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RTDs: From Concept to Consumption!
By Lauren Lund

Ready-to-Drink (RTD) beverages are taking the market by storm and it is no exception within the tea industry. From flavor concept to design and packaging, there are many steps to complete before the drink reaches the consumer.

It is evident that RTD selections are popular when one walks into a convenience store. Most of the time an entire wall is dedicated to refrigerators filled with these beverages whether it is soda, juice, energy drinks, iced tea or coffee. Due to this spike in consumer demand many companies are breaking into the RTD industry.

“Our core mission is to popularize mate in America and the easiest way to do that is in RTD bottles,” said T.J. McIntyre, founder and president of the Colorado-based company Pixie Mate, a tea packer. “By pushing our product with RTD bottles, many people will be able to become familiar with it.”

This is a philosophy that several in the tea industry are following, especially with the trend of consumers going towards a healthier grab at the store. “Consumers want easy, simple means in getting their dose of ‘wellness’ in convenient packaging that also tastes delicious and pure,” said Rona Tison, senior vice president of corporate relations at ITO EN, one of Japan’s leading suppliers of green tea leaves and green tea beverages.

As the trends rise in healthier beverages, companies are also changing their products to fit the new refined palates of Americans, who now want more natural products with the taste emphasis on the tea or coffee flavors and not the sugary flavorings or additives. “When we first introduced our RTD teas in the U.S., we adjusted the flavor to a lighter brew for the American market,” said Tison. “Today, however, the palate has evolved and we are now seeing demand for our original authentic brew, Oi Oacha, the number one selling brew in Japan, where the consumer has a long history of drinking unsweetened green teas.”

With RTDs being one of the main areas where there is growth in the tea industry, many companies are joining the grab-n-go frenzy. But, as with anything that is “easy” there is usually a lot that has to go into the production - RTDs are no exception.

Brief Company Profiles
New companies such as, Think Rooibos and Golden Star Tea Co. have seen a niche in the industry and are using it to promote their tea products. Think Rooibos was formed nine months ago and currently only produces RTD rooibos tea bottles, provided in four different flavors (Original, Passion Fruit, Pomegranate & Acai and Mint Lemonade) which are predicted to be on store shelves by the end of the summer, according to Anthony Berklich, partner of Think Rooibos. “I studied abroad in Africa and have an affinity for it and they have this amazing tea that is so great for you,” explained Berklich. “We decided to do this because there was no other company on the market who provided RTD rooibos tea… and its composition makes it easy to mix with different fruits and flavors.”

Golden Star Tea Co., another “newbie” in the industry, was literally created in the kitchen of Edward Carden, the CEO and creative director. “I had a mini-lab in my kitchen,” explained Carden who experimented with the carbonation process first by inviting people over for “carbonated pomegranate martinis and it just went from there.” Ultimately Carden settled upon a carbonated tea beverage because of the ability of many tea varietals’ to ferment and be paired well with food. Golden Star Tea Co. currently offers one flavor, White Jasmine Sparkling Tea, and can be found in upscale grocery stores come August.

Larger companies like ITO EN and Pixie Mate are also following suit by expanding their product line into RTDs. ITO EN has a history with tea spanning over 40 years and put their mark on the map of the RTD industry by producing “the first RTD green tea, revolutionizing the green tea market in the world,” said Tison. They have also just hit the market with their brand new flavor Pure Black Darjeeling, an unsweetened Darjeeling tea on their TEAS’ TEA brand.

Pixie Mate has developed a new RTD line for their mate distribution, which previously was only offered in bags, loose tea and concentrate. Their RTD is offered in three different selections, Authentic Yerba Mate, Green Tea Yerba Mate and Lemon Ginger Black Tea Mate.

No matter the size of the company, all must constantly be watching developments within the industry to figure out what the consumer desires in their quick grab-n-go process at the store. Once the trends are analyzed, an idea is brought to the table and from that point it could “take anywhere from a month to a year-and-half to hit the store shelves,” according Berklich.

Many companies agree the process from concept to creation can be short or long depending on many factors including how it tests in focus groups, distribution, FDA approval or the need for more RTDs on store shelves.

The first step everyone must do is to create the idea for a beverage concept. Then pick out the ingredients that would work best for the idea and make a “mock” of the beverage for taste testings. Whether a company does their testing “in-house” as ITO EN does, or focus groups across the country with various age groups as Think Rooibos does, the product must be tested.

The flavor concept for the beverage is one of the most important steps in the process. Creating a new flavor concept or a whole new idea for the RTD industry is what is going to make your product stand out. Think Rooibos is the first company to use rooibos for their RTD cold tea beverage, making it easier for the consumer to try; whereas the rest of the market serves it as a hot beverage. Golden Star Tea Co. is launching a new RTD tea that serves the “population underserved by the RTD industry who like to pair beverages with food, but don’t want alcohol; kind of like a replacement for wine or champagne.”

Whether your idea is create a new flavor, use a different type of tea or appeal to different populations otherwise underserved within the industry, it appears to be important to go natural with the ingredients in your beverage. All of the companies mentioned brew their tea to obtain the tea flavoring and use no powders or flavor extracts. “Our flavors are accomplished from brewing fresh tea. We use no flavors at all. To achieve our Lemon Ginger Black Tea Mate we use mate and achieve the additional flavors by brewing lemon grass, organic ginger and liquorice root and add a touch of sugar,” said McIntyre.

ITO EN, Think Rooibos and Golden Star Tea’s policies on beverage creation also follow this trend: Natural. “Our products are all natural and made with premium tea leaves, without any artificial additives,” said Tison. “There are three ingredients in our product: water, tea and sugar,” said Carden.

Production/ Distribution
For those interested in entering into the RTD industry, it must be known that creating a flavor concept that is going to sell isn’t the hardest part; it’s the production of the product that is. “The category is so hot…we are fighting for line time,” said McIntyre.

In order to avoid this problem, being a private label helps to solve any line time debates. But, according to McIntyre, “95% of the brands in RTD…are brewed and packed in a co-packer’s facility.” So, this is an issue many in the industry are facing. But, some, like ITO EN who produce through a co-packer, do not have this setback. “We’ve been with our co-packer in Japan for a long time and I think we are their biggest customer,” said Tison. “So, we don’t have that problem, but I can see how other companies might run into that issue.”

Just like every aspect of life, it’s not about what you know, it’s whom you know and most companies agree that it all depends on the distributor they have on how well their product is marketed and sold in specific areas of the country. “We sell a lot of mate in the Northeast, which would not make sense to most, but the distributor up there is good,” said McIntyre of Pixie Mate, which is headquartered in the Rocky Mountain region where their product is also well liked.

Generally speaking companies’ products sell best in the location of their headquarters due to their ability to watch and market their product best. But, companies must rely strongly on their distributors to help them get placement in stores across the nation. Once placement is settled, getting the product to the facility seems to be the easier part because tea is so sustainable; no refrigeration is required for transit.

Once in the stores:
Again, the companies are in agreement that store placement is very important in how their product sells. Being in the coolers, at eye-level on shelves or on an end-of-aisle display is the most desired. Unfortunately, companies do not have control on where a supplier places their product unless they can negotiate something with the buyer or retailer. Even then “you need a dedicated team going in to the stores to check because it doesn’t matter what retailers say,” said McIntyre. He added, “That’s why it is hard for smaller companies to break through. With a big company you have one person on a team for every 50 stores, whereas a smaller company has maybe one person to every 1,500 stores.”

These are reasons companies do in-store promotions and create eye-catching labeling for their bottles; so people will notice them. “How often do you look at the bottom shelf at the grocery store?” commented Berklich. To promote their products, companies must be out in the stores full-force to promote themselves and hopefully gain enough popularity to move up on the shelves or into the coolers. “There are two ways to help promote the sale of your product: You have to be in the drink cooler. And you have to do sale prices,” said McIntyre.

Companies also put a lot of thought into the labeling of the bottle, hoping to increase visibility and sales. Due to the rise in health-conscious consumers many companies are promoting the organic, 100% natural aspects of their drink, whereas some companies try to grab attention other ways. Pixie Mate has a huge bull’s eye in the middle of the label to grab the consumer’s attention. Think Rooibos has an outline of Africa on their bottle in order to promote the continent in which they get their product from and their philanthropic ways of donating a percentage of their profit to South Africa. Golden Star Tea Co. wanted a more “simple and timeless” design that follows their theme for their high-end RTD beverage, according to Carden.

After a product is on the shelves, all a company can do is cross their fingers and hope all of the thought and promotions they put into their product grabs the attention of consumers. With so many choices out there it is hard to say what will sell. “It’s all a guess, but you have to make an intelligent guess,” said Berklich. So for anyone who is trying to break in to the booming RTD industry or are hoping to boost sales in the industry it must be known, “it’s just a hard business,” he added.

Tea & Coffee - August, 2008

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