teas would already have been expanded and thus facilitating this growth.

The other factor affecting tea sales is the price & promotions for the different types of drinks within the beverage category – not just tea products themselves.  Summer months are normally the more heavily product-promotion months, and given the state of the economy the last few years it would not be surprising to see more aggressive price promotions on beverages.  And if the product itself is not on a manufacturer-funded promotion, the convenience store retailer themselves may try to lower the regular selling price of RTD teas and other summer seasonal beverages to create a stronger price gap with other products.  Since consumer perception is key, the larger price gap would mean that teas are a better value for their dollars and thus choose the tea beverage.

That said, the consumer need has to be there in the first place for the sale to even have any factor of influence.  If a consumer was not thirsty, price conscious, and in search of healthy drink alternatives, that sale for the AriZona tea or Nestea or Lipton product would never have occurred.

A Tale of Two Plant Bottles: Coca-Cola and Pepsi

Just as Coca-Cola releases their plant-based bottle packaging to Canadians this past month, Pepsi puts out a news release stating that they will be launching their own plant-based bottle (link here).   The news release does not indicate whether Pepsi’s plant bottle will be available in Canada right away in 2012, but it is likely a North American rollout rather than just the United States.   Since Coca-Cola already debuted their plant bottle for their core products last year at the Vancouver 2010 Olympics, it appears that Pepsi has been lagging on the topic of sustainable packaging.  But what the public did not know is that Pepsi already has a variety of products made using sustainable packaging, such as the Aquafina ‘Eco-Fina’ bottle and the Naked ‘reNEWable’ bottle.  The only thing lagging from Pepsi’s end is having a plant-based bottle with their own logo on it rather than a water or juice logo.

So is there any difference between the two different plant bottles, technology or recyclability or otherwise?  While the traditional recyclable plastic bottles are made using fossil fuels such as petroleum, Coca-Cola’s plant-based bottle materials for both Dasani and Odwalla are made through a process that turns sugarcane into a key component for PET and HDPE plastic.  This process reduces emissions and ultimately produces the plant bottle that looks like a regular plastic bottle.  Pepsi’s plant-based plastic bottle goes through a similar process that turns the inputs into PET and HDPE plastic, except it sources different materials; Pepsi will turn switch grass, corn husks, and pine bark (and expand to include orange peels, potato peels and other bio-based products from their food business) into the PET and HDPE plastics used for the bottle packaging.

Despite the “ground-breaking” news that each company released about using plant-based materials to produce their plastic bottles, it’s ultimately the same technology save for different material inputs.  The good thing is that the world’s two largest beverage manufacturers are mindful of their impact on the environment and have taken steps to reduce their emissions while refreshing their customers in the process.

AriZona Enters Coconut Water Category

BevNet has posted a review on AriZona’s recently launched coconut water beverage – CocoZona (link here).  According to BevNet’s review, CocoZona is a 100% pure coconut water product that contains 70 calories per 14.5oz (429ml) serving, and comes in a resealable and fully recyclable  aluminum can.  The suggested retail price is $1.99-$2.49.  The product is not yet available in Canada, having launched in the United States first (like how most products are initially launched) and recently gaining national distribution.

BevNet’s review on CocoZona’s product and packaging is on par, saying that the product is on par with other coconut water brands available and that the packaging is refreshingly different from other coconut water manufacturers with their resealable aluminum bottle.  Their only suggestion is that the company name AriZona should be more visible and printed across the front of the bottle, rather than its current position that has the brand name vertically printed, semi-transparent, and on the side of the bottle.

Why would AriZona, a well-known beverage manufacturer, choose to brand their coconut water product with ‘CocoZona’ across the top of the bottle rather than their own company name AriZona?  Wouldn’t they want to leverage on their brand name and generate more exposure for their new launch?  In my opinion, the success of AriZona is also the reason why they chose not to print AriZona in big, bold letters across the front of their coconut water product.  AriZona is most famous for their tea products – Green Tea Gingseng, Arnold Palmer Half & Half, Pomegranate Tea, etc – but not for their other products.  Without much success, they have tried to branch out into energy drinks (AZ Energy, Caution Energy), energy shots (AM, PM, Rx), water (Vapor Water, Rescue Water, Organic Tea Water), sports drinks (AriZona Sports), and even snacks (AriZona snack trays).  This means that the strength of their brand name only extends to tea products but not other areas.  Likewise, consumers will trust the AriZona brand name for tea beverages, but are likely to choose another brand for energy drinks (Red Bull, Monster, Rockstar), water (Nestle, Aquafina, Dasani, private label), sports drinks (Gatorade, Powerade) and so on.  As a result, this puts AriZona in their current state as they try to expand their product offerings outside of tea.

I do see the possibility of AriZona making their name more visible on CocoZona.  There are many similar product benefits between their tea and coconut water offerings that would help the consumer easily associate both products back to the AriZona brand name.  Both tea and coconut water are low calorie products, and both are also seen as healthier beverage alternatives.  The point is, the reach from tea to coconut water is not as far as from tea to energy drinks or sports drinks.  Since packaging may differ from country to country, we may have to wait for this product to enter Canada to see AriZona plans on printing their brand name across the front of their coconut water.  So when and if this product crosses the border, BevWire will post an update and opinion on CocoZona’s packaging.

Pepsi Next – the new 60-Calorie Soda

An article from BevNet.com mentions that Pepsi will be launching another soda in the coming year (link here).  The industry critic from the linked article believes that the launch won’t meet expectations since other similar products have failed in the past (Pepsi Edge, Pepsi XL, and Coke C2 are the failed experiments).  Pepsi Next – a 60-calorie carbonated soft drink (CSD) partially sweetened with high fructose corn syrup and natural sweeteners – launches Summer 2011.  Pepsi is reported to be promoting their new product through Simon Cowell’s new tv program “X Factor” in addition to other strong advertising and marketing support.

Is there such thing as middle ground for consumers though?  Those that want full flavor will opt for the regular Pepsi, those that want diet will grab a Diet Pepsi, and those that want the full flavor with zero calories will choose Pepsi Max.  Will anyone choose mixed sweeteners and 60 calories instead of any of the already available options?  Consumers that are willing to sacrifice taste and ingest less calories will likely choose the Pepsi Max, and whereas consumers that want full taste and do not care about the calories would choose Pepsi, so where does that leave Pepsi Next?  Even Pepsi expects there to be some form of cannibalization, where one Pepsi beverage will be substituted by another Pepsi beverage.

It is clear that the soft drink market is declining and Pepsi is trying to establish a stronghold in other categories like enhanced water and energy beverages, but why would they introduce one more product into this category?  On the heels of Pepsi slipping from No.2 to No.3 in the United States, their solution appears to be introducing a new product that will cannibalize their own shares in a declining CSD market and confuse their customers with which Pepsi product to choose.  Why not focus your portfolio on the emerging products and gain a stronghold in those categories?

The old adage is that you never want to fix anything that isn’t broken, and Pepsi clearly is broken in that sense.  But with what the beverage organization has done: introducing new Pepsi beverage alternatives, a modified logo and constantly changing packaging, are any of these “fixes” actually helping the company?  I believe this is a move in the wrong direction, but only time will tell.