DAVIDsTEA Expands into the Grocery Aisle

The lackluster selection of specialty tea in North America’s grocery aisles is getting a makeover.

Liquid tea has led sales growth in the center aisles of grocery stores the past couple of years and now dry tea in sachets is following that trend. In June Starbucks-owned Teavana began selling its tea sachets in six flavors regionally and will expand nationally by year end.

Last week Montreal-based DAVIDsTEA signed a distribution deal with Loblaws Companies, the largest grocery retailer in Canada. The teas will be stocked nationally at several banners including Loblaws, Value-Mart, Atlantic Superstore, Dominion, Fortinos, and Provigo. Loblaws is a $45 billion company employing 136,000 workers in Canada.

Sales of liquid tea were up 18.9 percent in 2017 on a 25.2 percent increase in units sold, according to The Nielsen Company. Ready-to-drink tea was also top among the 10 biggest center-aisle sellers in 2016, besting water and new age beverages with 19.5 percent growth in sales and 14.4 percent volume growth.”*

“Every year across both the perimeter and center aisles of grocery stores, some products stand out from the rest when it comes to top dollar sales. For the second year in a row, liquid tea led sales growth in the U.S. and were joined in the top 10 by three other beverage products, including liquid coffee, water and new age beverages,” reports Nielsen.

DAVIDsTEA continues to operate 240 stand-alone and mall-based outlets as well as selling online. Starbucks abandoned the last of its 379 Teavana tea shops this spring and no longer sells tea (or coffee) online. Teavana sales are up 14 percent in the current fiscal year, according to John Culver, group president global coffee & tea. During a spring earnings call Culver said Starbucks “remains committed to executing our plan to increase our tea business to $3 billion of the next five years.”

Herschel Segal, executive chairman and Interim CEO of DAVIDsTEA in a press release. “Among our wide variety of over 130 high-quality teas, this is an opportunity for new customers to discover some of our popular blends in tea sachet format at their local grocery store, while also providing added convenience to our existing loyal customers.”

Tazo, a long-standing grocery favorite, has refreshed its web presence under new owner Unilever, the world’s largest tea company. Unilever purchased Tazo for $384 million from Starbucks in November 2017. Tazo earned $112.5 million in 2017 in the U.S. and Canada. The brand is one of several acquisitions including Pukka Herbs, a packaged line featuring botanicals. In addition to Lipton and PG Tips, Unilever owns Australian-based specialty tea company T2 and Pure Leaf, a top selling U.S. brand in grocery. Eighty percent of Unilever’s offerings are commodity black teas which are experiencing a slowdown in sales.

Initially DAVIDsTEA will offer packs of 15 sachets that include the company’s best-selling blends. These include cinnamon rooibos chai, cream of Earl Grey, Forever Nuts, Green Passionfruit, Just Peachy, Cold 911, Mother’s Little Helper, Buddha’s Blend, and Peppermint Amour. Six are certified organic.

Teavana offers Youthberry, Peach Tranquility, Citrus Lavender, Jade Citrus Mint, Imperial Spiced Chai, and Earl Grey Créme.

When Starbucks announced it would close everyone of its Teavana locations Charles Cain, principal and executive consultant at Building Oz, “I don’t believe this announcement signals weakness in the market for specialty tea,” Cain writes. “Eighty percent of Americans drink tea, and 50 percent do so daily. The specialty tea segment is growing at nearly twice the rate of the overall U.S. tea business, and demographic trends suggest the industry has a long runway of expansion as younger consumers are more inclined to favor tea over coffee than their parents.”

When specialty stores first became popular the early sales results were “dramatic”, he said, “But sustained sales growth beyond seasonal gifting required consumers to shift their tea purchasing from the local grocery store to the regional mall. That’s not a behavior we see happening consistently in any other specialty food or beverage industry.”

The return of specialty sachets to grocery will not likely to match the pace set by RTD the past two years but will prove steady and sustainable.

Source: DAVIDsTEA, Tazo, Teavana

Footnotes: *Nielsen, total U.S. All Outlets Combined (AOC). Tracked sales include grocery, drug, mass merchandise, convenience, select dollar stores, select warehouse clubs, and military commissaries. Data reflects UPC-coded items only.

Specialty Grocery

Specialty tea has long been a top performer in specialty food stores. Large selections of high-margin tea and private label tins line the tea aisle. In 2017 specialty food and beverage sales, as a share of total market, reached 15.8 percent, according to the Specialty Food Association. Retail sales grew 12.9 percent versus 1.4 percent for all foods. The association reports that 65 percent of consumers purchase specialty foods, spending $140.3 billion in retail and foodservice in 2017 up 11 percent since 2015. The foodservice a segment grew at 12.8 percent during the period 2015-17 compared to 10.7 percent in brick-and-mortar — while the online channel grew 20.9 percent.

“Plant-based categories dominate the top four spots and are expected to grow over the next five years,” according to the association, which reported sales growth of 63.2 percent for refrigerated RTD tea & coffee during the period 2015-17.

Source: Specialty Food Association