Go Beyond The Basics

Whether they're gulping down a single-serve can of espresso and milk for a morning boost or enjoying a glass of iced tea on a lazy summer day, Americans love ready-to-drink (RTD) coffee and tea. These products are convenient, refreshing and come in a wide variety of flavors.

And the opportunity to develop the RTD coffee and tea products American consumers want isn't the national brands' alone. Retailers have a chance to provide value to shoppers with store brand RTD coffees and teas — as long as they're of good quality, says Gary Hemphill, managing director with the New York-based Beverage Marketing Corp.

"With any store brand, retailers need to remind themselves that while price is important, quality is equally important," he points out. "Today's consumer expects it."

Traditional items lead RTD coffee

In the overall RTD coffee category, traditional coffee-and-milk products continue to lead, with a number of brands rolling out versions of these items that feature unique flavors and alternative sweeteners, says Arnold Thorstad, director of sales with Wilmette, Ill.-based Imbibe. To a lesser extent, some brands are taking inspiration from the functional beverages category when developing RTD coffees.

"[Some] developers have begun to mix various fruits and functional ingredients with coffee," he explains. "Trends today include coconut water and coffee," coffee drinks that boost the immune system, and coffee-based energy drinks.

Coffee-based energy drinks are a particular hot spot in the overall RTD coffee category. According to "Coffee — US," an October 2011 report from global market research firm Mintel, the introduction of Starbucks Doubleshot Energy + Coffee and similar SKUs has helped combat energy drinks' assault on RTD coffee and drive growth.

But retailers seeking store brand opportunities in RTD coffee might want to leave the innovation to the national brands. Steve Fay, executive vice president and sales team leader with Roscoe, Ill.-based Berner Food and Beverage Inc., believes retailers should focus instead on developing high-quality versions of classic products that sell well.

"Some of [the unique products we've developed] taste delightful and are much differentiated from standard branded items," he says. "The only trouble is that the consumer does not buy them. Many of the fringe flavors end up on the discontinuance list."

That's not to say retailers shouldn't consider offering unique flavors on a seasonal basis. Fay says Berner has seen strong demand in seasonal RTD coffees.

"Our seasonal programs with pumpkin spice and other fall/winter flavor options were major hits last year," he says. "Many of our store brand programs actually saw volume increases over a period that generally sees a downturn in sales."

In terms of RTD coffee packaging, Americans continue to have "an enduring love affair" with glass bottles, Fay says. Aluminum cans also are a popular choice for store brand RTD coffees.

As for future packaging development, Fay says Berner is looking into flexible packaging and new packaging concepts that can withstand high-heat processing.

Do think about releasing new twists on traditional ready-to-drink teas — such as a reduced-calorie tea-and-lemonade blend — under your own brand.

Don't forget that providing quality is just as important as providing value when it comes to ready-to-drink coffees and teas.

RTD teas get innovative

On the RTD tea side, retailers are growing the category by introducing new twists on old favorites — such as reduced-calorie versions of the traditional tea-and-lemonade blend — under their own brands, says Jarrod Perkins, product manager with Carneys Point, N.J.-based Clement Pappas & Co. And as the category grows, so will retailers' opportunities for further innovation.

"As the segment expands, [retailers should] allow private brands to extend beyond basic tea staples to capitalize on trends," he says. "The world of tea opens doors to new product attributes that [retailers] can look towards for innovation — i.e., fair trade, exotic/ global flavors [and natural] alternative sweeteners like honey and stevia."

Retailers also could take cues from the functional beverages category, says John Wilson, marketing coordinator with Edison, N.J.-based Allen Flavors. Popular functional additions to energy drinks that are making their way into RTD teas include vitamins, amino acids, extra caffeine and more.

Moreover, retailers should consider varieties beyond the same old black and green RTD teas. In addition to black and green teas, a number of manufacturers are offering red and white RTD tea varieties for private labeling, Hemphill says.

"Today's consumers want variety, and companies are working to provide a wide range of RTD tea options for retailers to offer to their customers," he explains.

As for RTD tea packaging, not much has changed — PET bottles and single-serve aluminum cans continue to be mainstays, Wilson says.

However, some brands are increasing packaging size for the value-seeking consumer, Thorstad says.

"So the tea category is seeing package sizes increase to 20-ounce cans, 1.5-liter bottles and 1-gallon containers," he explains.

Do consider rolling out ready-to-drink coffees in seasonal flavors such as pumpkin spice.

Merchandise for success

But even with the right product in the right package, retailers still need to put some merchandising muscle behind their RTD coffee and tea products. Fay notes that offering a free store brand RTD coffee or tea with the purchase of the product's national brand counterpart is one way to get customers to try the product.

"We had a retailer who offered one free [store brand RTD coffee product] with the purchase of the national brand to invite a direct comparison," Fay says. "Their store brand sales have retained a good deal of the volume gain in residual."

Retailers also could merchandise store brand single-serve RTD coffee and tea products near checkout, Hemphill says.

"Single-serve refreshment beverages remain an impulse purchase in many situations," he says.

And according to Thorstad, demos will always be the most effective method to educate the consumer and get them to try store brand RTD coffee and tea products.

"While value may be evident on the shelf, consumers need to taste the great private label coffees and teas that retailers offer," he

Don't limit your merchandising activity to the beverage aisle — place ready-to-drink coffees and teas near the checkout.

Look what's new

Kettle Brewed Unsweetened Black Tea from Monrovia, Calif.-based Trader Joe's is said to be freshly brewed right before it is bottled. Made from "the finest tea leaves," the product contains no sugar or artificial sweeteners and is prepared in "an old fashioned way." It retails in a 128-oz. BPA-free plastic bottle made from 25 percent pre-consumer recycled materials.

New from San Antonio-based H-E-B is H-E-B Cafe Olé Caffecino Coffee Drink. Described as a low-fat creamy blend of coffee and milk, the product retails in a pack of four 4.95-oz. glass bottles.

Cincinnati-based Kroger's Tropical Peach Flavor Green Tea is said to contain all-natural flavors. The product retails in a pack of 12 16.9-oz. recyclable PET bottles.

Batavia, Ill.-based ALDI introduced Beaumont Coffee Caramel Iced Coffee, which comprises caramel-flavored coffee made from freshly roasted and flavored Arabica beans. The all-natural product retails in a 9.5-oz. glass bottle made from 10 percent recycled material.

Kirkland Signature Natural Brewed Green Tea from Issaquah, Wash.-based Costco Wholesale is said to be made with whole green tea leaves and all-natural ingredients. Lightly sweetened, the product retails in a package that includes five bottles of Natural Brewed Peach Green Tea bottles, five bottles of Natural Brewed Apple Green Tea bottles, and five bottles of Natural Brewed Lemon Green Tea bottles. Each recyclable PET bottle holds 16.9 oz. of tea.

Source: Mintel's Global New Products Database