In June, New Age Beverages Corp. acquired BWR (Beverages Within Reach) for its sales and distribution network but the deal also included a few surprises.
“We did the BWR acquisition not really for the additional brands, although we love those brands and we think they are fantastic,” CEO and Director Brent David Willis said during a November earnings call. “I’m amazed that we’ve got the same licenses that the Coca-Cola company had on Illy Coffee and Nestea. And we expect to do a better job than they did on those businesses,” said Willis. New Age reported sales of nearly $70 million during the quarter ending October, up 427% compared to the previous year.
Instant tea has suffered a long slide in sales which is why the U.S. tea industry is paying close attention to former market leader Nestea, a brand dating back to 1948 and known to 89% of U.S. consumers.
Colorado-based New Age Beverages Corporation, an organic and natural products company in partnership with Nestlé, relaunched Nestea powders online last month.
A new formulation eliminated artificial colors and flavors, replaced high fructose corn syrup with stevia in its ready-to-drink (RTD) offerings and certified the product line as non GMO. Sourcing tea leaves in the Nilgiri tea growing region in southern India signals a shift toward premiumization pioneered by Honest Tea, and more recently in natural versions of Snapple, AriZona, and Lipton.
In a release New Age said it intends to “leverage Nestea’s awareness and consumer loyalty and make the brand available through its own direct-store-distribution system, its network of distributor partners throughout the U.S., and its foot- print with major retailers throughout the country.”
After acquiring New York- based BWR, New Age negotiated a partnership with Nestlé Nestea as well as Danone’s Evian water and Illy Coffee. “We are thrilled to have the opportunity to manage the entire Nestea brand in the United States, and are committed to making it a sizable business for both Nestlé and New Age,” said New Age president for North America Olivier Sonnois, adding, “Nestea ready-to-drink and powdered teas have a large base of passionate, loyal consumers across the country.”
Rebranding as a natural product opens a previously closed retail channel where iced teas grew 12.4% through June, adding $5.6 million in sales during the past year, according to SPINS, a research firm focused on the natural channel. But will that be enough?
Nestea, tasked with regaining market share lost to Lipton and Tetley, generated $30 million in sales within the powdered tea category which grossed $259 million from mass market outlets in the past 52-weeks, according to Nielsen market research.
RTD dominates the retail tea segment according to Beverage Marketing Corp. which estimates RTD holds a 47.3% share of the U.S. tea market. Tea bags account for 42.9% market share. Powdered and ice-tea mixes account for 8.2%. The entire tea category (all formats) represents 5.6% of the U.S. beverage market, according to BMC.
Nestea modernized its label, switched to sculpted 23 ounce PET bottles and greatly improved the quality of tea the year before Coca-Cola ended its 16-year U.S. joint venture with Nestlé in January 2017 due to lagging sales. The depletion of inventory that followed led to complaints from loyal customers.
Top-ranked competitor Lipton Pure Leaf accelerated past AriZona ($565 million) to capture $723 million in annual sales by 2019. Gold Peak rose to third with $400 million in sales as Lipton Brisk fell to $365 million, according to IRI, which compiles a list of top 20 brands that at one time regularly included Nestea in the top tier.
Nestea has a long trail to travel but innovation clearly marks the path for a storied brand worth saving.