Rise Came Largely From Value-Added Products; Ready-To-Drink Coffee Market Continues to Slow

Sales of ready-to-drink tea, which recorded vigorous growth in the early years of the decade, have shown "new signs of life after a few lackluster years in the mid-1990s," it is reported in a study issued by Beverage Marketing Corporation, leading provider of data and consulting services to the global beverage industry.

Entitled RTD Tea & Coffee in the U.S. 1999, the latest edition of the annual study notes the same recent trend in overall tea sales, which grew by almost 2 percent, the best advance since 1993. Much of the growth and excitement in the U.S. tea market, it reports, came from specialty teas offering added value, including flavored, green, organic and nutrient-enhanced varieties. Green tea sales almost doubled in the past year, and a newcomer gaining favor was Chai, a blend from India of tea, milk, honey and spices.

RTD Coffee Sales Slump; Nescafé Exits Market

Ready-to-drink coffee sales, on the other hand, slowed considerably in 1999, the report discloses. One brand, Frappuccino, marketed by the Starbucks coffee chain and Pepsi-Cola, dominated the market, while the second-place brand, Nescafé, which had entered the category only in 1996, dropped out entirely, stating that the size of the market had not met expectations.

The total category rose just 2 percent in 1999, a retreat from the prior year's growth. Per capita consumption equalled 16.6 ounces, less than 1 percent of the total coffee imbibed by Americans, which came to 19 gallons for every man, woman and child, although coffee drinking has been declining consistently in the U.S., down 25 percent in the last 6 years.

RTD Tea Sales Bolstered by Functional Additives

Ready-to-drink tea sales grew 8 percent in 1999, accounting for 20 percent of the total tea market, the study reports. This represented a slowing from the 10.3 percent growth rate of the preceding year, with a large portion of the current year's growth derived from teas with added benefits and functions. Enhancements included herbs like St. John's Wort, echinacea, kava kava and ginkgo biloba. However, the study declares, "most RTD teas with nutrient enhancements have been able to satisfy consumer demand by walking a fine line between vaguely implied functional benefits (both physical and mental) and direct benefit claims, thereby avoiding both the incredulity of consumers and legal scrutiny by the FDA." In reality, it adds, "the dosage levels in most RTD teas are too small to provide any physiological effects among consumers."

Lipton and Nestea lead market; Snapple Revitalized

The top five RTD tea brands accounted for more than 95 percent of sales, the report revealed, with those marketed by the leading soft drink companies, Lipton from Pepsi-Cola and Nestea from Coca-Cola, far in the lead. Lipton held a 35.6 percent share of the market, followed by Nestea with 23.7 percent. Snapple, revitalized after its purchase by Triarc Beverage Companies, held third place with 17 percent, Arizona was fourth with 13 percent, and SoBe, which entered the market only in 1996 and has focused on herbal-enhanced products, took fifth place with 3.9 percent.

The study also notes that marketing programs in the field consisted largely of public relations and special promotions, and relied heavily on inventive packaging rather than on classic advertising methods. Distribution, it added, is slowly expanding, with the next area to be conquered being the fountain and on-premise business.

The 167-page RTD report studies in detail both the tea and coffee markets, including national and regional sales figures; the major corporations with their brands, strategies, management and promotional programs; trends and projections and consumer demographics. It is one of 21 such market reports issued annually by Beverage Marketing Corporation of New York, covering major areas and concerns of the worldwide beverage industry.