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    Retailers See Double-digit Growth in Bottled Tea

    C-stores continue to experience double-digit sales growth in bottled tea, as healthier perceptions abound.

    Tea time is alive and well in c-stores. In 2009, some c-stores reported to Convenience Store News that RTD tea was one of the surprising and best-growth beverage categories in their stores -- but it’s not a surprise anymore.

    "Bottled tea is still doing really well, growing 13 to 16 percent in our stores in 2010," reported Butch Fulton, beverage category manager for 103-store Plaid Pantries, based in Beaverton, Ore. "That good, strong growth continues into 2011, too."

    The same is true at Casey's General Stores in Ankeny, Iowa. "RTD tea continues to be up double-digits for us in stores with history," said Dana Sump, beverage category manager for Casey's, which operates more than 1,600 stores. "Even for January and February, it's up close to 20 percent on some items. I'm doing projections for our fiscal 2012, and I’m telling senior management that it's not showing any signs of slowing down. Does that mean it will grow only 12 percent instead of 18 percent moving forward? Well, I’ll take that any day."

    From an overall channel perspective, ready-to-drink tea may be one of the smallest sub-segments of bottled beverages in c-stores, totaling $1.2 billion for the 52 weeks ending Dec. 25, 2010, compared to $19.8 billion for the entire category during the same time period, according to Convenience Store News FIRST LOOK data, provided by The Nielsen Co. However, it is the fastest growing.

    For 2010, RTD tea increased 13.1 percent in sales over the previous year, on a volume gain of 17.7 percent. (The next closest category was alternative beverages with sales gains of 8.5 percent on a volume gain of 7.5 percent).

    And those tea gains keep improving slightly into this year. For the 52 weeks ending Feb. 19, 2011, RTD tea increased 13.4 percent in dollar sales and 17.9 percent in unit volume. Retailers believe the idea that tea is a "better-for-you" beverage choice is behind the growth.

    "People are looking for something healthier to drink," said Fulton. "I'm not sure the sweetened teas we sell are actually healthier than soda, but they are perceived healthier."

    Sump believes a lot of the growth is from people gravitating to the category from others, such as bottled water and carbonated soft drinks (CSD). "Bottled tea is at price points that are acceptable. It's often the same as a 20-ounce CSD, so it may or may not be healthier, especially when you’re talking about a straight-up sweet tea, but perception is everything to people."

    Plaid Pantries devotes about 12 percent to 15 percent of its cold vault space to RTD tea, depending on the particular set. This makes bottled tea third in terms of shelf space for the chain, behind carbonated soft drinks and energy drinks.

    "Tea is tied with isotonics and ahead of bottled water," said Fulton. "More and more people are going with just straight tap water or filters. Plus, the other thing is supermarkets are running 24-packs of water dirt-cheap, and there's no way we can come close to competing with that. Tea is a different story. Large format stores have also increased their packs of bottled tea, but people are still willing to buy a one-time tea that they’re going to drink instantly from us."

    While a barrage of manufacturers have come to the table with new teas, according to Sump, innovation is not behind the category growth and retailers are sticking to carefully defined sets.

    "If anything, innovation just cannibalizes it," he said. "We never allocated much more space to the category -- maybe a total of one shelf last summer." But for 2011, Casey's is keeping it as is. Sump said he carries about 7 or 8 brands, and recently looked at adding Zing tea but figured "how many brands and price point do you need here? Space is such a premium in the cold vault, and right now it’s not broke, so there’s no need to put it in flux."

    Fulton increased the RTD tea space of Plaid Pantries' larger beverage sets by about one shelf -- or 5 percent. "We’ll see how that does this year," he said. "If it's overkill, we’ll scale back next year in the spring."

    But so far, positive observations in the category continue, including:

    --Value-priced Teas: Casey's attests to having a good selection of value-oriented teas, according to Sump, with Arizona cans at 99 cents to premium bottles from direct-store delivery vendors (like Gold Peak) at about $1.79. "Arizona is the 5-Hour for the tea category," he said.

    Plaid Pantries does well selling Snapple bottles at two for $3. "When we do that about once a quarter they blow out of the store," said Fulton. When last year’s "The Apprentice" show with Donald Trump invented two new flavors of Snapple, "those really took off," he said. "This year the show is coming up with something else to do with Snapple and I expect to see great results again."

    --Gallons Growing: Casey's carries gallon jugs of Arizona tea for about $3.50 in the warm water set, right next to cases of bottled water, according to Sump. "Many of our customers would rather have a gallon of tea to take home rather than water and so that's continuing to grow slowly," he said. "It takes awhile for customers to realize that a c-store carries tea gallons. It's hard to stack them out on the front log. They’d get dirty and dusty. So sometimes it’s just time and repetition before it catches on."

    --Some Concentration on Concentrate: Altoona, Pa.-based Sheetz Inc. with 365 stores added B.W. Cooper's Iced Brew Tea Mini-Bottles of tea concentrate in some of its select stores. B.W. Cooper's Iced Brew Tea has been offered at Sheetz in the fountain since 2006, but jumping on the tea trend, the chain now wisely offers the mini-bottles to customers as a way for them to make the same tea at home for themselves.


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