Stir up sales

With a Starbucks seemingly on every corner, it’s no secret that Americans love ready-to-drink (RTD) coffee and tea. What many don’t love, however, are the high prices associated with these away-from-home purchases.

And prices are expected only to rise, thanks to a prolonged drought in Brazil this year and the resulting rise in the cost of Arabica coffee beans. A price hike is never good, but it could mean that consumers will be seeking more affordable options for their morning cup of joe or tea.

But store brands have been having a rough time of late in the RTD coffee and tea segment. Data from Chicago-based market research firm Information Resources Inc. show that dollar and unit sales of store brand canned and bottled tea and cappuccino/iced coffee fell dramatically during the 52 weeks ending May 18. See the table, p. 50.

Get creative with flavors

One way to attract shoppers to store brand RTD coffee is by featuring flavors that jump off the shelf. Here, flavors that are reminiscent of dessert are being seen more often, according to Laura Klibanow, opportunity manager at Niles, Ill.-based Imbibe Inc., a beverage development company.

“One of the prominent trends in coffee right now is decadent and indulgent flavor profiles,” she says. “We are seeing flavors that traditionally were limited to the ice cream aisle make their way across beverage platforms, including coffee.”

Just as with coffee, retailers also might want to think beyond basic when it comes to store brand RTD tea flavors. Pairing tea with an exotic fruit flavor is one current trend, while flavor combos are also popular, says Joe Arends, director of marketing at Glenview, Ill.-based Leahy IFP, a manufacturer of fruit and beverage solutions.

“Although fruit-flavored tea flavors continue to grow, we’re seeing strong demand for flavor combinations such as mojito mint, triple berry or cucumber lime from a variety of partners,” he says.

Another way to differentiate is through profiles that bring to mind specific locales or regions.

“Flavors of defined providence help brands to stand out on the shelf and establish a sense of authenticity against their competition. For example, Moroccan Mint, Tahitian Vanilla or Alphonso Mango,” Klibanow says.

Keep it natural

Americans value the convenience an RTD beverage represents, but they increasingly don’t value lots of sugar and artificial ingredients. Indeed, the better-for-you and clean label trends are impacting RTD coffee and tea just as they are impacting most other food and drink categories.

“It is clear that even the mainstream consumer is looking for more healthful products, containing natural ingredients,” Klibanow notes. “Consumers want simpler ingredient statements with ingredients they are familiar with. There is a perception among consumers that if you can’t pronounce it, it’s not good for you.”

And retailers have a number of options when it comes to creating a more healthful RTD coffee or tea beverage. With more consumers ditching cow’s milk in favor of substitutes, one avenue is through offering RTD coffees that contain a non-dairy base such as almond, coconut or soy milk. Sales for milk alternatives were nearly $2 billion in 2013, and the sales growth rate is expected to beat that of dairy milk at least through 2018, according to a recent Washington Post article that cites data from global market research firm Mintel. The article also points to almond milk as being well-suited for coffee and tea because of its mild flavor and thinner texture.

Tea, rich in antioxidants, already has the advantage of being generally considered more healthful than other RTD beverages such as soda and juice, but retailers could make existing tea products even more appealing to health-conscious consumers by substituting artificial non-nutritive sweeteners with stevia and other natural sweeteners.

“In order to stay relevant and compete with the leading national brands, store brands are turning to us to formulate products using a proprietary blend of natural zero-calorie sweetener, which includes stevia and monk fruit,” Klibanow says. “The key to a successful product launch is to use natural sweeteners but not compromise the taste profile.”

Get personal

Retailers also need to keep in mind their target audience for store brand coffee and tea, since different groups want different things, even from a bottled beverage.

“Store brand programs should continue to target millennials and Gen-X, who relate tea to a healthy beverage alternative to sodas and other sugary drink options, while promoting the functionality of certain types of teas to older customers with age-related problems such as joint or digestion [issues],” Arends contends.

One function that people across multiple demographics want from RTD beverages is energy. For that reason, green coffee extract is soaring in popularity, especially since Dr. Oz promoted the extract on his show as a supplement that can potentially stimulate weight loss. The weight loss claim is still being debated, but the extract, derived from unroasted coffee beans through a process that eliminates the bitter taste, does provide a good boost of caffeine, with a neutral flavor that makes it ideal for blending. The ingredient has already shown up in products such as Starbucks Refreshers, and retailers might find success by infusing store brand energy tea drinks with the extract.

“It is an exciting new ingredient that is getting a lot of media attention,” according to the website of Johns Creek, Ga.-based Amelia Bay, producer of extracts, essences and aromas for coffee and tea.

A recent report from the Packaged Facts division of Rockville, Md.- based MarketResearch.com — “Tea and Ready-to-Drink Tea in the U.S.: Retail & Foodservice, 5th Edition”— notes that men are another group to keep in mind for tea customization, particularly since men already drink RTD almost as much as women.

“Generally, tea consumption skews female, a point driven home by tea’s association as ‘healthy’ and even ‘dainty,’” says David Morris, a foodservice consultant for Packaged Facts, adding that packaging and marketing are probably the best means of selling tea to men, more so than flavor. But “let’s not forget that, thanks to marketing, men now drink Coke Zero.”

He singles out Woodbury, N.Y.-based AriZona Beverage Company as one RTD tea manufacturer that, “while maintaining cross-gender appeal,” has done a good job of reaching men through both its association with golfer Arnold Palmer and its “checkerboard design and bold colors.” Functional benefits tied to energy, virility or stress relief might also grab their attention.

“With energy drinks having gotten such bad press, I think there is a real opening here,” Morris says.

Another demographic that retailers might want to try reaching with their store brand teas is moms buying for their families — while RTD tea consumption for adults grew 5 percent between 2009 and 2013, usage grew even more among those consumers with children in the 6-11 and 12-17 age brackets, according to Packaged Facts.

“Tea marketers can win over the parent demographic by positioning tea as a replacement for alternative beverages,” and possibly also by “underscoring ethical farming and production practices,” the report’s summary reads.

Environmentally friendly packaging is something many consumers are seeking — and something that Arends says has been a success for his company with multi-serve space-saver cartons of tea. “Consumers have really responded to the non- GMO claim and the green aspects of the package — being sustainably sourced and recyclable with a low carbon footprint,” he adds. SB