Nestea and Lipton Go After AriZona

Nestea's new 695ml cans to compete head-to-head with AriZona.  Courtesy of
Nestea’s new 695ml cans to compete head-to-head with AriZona. Courtesy of

Each summer I pay a little more attention to monitor the Ready-to-Drink (RTD) tea segment.  Some of my beverage industry contacts say that AriZona’s dominance in the RTD tea segment have inspired other beverage companies to launch similar $0.99 tall cans to steal some of AriZona’s sales.  Most recently, I’ve noticed both Nestea and Lipton stock some competitive offerings.  Both have come out with tall cans of tea, with similar $0.99 price points labeled on the cans themselves.  Given that AriZona has made $0.99 teas their claim to fame and have been selling them for many years already, how successful will Nestea and Lipton be at stealing some sales?  More importantly, is selling tea at $0.99 profitable for Nestea and Lipton, or is there another reason for them to enter this segment?

Unlike AriZona, Nestea and Lipton have strong backers.  Nestea’s partnership with Coca-Cola provides them a robust distribution network.  Lipton also has a strong market coverage through their agreement with PepsiCo.  Both competitive brands would be able to leverage the sales and merchandising support of Coca-Cola and Pepsi to ensure retailer shelves are always stocked.  Beyond retail coverage, both Nestea and Lipton would get premium in-store placement locations.  Coca-Cola and Pepsi both own front-end cooler space as well as multiple locations within a grocery store, giving them the opportunity to stock products to their liking within these areas.  So unlike previous challengers, AriZona will face their strongest competition yet in Nestea and Lipton.  These two competitors have the necessary support and expertise to erode AriZona’s leadership in this segment.

Nestea's new 695ml cans to compete head-to-head with AriZona.
Nestea’s new 695ml cans to compete head-to-head with AriZona.

Given these dynamics, it certainly appears that Nestea and Lipton stand as formidable opponents to AriZona and steal their sales.  However, both Nestea and Lipton are known best for their offerings in a different tea format: bottled tea.  By rolling out these $0.99 aluminum cans, don’t they risk cannibalizing their own sales from a more profitable tea format?  Wouldn’t this make the decision to launch 695ml tea cans with $0.99 printed on it hurt their total tea business?  Given the risk associated with devaluing sales potential, why come out with tall cans at all?  In the end, they are just as likely to steal sales from AriZona as they are on stealing their own sales.

Simply put, it may be better to get less dollars from the consumer, than get none at all.  If their market research indicates that the same consumers buy both bottled tea and canned tea, both Nestea and Lipton have much to lose by not having a canned tea offering themselves.  And given the price range of canned and bottled tea, it would appear that canned teas serve as the “value” segment to get people to buy a tea product.  Bottled tea appears to serve more as a “mid-value” or “premium” segment.  Should Nestea & Lipton leave AriZona to own the value tea, it will be much harder to steal that tea customer away at a later point when they are interested in moving up the value chain to premium tea.

As long as you can get them to buy (or try) your drink once, you’ll stand a chance to get them to come by as a repeat customer.  Even if the immediate value is $0.99, there could be opportunities to get these thirsty consumers to buy the more expensive bottled tea at a later time.

Snapple’s Diet Half & Half Criticized, Message Lost In Stereotypes

Snapple’s recent marketing efforts for their half tea, half lemonade diet beverage is criticized for being racist, rather than lauded for its comedic relief.  The commercial’s aim was to stir up interest on which half of the beverage is the better: tea or lemonade.  Instead, its portayal of the office workers supporting tea (East Indian) or lemonade (Asian) has stirred up controversy for being stereotypical.  The lemonade supporter wears a yellow outfit and plays ping pong to support lemonade, while the tea supporter wears a jockey outfit and also plays ping pong to debate his point.  The two sides end up wearing sumo outfits and battle on a wrestling mat to see who wins.  See the commercial below.

This makes the overall commercial very confusing as it spends too much time debating which half is better, and only uses the remaining 5-10 seconds to tell the audience that neither half matters.  At the same time, hashtags for #tea and #lemonade are shown to extend the debate through Twitter at

All this initial attention on tea or lemonade has muted the commercial’s overarching message.  Neither half is more important than the other; it is the half lemonade PLUS half tea that gives the beverage the great taste consumers want.   Extending the conversation to Twitter also appears to be a bad idea as users are encouraged to vote on which half is better.  The debate may generate more buzz for the product, but it does not translate to sales.  It also reinforces the message that one half is better than the other.  In the end, this may lead users to believe that the Diet Half ‘n’ Half is really a Diet Two-Third ‘n’ One-Third, or a product that is not evenly mixed to provide a refreshing taste.

Based on the commercial alone, would you go on-line to join in on debate?  Do you even care which half is better?  Or do you ultimately prefer AriZona’s Arnold Palmer and would not bother trying this product?

How Big Can Recovery Beverages Grow?

Monster Rehab - courtesy of

Initially piggybacking off of energy drinks, beverage experts are now defining recovery drinks to merit their own category (BevNet article here).  BevWire also previously reported on Lush Recovery Drink (recently rebranded to Amara Recovery Beverage).  As recovery drinks are still in its infancy along the beverage product life cycle, how can this category grow?  Who are the major players and what is being done to bring news/attention to the category?

The more well-known major players are energy drink manufacturers that each have their own line of recovery beverages such as Monster Rehab and Rockstar Recovery.  However, as Monster and Rockstar are companies that have built their name associated with “energy”, Rehab and Recovery may find it hard to grow within the companie’s beverage portfolios.  Despite their organization’s international distribution network, marketing budgets are devoted to the energy drinks since there’s more competition and the larger energy drink brand’s awareness needs to be maintained.

Amara Can - courtesy of

Given these circumstances, there are high reward opportunities for lesser known manufacturers to drive awareness to their recovery drinks.  Amara builds awareness through event sampling where the consumer can firsthand understand and experience the functions of the recovery beverage.  Also interesting about Amara is that their rebranding effort also included coating their aluminum cans with flourescent material so the packaging will glow when it’s on the shelf and in coolers.  BevNet’s article describes GTOX as another recovery drink manufacturer that is driving awareness for their product with Dennis Rodman as a spokesperson.  Code Blue is another manufacturer that is trying to re-position itself as more than just a hangover recovery beverage by targetting exercise recovery and hydration.  Although not all these beverages have national distribution, each of them are driving news and awareness to this category.

The theory is that companies that bring awareness to the category bring awareness to the product, and consumers are likely to reward these companies with their business.  It happened with Coca-Cola and Pepsi with carbonated soft drinks, it also happened with Red Bull, Monster and Rockstar with energy drinks.  Consumers also rewarded vitaminwater with their business for growing the enhanced water category.  The market leader for each of these respective beverage categories are typically those that started off bringing attention to the category.

On the original question on how big can this emerging category get, one needs to look at the path of the coconut water category.  The major players that drove category awareness – O.N.E. Zico, and Vita Coco – either purchased or signed partnership agreements with PepsiCo, Coca-Cola Refreshments and Dr Pepper Snapple Group in the past two years.  The beverage conglomerates recognized the potential of coconut water and quickly brought on experts in the business.  Even AriZona has gotten into the game (link here).  That said, it is still not time to put a dollar figure on the category worth of recovery drinks, but it certainly draws parallelisms to coconut water. There are only a few main players for now, but all the potential lies with names that are not nationally known.

The next time you go into your grocery store or convenience store, look for where they stock the Monster Rehab and Rockstar Recovery, and keep an eye out for other recovery drinks.

RTD Tea Category Growing – Driven By Convenience and Natural Food Stores

Arizona and Tazo tea

Packaged Facts published a research paper in early October stating that Ready-To-Drink (abbreviated RTD,  sometimes referred to refrigerated tea or bottled tea) is showing growth and resilience despite an economic downtown in the United States (link to the abstract here, but unless you want to buy the report you won’t know the full details of the research).  I’ve also wrote about the tea category’s growth in convenience stores earlier in the year (link here).

While the focus is entirely on the United States, there are some similarities between the two markets of U.S. and Canada, so the category’s growth is relevant to consumers here.  Packaged Fact’s research abstract points to the growth being driven by convenience stores and natural  food stores, although grocery stores remain the top channel that shoppers choose to purchase tea from.  In Canada, I would suggest that specific tea shops and also coffee shops (think Starbucks, Tim Horton’s, Second Cup, and Blenz, etc) also contributed to the tea’s growth.

Consumers already have a belief that tea is a healthier option relative to coffee, and many are sacrificing coffee beverages for tea or other caffeinated beverages.  Therefore the coffee shop’s survival depends on their ability to expand their beverage offerings beyond what they are experts at.  Walk into a Starbucks and you will see Tazo tea, Naked Juice, and Ethos water,  while Tim Horton’s will have a refrigerated section that includes Lipton bottled tea.  While these coffee shops’ main purpose is to serve coffee, having tea and other category options allows them to keep the customer happy and retain them, rather than losing them to a competitor.  After all, would you still go into a coffee shop with a friend if neither of you wanted coffee and they only served coffee, why not go into a tea shop?

Honest and Lipton tea

Focusing back on the growth of RTD tea, the report mentions that natural food stores drove double digit growth.  This point is intriguing because natural food stores are seen as niche and somewhat unconventional in their grocery offerings.  However, the growth of tea products in this channel may indicate that consumers are receptive to healthier alternatives, and bottled tea products that are stocked in these natural food stores may soon see wider distribution because of this healthy trend.  Another insight may be beverage manufacturers anticipating this trend and have looked to get their tea products listed and distributed in natural food stores to reach a wider audience.

In any case, it looks as if the tea category’s growth has very strong potential in the upcoming years.  As a healthy alternative to carbonated beverages and coffee, tea may be growing at these beverage category’s expense.  And it may provide competition in more than the traditional setting of your grocery store’s beverage aisle, as coffee shops and natural food stores are increasingly stocking tea options.

Taking this one step further, how can beverage manufacturers like Coca-Cola and Pepsi protect their carbonated offerings?  Since the beverage conglomerates also have tea offerings in their beverage portfolios (Coca-Cola with Nestea and Honest Tea, Pepsi with Lipton and SoBe), a solution may be a two step process.  First, gain distribution within these natural food stores (and other alternative channels like tea shops and pharmacies) for their respective tea beverages.  Next, understanding that there may be space and refrigeration limitations within the store, provide a health-branded cooler (of course, also include the manufacturer’s logo somewhere) to resolve these limitations, and bring in quick-moving and higher margin carbonated soft drinks.  These carbonated products can offset the cooler’s cost and provide these alternative channel retailers with a wider beverage selection to grow their customer base.

So the next time you step into a natural food store, keep a look out for the tea offerings they have available.  Are the tea offerings all-natural and names that you have rarely heard of?  If so, look out for these beverages in your traditional grocery store aisle in the near future, as they may be gaining wider acceptance in the market.  Or are they the Honest Teas and Liptons that you are familiar with?  If so, then the beverage manufacturer has successfully entered the alternative channel to expand their tea’s growth.

Honest Tea’s Social Experiment – Are Americans Honest?

Over the last few weeks, U.S. cities have been running a live social experiment on the subject of honesty.  Honest Tea (and for this social experiment the word play of “Honesty”) has set up unmanned “tea booths” across cities including Boston, Chicago, Miami, Washington D.C., Philadelphia, Dallas, New York, and Los Angeles where consumers can pick up a bottle of Honest Tea by donating $1 into a plastic box.  There is supposedly a camera watching the unmanned tea booth, but no one would be there to stop the consumer from stealing a bottle if they decided to not pay (or slip in an IOU note, monopoly money, or put in $1 and take 3 bottles, etc).  So far the results (posted on the microsite indicate that Boston citizens (99%) are the most honest while New York citizens (87%) are least honest.  The site also provide a camera link for each city the experiment is run, so you can watch to see if people are putting in a dollar when they grab a bottle.

The marketing campaign appears to be successful so far, with strong social integration and media impressions.    Social aspects include the ability to tune in on-line to the city of your choice, choosing the foundation that all the donations will go to, and the usual twitter/facebook/google+/e-mail/etc.

The campaign is sure to generate a lot of goodwill for Honest Tea, but will it bring in sales for the beverage, especially after the campaign and tea season (summer) ends?  So far, the translation to their bottom line is positive – almost all cities are seeing sales growth, ranging from strong double digit sales growth to modest single digits in others.  Depending on how long the campaign is run for, I might be able to watch this live in Boston or San Francisco when I make a visit later in the month.

Whether Honest Tea will carve out a stronghold in the category against larger manufacturers like Lipton, Nestea, or AriZona is a question for another day.  Though for a smaller player in the category, this is something that will certainly catch attention, generate buzz, and show that you understand how to reach your target market.

AriZona Enters Coconut Water Category

CocoZona - courtesy of

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.

AriZona Arnold Palmer Now in Canada

BevWire just found AriZona Arnold Palmer in a convenience store earlier this week, and was pleasantly surprised it was a glass bottle.  Naturally I had to buy it – this drink is normally found in an aluminum can, and has always been in the United States save for a few small corner stores bringing it across the border themselves.  Apparently it has made its entry into the Canadian market now.  AriZona has launched two new tea beverages, one is the Arnold Palmer half tea half lemonade beverage and the other is a Raspberry Tea.

Not fully confident that the Raspberry Tea will do well, since every company already has a raspberry tea offering.  It almost seems like a copycat innovation for them, relying on AriZona brand name to sell the tea rather than the tea being good itself.  Not that the AriZona Arnold Palmer Tea is any different for relying on the brand name, but there has been such a cult following for this flavor making it likely to succeed more so than the Raspberry Tea.  And there aren’t too many half tea half lemonade offerings out there, making this a unique combination without much competition.  Nestea and Lipton are the main competitors in this ready-to-drink tea.  Nestea offers their beverages in both plastic and glass bottles, as well as aluminum cans.  However, their glass bottle flavors haven’t done too well (remember the Nestea Vitao series, which has all but disappeared from stores by now).  So that makes Nestea not a close competitor for AriZona.  Lipton on the other side has glass bottles but nothing remotely close to the Arnold Palmer flavor.  Furthermore, most of their innovations are in the plastic bottles (Lipton Sparkling, diet flavors, and carbonated flavored teas) so they are not too strong of a competitor for AriZona either.

That said, who knows if Nestea or Lipton will come out with a Arnold Palmer copycat (like how everyone has a Raspberry tea flavor).  In the meantime, consumers that were introduced to the Arnold Palmer tea before but could not get it in Canada can now rest easy – it will likely be found at gas stations and supermarkets as well as the local corner store.

Coca-Cola To Distribute Dr Pepper For $715 Million

In an agreement announced last Monday, The Coca-Cola Company will pay $715 million to continue distributing Dr Pepper Snapple Group (DPSG) brands.

DPSG brands are largely distributed through Coca-Cola and Pepsi, and the one-time cash payments are part of a termination agreement that was triggered when the two companies purchased their distribution subsidiaries this year.  These deals appear to be really beneficial to DPSG, as they are one of the few beverage companies to see growth this past year in the carbonated soda drink category.  As a result of these deals, they save on infrastructure costs by having their products distributed from other companies’ trucks instead of their own.  This will allow them to spend more to market their beverages and hopefully gain more market share.

One interesting piece of information to note is that Snapple will now be distributed by Coca-Cola as part of the agreement.  It may not have mattered too much before when Snapple was a suffering beverage brand, one that was losing customers and market share to competitors.  However, the Snapple brand’s recent revival puts the tea back on customers’ radar with their recent marketing efforts (ie. The Apprentice’s flavor creations, increased distributive reach, new packaging).  At this time, it still stands to be determined where Snapple fits in with Coca-Cola’s other tea drinks – namely Nestea and AriZona – but it shouldn’t be taken lightly by any means.