Brewing up the hot beverage category

Shane Starling explores the challenges of marketing teas and other hot drinks to a younger generation and assesses stimulating new developments in the coffee market

When it comes to functional hot beverages, most consumers will probably think of specialty teas: green teas, white teas, chai teas, herbal teas. Tea is, after all, the most popular beverage in the world—not including water.

Drinks consultancy Zenith estimates worldwide tea consumption at 54 litres per person, followed by carbonates and milk. Most teas have a functional aspect, whether it is their inherent antioxidant properties, or whether they are enhanced by the fortification of vitamins, minerals or herbs. Specialty teas continue to find their most receptive audience among core health consumers who are receptive to their healthful messages. But they are slowly entering the mainstream where they can be found in a growing number of major supermarkets.

It?s about time, says Brian Keating, founder of industry consultancy, the Sage Group, which publishes ?Tea is Hot?, an annual report on the US and international tea markets. ?Tea has been an unsexy, undervalued drink in the form of black teas and green teas,? he observes. ?Herbal teas are quite hip but very niche. Now tea people are starting to look at what they do and saying, ?My God, we?re a functional beverage without getting dressed up and going anywhere?,? he states. ?There is so much research out there. Tea companies are seeing that they are sitting on a portfolio of goodies—phytoconstituents they never dreamed of. Now they need to work on marketing themselves.?

People are interested in herbal teas for a variety of reasons, says Lynn Painter of UK-based Dragonfly Teas, which makes a range of specialty teas including an organic white tea and a line that blends traditional black teas such as earl grey and English breakfast with rooibos. ?Some people are looking for antioxidants, some want less caffeine, and some prefer low tannins. Then there are people who just like the taste. Tea is a good way to give up caffeine because you get the flavour without the caffeine.?

Green tea growing
Market analyst Datamonitor estimates British green tea consumption increased more than 20 fold between 1997 and 2002. In the same period, black tea bag consumption fell from 127 to 114 million kg, while herbal and fruit tea use grew 50 per cent.

While straight green tea is one of the biggest sellers, Jeremy Dunn, design and marketing manager at UK-based tea producer Clipper Teas, notes white tea has entered the public?s consciousness. ?When we launched it just over a year ago, little attention was paid to it, but that has changed very quickly. There has been a lot of talk about white tea in the press and that has made our job much easier. The common public perception of white tea is that it is clean, very low in caffeine and high in antioxidants. We add ingredients to some of them and the functional ones have flavours added as well to boost their flavour profiles. But we do this only because we put enough of the functional ingredient in there to make sure it is actually functional.? The company is about to launch a range of white teas with added ingredients such as echinacea and ginseng.

Dunn says a sea change is occurring, albeit a subtle one. ?I don?t think mainstream consumers are moving to exclusively drinking green tea. People are buying specialist teas in addition to their regular black teas. More and more people have more teas in their cupboard. They?ve got an everyday tea but they also have specialty teas for special occasions.?

Japan is one of the most advanced hot functional beverages markets. Datamoni-tor?s 2002 figures show the average Japanese spent $65 annually on all hot beverages, the most in the Asia-Pacific region. Hong Kong was next ($36) with Australia third ($32).

Japanese market specialist Paul Yamaguchi, of Paul Yamaguchi & Associates, notes there are literally hundreds of ready-to-drink teas in Japanese supermarkets, vending machines and other outlets, although many of them are of the chilled tonic variety that are becoming increasingly popular in Western markets the world over. Hot herbal teas marketed specifically at those with diabetes, or those with cardiovascular concerns or high blood pressure, are beginning to appear on the market, he notes.

A new take on coffee
Coffee, on the other hand, is not seen as a functional drink in most parts of the world, despite its stimulant properties. Hot chocolate is similarly considered even if a recent well-publicised Journal of Agricultural and Food Chemistry study showed cocoa had better antioxidant potential than green and black tea and red wine. Cargill?s Wilbur Chocolate division plans a sugar-free line of chocolate based on erythritol and inulin that may lend functionality to hot chocolate beverages in the future, but for now it remains an underdeveloped sector as far as functionality goes.

Similarly, coffee is rarely marketed on the basis of its functional properties and that includes its most obvious functional characteristic—as a stimulant. It is almost as if the stimulant quality of coffee can be enjoyed but not spoken of. Perhaps this is to do with its homely image and the ubiquity of its consumption—the average American consumes a mammoth 3.3 cups of coffee per day, although, according to Datamonitor, Brazilians and Scandinavians drink even more. San Diego-based Nutrition Business Journal puts the US functional tea and coffee market at just over $1 billion in 2002.

New technologies are opening up fresh marketing angles for traditional beverages like coffee. A Texas-based company, Applied Food Sciences, has developed a patented coffee roasting process, HealthyRoast, which boosts the antioxidant count of brewed coffee in comparison to regular coffee. It does this by pre-soaking green coffee beans to drain much of their antioxidant content and then soaking the roasted beans in this same liquid to return many of the antioxidants to the end product. ?It?s a 100 per cent natural process that does not affect the taste and aroma of brewed coffee,? says AFS chief executive officer Loretta Zapp.

AFS has linked up with specialty roaster, California-based Black Mountain Gold, and will have product in health stores early this year. ?We know we have a tricky path to negotiate to take this into the mainstream,? Zapp states, ?and we need to be gentle or they might reject it without giving it a chance. The consumer seems to have a pretty good handle on the fact that antioxidants are good for you, but there is little understanding of how they function. The product will be marketed in such a way to ensure that consumers understand that a cup of HealthyRoast coffee is just like a cup of tea as far as delivering health-promoting antioxidants.?

Antioxidant awareness is low
Donald Wilkes, president/CEO of California-based flavour manufacturer Blue Pacific Flavors, believes the antioxidant sell needs to be amplified. ?People talk about the health benefits but you have to do it in a lifestyle approach. People might be interested in the health benefits of green tea, but antioxidant awareness is low. People might know they are healthy for you, but they won?t know how or why. Part of the solution is creating an education platform.?

One company not shying away from coffee?s stimulant potential is UK-based Rocket Fuel, which makes a ready-to-drink self-heating espresso. Not content with the caffeine content, they infuse it with guarana. Rocket Fuel is marketing itself as a rival to energy drinks like Red Bull and is aimed squarely at ?fast-living 18- to 35-year-old consumers who demand high quality premium beverages to fit in with their fast moving lifestyles,? says the company.

Aside from its functionality, the product is also being sold on its high-convenience factor for both the consumer and the retailer. ?You can use it anywhere,? says Rocket Fuel spokesperson Ed Chapman. ?You can open it while you are travelling, at home, in the car. Basically it is a coffee machine in your hand. Retailers can sell the product just by putting it on the shelf. They don?t need any coffee-making equipment whatsoever.?

Starbucks promoting functional drinks
One chain of outlets that is very much in the business of coffee-making is Starbucks. Depending on how you view it, Starbucks and other coffee-house chains have either benefited from, or precipitated, a move away from instant, home-made coffee. ?While we may focus on health and convenience more than ever, we are no longer willing to settle for something that?s fast or caffeine-free but unpleasant,? says Datamonitor consumer analyst, John Band. ?People increasingly prefer to pay for a take-out of premium coffee, rather than making instant at home.?

Starbucks has promoted a range of specialty coffees and teas that have done much to broaden the hot beverage palette of many Western consumers, especially Americans. The Seattle-based multinational bought out specialty tea maker, Tazo Tea Company, and although its tea sales only account for a minute percentage of its total revenues, it is an important part of its platform as a beverage innovator. That?s why Starbucks has signed an agreement with a company like White Wave to bring a soy latte drink to the US mass market.

?Silk (White Wave?s soymilk brand) has made a deal with Starbucks and that is the merging of two strong brands, says Wilkes. ?Soy has done a great job of appearing to be healthier than dairy. I see lines of coffee-based soy products coming out soon. You might even get a soy coffee chain. It?s a very significant move as it shows that soymilk has become a mainstream category.?

According to Sage?s Keating, Starbucks has become the ?largest daily vendor of Chai tea on the planet.? Starbucks? influence cannot be underestimated, he says, noting their immense marketing muscle and unparalleled worldwide exposure. ?They can do a lot to sway the future perception of a functional beverage. They are moving millions of dollars of functional beverages every day—particularly Tazo chai and soy lattes. They also do a chai soy latte that is selling well. A lot of people are trying to make chai tea the cappuccino or latte of the new century. Getting young people to drink tea is the challenge. There are many young people with high incomes so if tea can be made hip and trendier it can break out of its traditional 40-plus female demographic.?

He adds: ?Anybody involved in specialty tea should pay attention to Starbucks because they have the ability to own a significant share of tea. They can make statements about nutrition and the health aspects of tea that many of these companies can?t make and they have incredible distribution with thousands of outlets. Although Starbucks teas seem to be a sealed deal with Tazo, watch it for trends. They are going to drive the market and open up a lot of consciousness for tea and functionality in all hot beverages.?

US specialty tea manufacturers needed to get up to speed on health claims, especially now that the system has been liberalised by the Food and Drug Administration, he warns. ?Tea people have never operated in the area of claims ? most of them don?t even know what DSHEA is,? says Keating. ?That?s why we?ve put together some information with a regulatory expert so they can get moving in the claims area.?

More than coffee
The very fact that a heavyweight like Starbucks is introducing non-coffee products is a sign of things to come, according to Philip Samuel, chairman and managing director of Indian ingredient supplier Indfrag, which supplies its ingredients worldwide and has a healthy trade into the US. ?Teas are mostly sold on the visual and taste appeal,? he observes. ?There are new ingredients coming onto the market that will have sufficient power to make the beverages deliver the promised functionality.?

Such ingredients will not be affected by brewing issues, a fact that should allow their healthful benefits to be exploited more fully. ?Concentrated extracts will have standardised activity and since they dissolve quickly, it won?t matter how long the tea is brewed for. The challenge is to preserve a good taste.?

Ah, taste—the foundation without which nothing can be built. ?If the formulators do not deliver taste, then a lot of these functional beverages will go the way of decaffeinated coffee,? predicts Wilkes. ?Obsolescence.?

Tea makers looking to tap the US market would do well to move with caution, he warns. ?We are very immature in the US when it comes to specialty teas. It is a much more developed market in Europe and in particular the UK. They understand the differences between good and bad tea. Because of that immaturity, I don?t see tea growing so fast on the functional side because there is still so far to go on the specialty tea side.? He forecasts hot beverages marketed on their low-carb potential, perhaps based on soy or even regular milk.

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