Canadian Vending

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Dispensing Strategies: The Art Of Tea

The Art Of Tea


April 30, 2008
By Michelle Brisebois

Topics

If you think of doddering grannies and rocking chairs when you think of
tea – it may be time to make change for a paradigm shift. Tea is one of
the fastest-growing hot beverages sold in both grocery and foodservice
and it’s posting double-digit growth.

If you think of doddering grannies and rocking chairs when you think of tea – it may be time to make change for a paradigm shift. Tea is one of the fastest-growing hot beverages sold in both grocery and foodservice and it’s posting double-digit growth.

What’s even more intriguing is to note that the profit margins on tea are growing as well. Tea is becoming more exotic and lending itself to the same upscale formats as coffee. Exotic and upscale are usually code words for “profitable” and that’s a fact the vending industry should take notice of. Beverages, especially hot beverages have become more upscale. Tea and coffee used to simply accompany a meal or be an afterthought consumed on the run. 

There are several trends driving the demand for change in hot beverages. Demographics play a key role, since baby boomers are such a large consumer group. These consumers are extremely driven to seek out healthier products and are demanding foods and beverages that can serve as medicine and still taste good; tea fits this profile much more effectively than coffee. In fact, a survey conducted by Ipsos-Reid for the Tea Association of Canada found that 14 per cent or every one in seven tea drinkers mention the fact that tea is good for their health as a top of mind reason for drinking tea.

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Youthful consumers want healthier choices too. A recent Beverage World magazine article on the future of drink explains, “Kids today, you know, are growing up with bottled water, not cola, as an automatic choice” (Prince, 2002).

It’s become fashionable for beverages to target lifestyle events: sporting, dining experiences, mood enhancement, and a host of other situations. Marketplace usage occasions have become more specific. A consumer may choose a black tea to start the day and herbal tea in the afternoon to de-stress. 

The lifestyle marketing of tea has increased the number of different types of occasions where teas are being consumed. Viewing tea-drinking opportunities through this lens is the key to success for the vending industry because some of your machines may be in prime locations to target a tea-drinking consumer.

Canada’s growth relies very much on immigration. Right now, most of our immigrants are coming from Asian and Middle Eastern countries and these are tea-drinking cultures. Homegrown consumers are moving towards tea as well largely because heavy hitters like Starbucks have created a new tea category – the gourmet tea latte. 

One of the fastest growing beverage categories over the past decade has been specialty coffee and tea. Research conducted by NPD Canada indicates the market is worth almost $1 billion in Canada alone, an increase of 19 per cent in 2005 from 2004. These numbers are enough to make Coke, the granddaddy of the beverage industry, nervous enough to try and jump on the trend. 

Struggling to combat slumping demand for its soft drinks, Coca-Cola Co. is making its foray into the hot beverage market, launching a new line of brewed tea and coffee lattes. Canada will be the test market for this new launch and Coke has dubbed the new brand “Far Coast.” Coke is planning to sell this product to restaurants and movie theatres. The intent is to provide vendors with Coke’s own espresso machines and brewing systems, as well as the coffee and tea.

Celestial Seasonings helped consumers move from black tea to herbal teas in the 1970s and ’80s. These fruity teas were sweet and easy to drink. Much like we’re seeing wine drinkers develop a more sophisticated palate – tea drinkers have moved to green tea, white tea and the hot new trend, red teas. These teas have a much more unusual flavour profile but are touted as having quite extensive health benefits.  An aging population eats this stuff up and the proof is at the cash register.

The past few years have been good to green tea. Articles about the tea’s “foodaceutical benefits” helped bring this specialty tea to the forefront. In the natural products supermarket channel, green tea represented 21.2 per cent of dollar sales of teas in 2003. The herbal beverage tea category captured 12.7 per cent of sales. All of this noise is leading somewhere very good for us.  You see, once consumers learn to drink something new, it’s only a matter of time before the mixologists step in and create formats perfect for vending.

The “ready-to-drink” category of teas is currently exploding in sales growth. This category includes iced tea and exotic tea infusions featuring green, jasmine and Rooibos blends. These elixirs appeal mainly to the youth segment no longer choosing soft drinks as their main beverage. 

“Ready-to-drink teas have become a terrific platform for flavor and functional innovation,” Christine Farkas of Merrill Lynch wrote.

“Consumers appear willing to try new blends, are interested in exotic sources and are willing to pay up for healthier options or quality.” Canadian sales of ready-to-drink (RTD) teas were $2 billion in 2003, up significantly from only $200 million in 1990. The RTD segment is the largest component of the overall tea market, accounting for 35 per cent of the total.

As tea moves from low margin commodity to profitable delicacy, the opportunities for the vending industry explode. Look at your locations for opportunity. That machine at the hockey arena in small town Canada may always be a java centre but universities, colleges and trendier offices may be perfect for piloting some upscale teas.o


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