July August 2007

Gerry's Insight

By Gerry Khermouch

In an engaging recent book, writer Tom Standage sought to tell “A History of the World in Six Glasses” by showing how beverages like coffee, tea and beer played integral roles in the key ages of mankind. By a similar act of reductionism, I think it’s possible to tour the broader world of beverages simply through a bottle of iced tea. The rich range of possibilities afforded by tea – and the concomitant opportunity for new entries in what might otherwise seem to be an exhausted segment – strikes me as quite extraordinary.

This was driven home to me a few weeks ago when a shrewd wholesaler I know, High Grade’s Guy Battaglia in New Jersey, insisted I check out a new brand he was carrying called Alexander’s Real Iced Tea. Guy was one of the first distributors to carry AriZona back in the early 1990s and more recently has aggressively worked Honest Tea, so I’ve learned never to fault his instincts. Yet Alexander’s seemed unprepossessing: nicely brewed tea, but stock bottle, Okay label, standard array of flavors, picture of its young founder on the back panel. What else is new?

When I finally got to meet the founder (last name Krosnowski, so I understand “Alexander’s”) at an event it was clear he was garnering traction for the brand by high-spirited force of personality, his visibly local connections and sheer hard work. In any other category I’m not sure that would suffice, but tea confers all kinds of advantages: it’s positioned as alternative yet accessible, is clearly derived from natural sources (as opposed to most energy drinks and functional beverages) and draws upon a rich nostalgic tradition. It also seems to stimulate consumers’ garage-startup fantasies (“I could do that!”). That’s not to even mention the spate of recent health news on the ingredient. All this gives an otherwise mundane idea like Alexander’s a fighting chance to carve out at least a regional niche.

That’s just the beginning in this category, which serves as a platform for excursions into all kinds of other realms. As “Tea Tells Many Tales” outlines elsewhere in this issue, teas are available in a wide range of varieties and can also serve as the familiar base for drinks that play in other segments, too. Meanwhile, venerable brands like Lipton, Nestea and Tetley can only reach so far up the intrigue scales. And after it descended into discounting hell and took an innovation vacation, it remains to be seen whether Snapple’s more recent push into premium realms will be enough to get that brand back on track. Even AriZona has thrived mainly at the value end lately. With consumers showing a remarkable interest in ferreting out niche items, that seems to create any number of openings for new entrants. So what are some of these?

At the gourmet end, I suspect that unsweetened or lightly sweetened brands like Honest Tea, Ito-En and Republic of Tea are about to garner considerably broader – and younger – audiences than the conventional wisdom would have it. I look among my daughter’s high school friends and see a sizable minority eschewing the more sugary Vitaminwater for brands like Honest Tea or Tea’s Tea, and without bridling at prices approaching $2, either. Nor do I see why a gourmet audience won’t be enamored of such top-shelf new entries as Harney & Sons’ bottled line.

Tea is also insinuating itself into CSDs. Steaz has fared well with its green-tea-based better-for-you sodas and Cricket even tries to play off Americans’ cola addiction with its green tea cola.

Then there’s a broad range of functional versions. I’ve been enthusiastic for some time about tea-based energy drinks targeting the majority of American consumers who’re alienated by the ingredients and positioning of conventional energy drinks. So far, entries like AriZona Green Tea Energy and Inko’s Energy haven’t quite ignited, and some observers believe that green tea – with its connotation of relaxation – fundamentally fights the idea of energy. I still think somebody’s going to figure it out, if not AriZona, Inko or Steaz, then some new brand.

Maybe it will be one of these yerba mate brands that seem to be rising on consumers’ radar with surprising speed. Even a guy like me, who mainly hangs around in relatively mainstream haunts has begun to run into folks imbibing mate through a traditional gourd and bombilla straw. That suggests that brands like Guayaki and Bombilla Gourd could prove more than a bleeding-edge phenomenon. It also suggests that, as so often is the case, consumers may be running a little ahead of those of us who actually are in the business. It will be fun to see who succeeds in figuring out precisely what their cup – or gourd – of tea is in coming years.