The Market for Coffee and Tea

I. Executive Summary

Scope and Methodology
• Market Parameters
• Study Methodology

The Overall Market
• Overall Market Size and Growth
• Coffee vs. Tea Share
• Factors in Future Growth
• Projected Market Growth
• Table 1-1: U.S. Retail Sales of Coffee and Tea, 1994-2003 (dollars): coffee, tea
• The Marketers: Little Coffee/Tea Marketer Overlap
• Coffee/Tea at Retail
• Coffee Cafes

The Coffee Market
• Four Major Product Types
• Coffee Market Size and Growth
• Ground Regular the Dominant Coffee Type
• Figure 1-1: Share of U.S. Mass-Market Coffee Dollar Sales by Product Type, 1998 (percent) five types
• Factors in Future Growth
• Projected Market Growth
• At Mass-Retail: Three Roasters/Marketers Dominate
• Significant Mass-Retail Minors
• Specialty Roasters: Another Universe
• Competition Is Relative
• At the Mass Level: A P&G/PM Duopoly
• Fluid Situation at the Specialty Level
• Mass Majors Entering Specialty Coffee
• New Product Trends
• Consumer Advertising Expenditures
• Retail: Mass vs. Specialty Sectors
• Food Stores Lead in Retail Share
• The Consumer

The Tea Market
• Five Major Product Segments
• Market Size and Growth
• RTD Tea the Dominant Segment
• Regular, Instant/Mix Floundering
• Market Composition by Segment
• Factors in Future Growth
• Projected Market Growth
• Figure 1-2: Share of U.S. Tea Dollar Sales by Product Segment, 1998 (percent): five segments
• The Marketers: Number Has Vastly Expanded
• Lipton the Top U.S. Tea Marketer
• Nestlé, Bigelow, Celestial Seasonings
• Brisk, Cool, Snapple, Arizona
• Specialty Tea Leaders
• Herbal Tea Leaders
• Little Direct Competition
• RTD Segment Is Most Dynamic
• Specialty Marketers Both Subsegment and Expand Their Lines
• Anarchic Competition in Herbal Tea
• New Product Trends
• Consumer Advertising Expenditures
• Retail: Estimated Share of Sales by Segment and Outlet
• The Consumer
• Use by Sex

II. The Overall Market

Coffee/Tea Overview
• Scope of Study: The Retail Market
• Non/Extra-Retail Channels Fall Outside Scope
• Schematic Ambiguity: Coffee/Tea Drinking Establishments
• Product Areas Excluded

Coffee/Tea Classifications
• Coffee: Four Product Types
• Tea: Five Product Segments
• Coffee/Tea Similarities: Natural Plants
• Coffee/Tea Similarities: Product Segments
• Coffee/Tea Differences: Natural Plants
• Coffee/Tea Differences: Product Segments

Historical Overview
• New to Western World
• Coffee and Tea in the USA

Market Size, Growth, and Composition
• Guesswork Estimations
• Indicative vs. Definitive Figures
• Coffee/Tea Market at over $10 Billion
• Table 2-1: The U.S. Retail Coffee and Tea Market: Estimated Dollar Sales, 1994-1998 (dollars): coffee, tea
• Both Coffee and Tea Gain Sales...
• ...Yet Appearances Can Be Deceiving
• Coffee vs. Tea Share

Factors in Future Growth
• Coffee and Tea in the Beverage Universe
• Soft Drinks Rule
• Milk, Coffee on the Downswing
• Water, Tea, Fruit Drinks, Fruit Juice
• Table 2-2: U.S. Per Capita Consumption of Selected Nonalcoholi+B115c Beverages, 1980-1995 (gallons): seven beverage categories
• American Beverage Preferences
• Coffee and Tea in an Uphill Battle
• Age Demographics Extremely Positive
• Table 2-3: U.S. Actual and Projected Population by Age Group, 1990-2010 (number): seven age cohorts
• The Aging Baby Boomers
• Economics, Weather, Health, Culture

Coffee/Tea Market: Projected Growth
• Overall Market to Approach $13 Billion by 2003
• Table 2-4: U.S. Coffee and Tea Market: Projected Retail Sales, 1998-2003 (dollars): coffee, tea

The Marketers
• Little Coffee/Tea Marketer Overlap
• Nestlé, Tetley, and Starbucks

Consumer Advertising Expenditures
• Amount Spent in 1998
• Three Majors Account for Lion's Share

Distribution/Retail
• Coffee/Tea Distribution: Follows Standard Scheme
• Distributors Play Important Role
• The Unique Distribution of Arizona
• Coffee/Tea at Retail
• Coffee/Tea Drinking Establishments

III. The Coffee Market

Coffee Market Parameters
• Market Includes Coffee Sold at Retail for Home Consumption
• Most Away-From-Home Sales Not Covered
• Two Minor Gray Areas
• The Coffee "Retail Market"
• Market Excludes Non-Roasted-Bean Products

Coffee: Overview
• Botany/Chemistry
• Geography
• Climate and Environment
• Two Commercial Species
• Arabica
• Robusta

Coffee History
• Mythic Origins
• An Arab Secret for Nearly a Millennium
• Modern History Begins with the Ottomans
• Coffee Drinking Spreads to Europe
• The Dutch Break Ottoman Monopoly
• By Crook, Coffee Transplanted to Caribbean
• By Hook, Coffee Blossoms in Brazil
• Coffee Goes Global

Coffee Production
• Growing and Harvesting
• Processing: Wet and Dry Methods
• Sorting, Grading, Naming, and Packing
• Blending
• Roasting
• Grinding
• Packaging
• Three Value-Added Variations
• Instant/Soluble Coffee
• Decaffeinated Coffee
• Flavored Coffee

Coffee Classifications
• Four Major Product Types
• Ground Coffee
• A Note on Ground Specialty
• Instant Coffee
• Commercial Whole Bean Coffee
• Specialty Coffee
• Three Minor Product Types
• RTD Coffee: Iced vs. Blended Drinks
• Powdered Mixes
• Liquid Concentrates
• Retail Product Classifications: Mass-Market vs. Specialty Coffee

Coffee Retail Market: Size, Growth, and Composition
• Combined At-Home/Away-From-Home Coffee Dollar Sales: "Guesstimates"
• Estimating Retail Sales: Methodology
• Retail Coffee Sales at $6.8 Billion in 1998
• Rising/Flattening Growth Pattern
• Figure 3-1: U.S. Retail Coffee Market: Estimated Dollar Sales, 1994-1998 (dollars)
• Table 3-1: U.S. Retail Coffee Market: Estimated Dollar Sales and Pound Volume, 1994-1998 (dollars, pounds)
• "Real" Pound Sales Reveal a Stagnant Market
• Specialty Coffee on the Rise; Mass Coffee in the Doldrums
• Mass Up in Dollars, Down in Pounds; Specialty Grows in Both
• Table 3-2: U.S. Retail Coffee Market: Estimated Dollar Sales and Pound Volume of Mass-Market and Specialty Coffee, 1994-1998 (dollars, pounds): mass-market coffee, specialty coffee
• Dollar Share: Specialty vs. Mass
• Table 3-3: U.S. Retail Coffee Market Share of Dollar Sales: Mass-Market vs. Specialty Coffee, 1994-1998 (percent, dollars): mass-market coffee, specialty coffee
• Pound Share: Specialty vs. Mass
• Table 3-4: U.S. Retail Coffee Market Share of Pound Volume: Mass-Market vs. Specialty Coffee, 1994-1998 (percent, pounds): mass-market coffee, specialty coffee
• Mass Coffee Still in Command

Coffee Mass Market: Size, Growth, and Composition
• Explanatory Note: IRI and FDM
• FDM Dollar Sales Down in 1998
• Table 3-5: U.S. Coffee Dollar Sales in FDM Outlets by Outlet Type: 1998 vs. 1997 (dollars): food stores, drugstores, mass merchandisers
• FDM Pound Volume Flat in 1998
• Table 3-6: U.S. Coffee Pound Volume in FDM Outlets by Outlet Type: 1998 vs. 1997 (pounds): food stores, drugstores, mass merchandisers
• Food Stores Big Losers, Discounters Big Gainers
• FDM Retail Share: Food Stores Dominate
• Food Stores Sales Bounce Up and Down Since 1992
• Table 3-7: U.S. Coffee Sales in Food Stores: Dollar Sales and Pound Volume, 1992-1998 (dollars, pounds): food stores
• Figure 3-2: Retail Share of Coffee Dollar Sales: FDM Outlets, 1998 (percent, dollars): food stores, drugstores, mass merchandisers
• Figure 3-3: Retail Share of Coffee Pound Volume: FDM Outlets, 1998 (percent, pounds): food stores, drugstores, mass merchandisers
• Price Swings and Dollar Rises
• Food Store Prices Up 40% Since 1992
• Price Swings and Plummeting Pounds
• Preliminary Note on FDM Sales/Volume by Product Type
• FDM Dollar Sales by Product Type
• Figure 3-4 Average Coffee Prices* in Food Stores: 1992-1998 (prices): average in food stores
• Table 3-8: Coffee Dollar Sales in FDM Outlets: By Product Type, 1997 vs. 1998 (dollars): ground, ground decaf, instant, instant decaf, whole bean
• FDM Pound Volume by Product Type
• Table 3-9: Coffee Pound Volume in FDM Outlets: By Product Type, 1997 vs. 1998 (pounds): ground, ground decaf, instant, instant decaf, whole bean
• FDM Dollar Share by Type
• FDM Pound Share by Type
• FDM Share: Regular vs. Decaf
• FDM Share by Product Form
• Figure 3-5: Share of Coffee Dollar Sales in FDM Outlets: By Product Type, 1998 (percent): five types
• Figure 3-6: Share of Coffee Pound Volume in FDM Outlets: By Product Type, 1998 (percent): five types
• Figure 3-7: Share of Coffee Dollar Sales in FDM: Regular vs. Decaffeinated, 1998 (percent, dollars): regular, decaffeinated
• Figure 3-8: Share of Coffee Pound Volume in FDM: Regular vs. Decaffeinated, 1998 (percent, pounds): regular, decaffeinated
• Figure 3-9: Share of Coffee Dollar Sales in FDM by Product Form, 1998 (percent, dollars): ground, instant, whole bean
• Figure 3-10: Share of Coffee Pound Sales in FDM by Product Form, 1998 (percent, pounds): ground, instant, whole bean
• Food Store Dollar Sales by Type: 1994-1998
• Table 3-10: Coffee Dollar Sales in Food Stores: By Product Type, 1994-1998 (dollars): five types, food stores
• Food Store Pound Volume by Type: 1994-1998
• Table 3-11: Coffee Pound Volume in Food Stores: By Product Type, 1994-1998 (pounds): five types, food stores
• Dollar Share by Type: 1992-1998
• Table 3-12: Coffee Share of Dollar Sales in Food Stores: By Product Type, 1992-1998 (percent, dollars): five types, food stores
• Food Store Pound Share by Type: 1992-1998
• Food Store Pound Share: Ground Regular
• Food Store Pound Share: Ground Decaf
• Food Store Pound Share: Instant Regular
• Food Store Pound Share: Instant Decaf
• Food Store Pound Share: Whole Bean
• Table 3-13: Coffee Share of Pound Volume in Food Stores: By Product Type, 1992-1998 (percent, pounds): five types, food stores
• Food Store Coffee Prices by Type
• By-Type Price Dynamics: 1992-1998
• Table 3-14: Coffee Prices in Food Stores: Average Price per Volume by Product Type, 1992-1998 (prices): five types, food stores
• RTD Coffee in the Mass Market
• RTD Blended Coffee Drinks: Sales
• Table 3-15: RTD Blended Coffee Drinks: Dollar Sales and Unit Volume in FDM Outlets, 1998 vs. 1997 (dollars, units): RTD blended coffee drinks
• RTD Iced Coffee: Sales
• Table 3-16: RTD Iced Coffee: Dollar Sales and Unit Volume in Food Stores, 1998 vs. 1997 (dollars, units): RTD iced coffee
• Seasonality
• Regionality

The World Market
• Record Crop in 1998/1999
• Brazil, Columbia the Leading Producers
• Other Significant Producers
• Major Producers of Arabica and Robusta
• Major Coffee-Importing Countries
• Table 3-17: Coffee: Major Importing Countries to the United States, 1998 (kilograms, percent): eleven countries

Coffee Market: Factors in Past Growth
• Five Major Historical Trends
• Consumption: Historically Trending Downward
• 1977: A Key Year in Decline
• Soft Drinks as Taste/Convenience Alternatives
• Figure 3-11: U.S. Per Capita Consumption of Regular and Instant Coffee, 1910-1995 (pounds): per capita consumption
• Figure 3-12: U.S. Per Capita Consumption of Regular and Instant Coffee, 1975-1995 (pounds): per capita consumption
• Health Considerations
• Baby Boomers and the Consumption Decline
• Unstable Price Structure

Coffee Market: Factors in Future Growth
• Increasingly Volatile Commodity Prices
• 1997: A Case Study in Market Panic
• The Possibility of Global Warming
• Age Demographics Could Be Positive
• Specialty Coffee: The Market's Saving Grace
• Coffee Cafes a Two-Edged Sword
• Cafe Convenience
• Cafe Social Atmosphere
• The Paradoxical Economics of Specialty Coffee
• Specialty Coffee as Future Market Stimulant
• Greater Segmentation Positive
• Extending Beyond the Morning Daypart

Projected Market Growth
• Coffee Market to Approach $8 Billion in 2003
• Table 3-18: U.S. Coffee Market: Projected Retail Sales, 1998-2003 (dollars)

The Marketers
• Byzantine Marketing Structure
• The Futures Market
• Roasters Form Marketing Core
• Roasters: Size and Scope
• At Mass-Retail: Three Roasters/Marketers Dominate
• Significant Mass-Retail Minors
• Private Labels
• Specialty Roasters: Another Universe
• Number of Specialty Roasters
• Table 3-19: Selected Coffee Marketers and Brands (list): 82 marketers, product types

Marketer and Brand Shares
• Special Note
• Leaders: P&G, PM, Nestlé, A&P, PL
• Table 3-20: Marketer Shares: Dollar Sales of Coffee in FDM Outlets, 1998 (percent share): four marketers, private label, other
• Marketer Shares: Ground Regular
• Table 3-21: Marketer Shares: Dollar Sales of Ground Regular Coffee in FDM Outlets, 1998 (percent share): seven marketers, private label, other
• Marketer Shares: Ground Decaf
• Table 3-22: Marketer Shares: Dollar Sales of Ground Decaffeinated Coffee in FDM Outlets, 1998 (percent share): six marketers, private label, other
• Marketer Shares: Instant Regular
• Table 3-23: Marketer Shares: Dollar Sales of Instant Regular Coffee in FDM Outlets, 1998 (percent share): three marketers, private label, other
• Marketer Shares: Instant Decaf
• Table 3-24: Marketer Shares: Dollar Sales of Instant Decaffeinated Coffee in FDM Outlets, 1998 (percent share): three marketers, private label, other
• Marketer Shares: Whole Bean
• Table 3-25: Marketer Shares: Dollar Sales of Whole Bean Coffee in FDM Outlets, 1998 (percent share): nine marketers, private label, other
• Brand Shares: Ground Regular
• Table 3-26: Brand Shares: Dollar Sales of Ground Regular Coffee in FDM Outlets, 1998 (percent share): 12 brands, other
• Brand Shares: Ground Decaf
• Table 3-27: Brand Shares: Dollar Sales of Ground Decaffeinated Coffee in FDM Outlets, 1998 (percent share): seven brands, other
• Brand Shares: Instant Regular
• Table 3-28: Brand Shares: Dollar Sales of Instant Regular Coffee in FDM Outlets, 1998 (percent share): 10 brands, other
• Brand Shares: Instant Decaf
• Table 3-29: Brand Shares: Dollar Sales of Instant Decaffeinated Coffee in FDM Outlets, 1998 (percent share): five brands, other
• Recent Brand Share Trends: Majors Decline, Minors Rise
• Table 3-30: Coffee Brands Registering Positive Dollar Growth in 1997 vs. 1998: By Type (percent change): five product types, 19 brands, private label

The Competitive Situation
• Competition is Relative
• At the Mass Level: A P&G/PM Duopoly
• Fluid Situation at the Specialty Level
• Mass/Specialty Barriers Breaking Down
• The Old Days: Price/Quality Balance
• A Trend and an Event Tip Balance to Price
• The Panic of 1997
• The Competitive Costs of Price Positioning
• Figure 3-13: Folger's Retail Price Fluctuations: January 1997-July 1998
• The Specialty Alternative
• The Majors' Response to the Specialty Challenge
• Majors Walking a Tightrope
• The Premium-Upgrade Compromise
• Specialty Coffee in Its Own Quandary
• Specialty Entry into Mass
• Myriad Minors Segment Creatively

Competitive Profile: Nestlé
• Nestlé SA
• Nestlé USA Coffee Beverages
• Taster's Choice
• Nescafe
• Chase & Sanborn and Hills Brothers
• MJB
• Sarks
• Nestlé Has U.S. Problems
• Nestlé's RTD Coffee Fiasco
• Restaging Taster's Choice
• Nestlé a Major Tea Marketer

Competitive Profile: Philip Morris/Kraft
• Philip Morris Parent of Kraft
• Kraft's Major Coffee Brand Lines
• Maxwell House Origins
• The Maxwell House Brand Line
• General Foods International Coffees (GFIC)
• New GFIC Cappuccino Cooler
• Restaging Viennese Chocolate
• Positioning for Specialty Entry
• Kraft/Starbucks Joint Venture
• Solidifying Price Segmentation
• Overseas Coffee Interests
• The Gevalia Mail-Order Brand
• Kraft's Entry into Tea

Competitive Profile: Procter & Gamble Co.
• Procter & Gamble Beverage Division
• The Folgers Story
• The Folgers Brand Line
• Specialty Strategy: Millstone Acquisition
• Testing Select Roast and Jakada
• Distributing Seattle's Best

Competitive Profile: Starbucks Coffee Company
• Early '70s: Seattle Origin
• Early '80s: Howard Schultz Hired
• Late '90s: A Billion-Dollar Enterprise
• Facing Saturation, Starbucks Diversifies
• Frappuccino Joint-Venture with Pepsi
• Marketing/Distribution J-V with Kraft
• A Surprise Move: Acquires Tazo Tea

Brief Competitive Profiles
• A&P: Eight O' Clock Coffee
• Chock Full O' Nuts Corp.
• Brothers Gourmet Coffee, Inc.
• Green Mountain Coffee, Inc.

New Product Trends
• "Upgrade" Trend in Traditional Forms
• "Premium" Extensions
• Gourmet Flavors
• Table 3-31: Gourmet Flavor Variations Used in New Product Introductions, 1998-1999 (flavor types): eight types, variations
• Exotic Gourmet/Specialty Blends
• Upscale Instant
• "Natural" Decaf
• A Major "Minor" Trend: Organic
• Licensed/Tie-In Coffees
• Holiday/Gift Coffee
• Three Trends in Nontraditional Forms
• Powdered Mixes
• Liquid Concentrates
• Focus: RTD Coffee
• Blended Coffee Drinks
• Trends in Iced Coffee
• "Alternative" RTD Coffees
• Table 3-32: Coffee: Selected New Product Introductions, 1998-1999 (list): 59 marketers, brands, descriptions

Consumer Advertising Expenditures
• Amount Spent in 1998
• PM/Kraft Expenditures
• P&G Expenditures
• Nestlé Expenditures

Advertising Positioning
• Two Main Coffee Themes: Taste and Social Stimulation
• The Taste Theme
• The Social Stimulation Theme
• Combining the Themes
• Extending the Combined Themes
• Cause-Driven Stimulation
• Internal Stimulation
• Competitive Positioning

Consumer Promotions
• Standard Techniques Utilized
• Examples of Promotions

At the Retail Level
• Mass vs. Specialty Sectors
• Food Stores Lead in Retail Share
• Food Store Margins
• Figure 3-14: Estimated Coffee Dollar Share by Retail Outlet Type, 1998 (percent): food stores, specialty stores, mass merchandisers, drugstores/other, direct sales
• Food Stores Threatened
• Discounters on the Rise
• Table 3-33: Average Price Per Pound by Type of Coffee: Food Stores vs. Mass Merchandisers, 1998 (price): five types, food stores, mass merchandisers, price differential
• Blurring the Food/Discount Line
• Warehouse Clubs
• Supermarkets Upscale in Response
• At the Specialty Level

Focus: Coffee Cafes
• The Force Driving Coffee
• Brief History
• The Contemporary Coffee Cafe
• Out of the Northwest
• Numbers Proliferating
• Three Types
• Starbucks Leads the Way
• Cafe Chains Face Challenges
• Entering Supermarkets
• Some Prominent Cafe Chains

Profile: Seattle Coffee Holdings, Inc.
• Primarily a Wholesaler
• Retail Operations
• Seattle's Best and Torrefazione Italia
• Cafe Chains as Showcases
• SCC Moves More Toward Retail
• J-V with P&G
• Acquired by AFC
• AFC's Big Plans
• Latest Moves

Profile: Coffee People, Inc.
• Started Small in Portland
• Merger with The Second Cup
• The Restructured Entity
• Now Diedrich Wants to Acquire

The Consumer
• Number/Gender of Users
• Popularity of Product Types
• Consumer Preferences: Regular Ground; Decaf Instant
• Frequency of Use: Ground vs. Instant
• Factors Favoring Use: All Coffee
• Factors Favoring Use: Ground vs. Whole Bean Coffee
• Factors Favoring Use: Ground Regular vs. Decaf Coffee
• Factors Favoring Heavy Use of Ground Coffee
• Factors Favoring Use: Three Major Mass Ground Brands
• Factors Favoring Use: Instant Coffee
• Factors Favoring Use: International-Flavored Coffee
• Factors Favoring Use: Espresso/Cappuccino
• Table 3-34: Demographic Characteristics Favoring Use of Ground vs. Whole Bean Coffee
• Table 3-35: Demographic Characteristics Favoring Use of Ground Coffee: Regular vs. Decaffeinated
• Table 3-36: Demographic Characteristics Favoring Use of Ground Coffee: By Frequency
• Table 3-37: Demographic Characteristics Favoring Use of Ground Coffee: By Brand
• Table 3-38: Demographic Characteristics Favoring Use of Regular Instant Coffee: By Type
• Table 3-39: Demographic Characteristics Favoring Use of Regular Instant Coffee: By Frequency
• Table 3-40: Demographic Characteristics Favoring Use of Instant Decaffeinated Coffee: By Type
• Table 3-41: Demographic Characteristics Favoring Use of Instant Regular Coffee: By Brand
• Table 3-42: Demographic Characteristics Favoring Use of Instant Decaffeinated Coffee: By Brand
• Table 3-43: Demographic Characteristics Favoring Use of International-Flavored Instant Coffee
• Table 3-44: Demographic Characteristics Favoring Use of Espresso/Cappuccino: By Form

IV. The Tea Market

Tea Market Parameters
• Market Includes Tea Products Sold at Retail
• Tea Market Parameters Simpler Than Coffee
• Apparent Complexity: RTD Teas
• Actual Complexity: Herbal Teas ("Tisanes")
• Market Excludes Tea Additive Products

Tea: Overview
• Botany/Taxonomy
• Botany/Chemistry
• Geography
• Climate/Environment

Tea History
• Etymology
• Legendary Origin in China
• Tea May Go Back to the "Stone Age"
• Historical Record Begins in Sixth Century
• Use in Ceremonial Rituals
• Dutch Bring Tea to Europe
• British and Dutch Break China Monopoly
• Tea a Negative Symbol in American Folklore
• America as Tea Innovator
• Is Tea on the Brink of a Breakthrough?

Tea Production
• Growing/Harvesting
• Tea Leaf Classifications
• Processing Determines Form
• Black Tea (Fermented)
• Green Tea (Unfermented)
• Oolong Tea (Semi-Fermented)
• Grading, Packing, Value-Adding

Tea Classifications
• Five Product Segments
• Regular Tea
• Instant/Mix Teas
• Ready-to-Drink (RTD) Tea
• RTD Characteristics
• Cold-Fill RTDs
• Hot-Fill RTDs
• RTD Tea Highly Subsegmented
• Specialty Tea
• Herbal Teas
• Flavor vs. Health Herbals
• An Emerging Segment: "Natural" Tea
• A New Type of "Tea": Rooibos, or Red Tea

Market Size, Growth, and Composition
• Most Tea Sales in Unmonitored Outlets
• Sales Methodology
• Tea Market at $3.6 Billion in 1998
• Table 4-1: U.S. Retail Tea Market: Estimated Size and Growth, 1994-1998 (dollars)
• RTD the Dominant Segment
• Figure 4-1: U.S. Retail Tea Market: Estimated Dollar Sales, 1994-1998 (dollars)
• Table 4-2: U.S. Retail Tea Market: Estimated Size and Growth by Product Segment, 1994-1998 (percent): RTD, regular, specialty herbal, instant/mix
• Specialty, Herbal on the Rise
• Regular, Instant/Mix Foundering
• Market Composition by Segment
• Monitored Sales Offer Clarity, But Are Limited
• FDM Tea Sales at Nearly $1.5 Billion
• Figure 4-2: U.S. Tea Market: Estimated Dollar Share by Product Segment, 1998 (percent): five segments
• Table 4-3: Tea Dollar Sales by Product Segment in FDM Outlets, 1996-1998 (dollars): bags/loose, RTD, instant/mix
• Volume Sales at FDM Outlets
• Table 4-4: Tea Unit Volume by Product Segment in FDM Outlets, 1996-1998 (units): bags/loose, RTD, instant/mix
• Bag/Loose Tea Leads by Segment in FDM Outlets
• Food Stores Primary FDM Outlet Type
• FDM Sales by Segment
• Figure 4-3: Tea Sales in FDM Outlets: Dollar Share by Product Segment, 1998 (percent, dollars): bags/loose, RTD, instant/mix
• Figure 4-4: Retail Share of Tea Dollar Sales by FDM Outlet Type, 1998 (percent, dollars): food stores, drugstores, mass merchandisers
• Table 4-5: Retail Share of Product Segment Dollar Sales by FDM Outlet Type, 1998 (percent, dollars): three outlet types, three segments
• Sales Trends in Food Stores, 1992-1998
• RTD Drives Sales Gains in Food Stores
• Bag/Loose and Instant/Mix in Decline
• Table 4-6: Food Store Dollar Sales of Tea: By Product Segment, 1992-1998 (dollars): bags/loose, RTD, instant/mix
• Unit Volume Trends in Food Stores
• Table 4-7: Food Store Unit Sales of Tea: By Product Segment, 1992-1998 (units): bags/loose, RTD, instant/mix
• Sales Brisk at Natural Foods Stores
• Herbal Teas Big Sellers in Natural Foods Stores
• Green Tea Also Popular
• Sales Trends in Specialty Outlets

Factors in Future Growth
• Tea Market Has Yet to "Take Off"
• Historically Low U.S. Tea Consumption
• Consumption Rates on the Rise
• Tea's Hot Rival: Coffee
• Tea's Cold Rival: Soft Drinks
• Tea's Great Advantage: Health Benefits
• Demographic Situation Extremely Favorable
• Baby Boomers "Geriatrically Motivated" to Embrace Tea
• Good Economic Times Good for Tea
• "Globalization" Stimulates the Market
• Lack of Price Volatility Positive
• Tea Could Better Weather Climate Change
• Flood of New Products a Positive Sign
• Rising Profile at Retail and Foodservice
• Will Tea Shops Take Off?

Projected Market Growth
• Tea Market to Reach $5 Billion by 2003
• Table 4-8: U.S. Tea Market: Projected Retail Sales, 1998-2003 (dollars)

The Marketers
• Number Has Vastly Expanded
• Lipton the Top U.S. Tea Marketer
• Nestlé, Bigelow, Celestial Seasonings
• Brisk, Cool, Snapple, Arizona
• Specialty Tea Leaders
• Herbal Tea Leaders
• Table 4-9: Selected List of Tea Marketers and Brands (list): 92 marketers and brands, product segments

Marketer and Brand Shares
• Introductory Note
• Lipton Leads in FDM Share, Followed by Nestlé
• Three Marketers in a Second Tier
• Ferolito, Vultaggio a Major in Convenience Outlets
• Private Label with Strong FDM Presence
• Table 4-10: Marketer Share: Dollar Sales of Bag/Loose, RTD, and Instant/Mix Tea in FDM Outlets, 1998 (percent share): five marketers, private label, other
• Marketer Share: Bag/Loose Tea
• Table 4-11: Marketer Share: Dollar Sales of Bag/Loose Tea in FDM Outlets, 1997 vs. 1998 (percent share): 10 marketers, private label, other
• Brand Share: Bag/Loose Tea
• Table 4-12: Brand Share: Dollar Sales of Bag/Loose Tea in FDM Outlets, 1997 vs. 1998 (percent share): 15 brands, other
• Marketer Share: RTD Tea
• Table 4-13: Marketer Share: Dollar Sales of RTD Tea in FDM Outlets, 1997 vs. 1998 (percent share): six marketers, private label, other
• Brand Share: RTD Tea
• Table 4-14: Brand Share: Dollar Sales of RTD Tea in FDM Outlets, 1997 vs. 1998 (percent share): 11 brands, other
• Marketer Share: Instant/Mix Tea
• Table 4-15: Marketer Share: Dollar Sales of Instant/Mix Tea in FDM Outlets, 1997 vs. 1998 (percent share): five marketers, private label, other
• Brand Share: Instant/Mix Tea
• Table 4-16: Brand Share: Dollar Sales of Instant/Mix Tea in FDM Outlets, 1997 vs. 1998 (percent share): nine brands, other

The Competitive Situation
• Little Direct Competition
• Most Competition at Trade Level
• RTD Segment Is Most Dynamic
• Innovative RTD Competitor: South Beach
• Regular Tea Marketers Compete with Packaging "Hooks"
• Instant/Mix Marketers Try New Formulations
• Specialty Marketers Both Subsegment and Expand Their Lines
• Anarchic Competition in Herbal Tea

Competitive Profile: Thomas J. Lipton Co.
• Overview
• Dominates U.S. Tea Sales
• Flurry of Product Activity in Mid-1990s
• Now Focusing on Marketing, Extensions, Packaging
• New Products: Sun Spree and Squeezable Tea Bags
• The Pepsi-Lipton Tea Partnership

Competitive Profile: Celestial Seasonings, Inc.
• From Wildcrafter to Herbal Tea Leader
• Finally Reaches $100 Million in Sales
• Reasons for Success
• Wide-Ranging Retail Presence
• Product Line
• International Scope
• Ownership Changes in the 1980s
• Founder Mo Siegel Returns in 1990s
• Branching into Herbal Supplements
• A New CEO Invigorates Celestial
• New Focus on Herbal Supplement Teas

Competitive Profile: R.C. Bigelow
• Founded by Socialite/Entrepreneur Ruth Campbell Bigelow
• The Leader in Specialty Tea
• New Green Tea Extensions
• Sales Estimates

Competitive Profile: Snapple Beverage Corp.
• Pioneered Alternative Beverages
• A Bad Move: Snapple Acquired by Quaker Oats in 1994
• Bought by Triarc in 1997
• A New Lease on Life
• 1999 Product Debuts

Competitive Profile: Ferolito, Vultaggio & Sons
• A Huge Success with Arizona
• Artful Bottles
• Cutting-Edge Formulations
• New Peter Max Designs

Competitive Profile: Tetley USA
• Tea Bag Leader in Britain
• New Tea Products
• Coffee Brands

Competitive Focus: Specialty/Herbal Marketers
• A New Breed of Alternative-Style Tea Marketers
• Stash Tea Co.
• The Republic of Tea
• Tazo

New Product Trends
• A Flood of New Products
• A Great Deal of Segment Blurring
• Lots of Green Tea
• Table 4-17: Selected List of Marketers with Recent Green Tea Introductions, 1998-1999 (list): 16 marketers, green tea
• An Explosion in Flavors
• Table 4-18: Selected List of Flavors Used in Recent Specialty/Herbal Tea Introductions, 1998-1999 (flavors): five flavor types, variations
• Organic Tea an Emerging Niche
• Table 4-19: Selected List of Marketers with Recent Organic Tea Introductions, 1998-1999 (list): 11 marketers, organic tea
• A Deluge of Chais
• Table 4-20: Selected List of Marketers with Recent Chai Introductions, 1998-1999 (list): 12 marketers, chai
• Herbal Teas Proliferating—Mainly Health Herbals
• Medicinal Herbals
• Functional Herbals
• Table 4-21: Selected List of Herbs Used in Recent Tea Introductions, 1998-1999 (list): 31 herbs
• Specialty RTD Teas
• Natural Sweeteners in RTDs
• "Alternative" RTDs
• Sports Teas
• Decaf Teas
• Diet Teas
• Kosher Teas
• Liquid Tea Concentrates
• Rooibos (Red) Teas
• The Drawstring Tea Bag
• Assortment Packaging
• RTD Container Trends
• New Tea Product Introductions: 1998-1999
• Table 4-22: Selected New Product Introductions: Major Marketers and Brands, 1998-1999
• Table 4-23: Selected New Product Introductions: Minor Marketers and Brands, 1998-1999

Consumer Advertising Expenditures
• Amount Spent in 1998
• Lipton Expenditures
• PM/Kraft Expenditures
• Nestlé and Celestial Seasonings

Advertising Positioning
• Relatively Peaceful Tea Thematics
• Themes Differ for Young and Old
• Relaxation
• Health
• Tradition
• Refreshment and Fun
• Targeting Generation X
• Humor Thematics
• Positioning Sans Ads

Consumer Promotions
• Most Standard Techniques Used
• Lipton Promotions
• Snapple's Unique Promotions

At the Retail Level
• Roughly 60% of Sales through Non-Monitored Outlets
• Monitored vs. Non-Monitored Outlets: Estimated Retail Share by Segment
• Tea Margins in Supermarkets
• Teas in Natural Foods Stores
• Tea in Supermarkets
• New Use of Freestanding Merchandising Displays
• Focus: Tea Shops
• Despite Obstacles, Tea Shop Entrepreneurs Keep Trying
• Examples of Tea Shops
• If They Ever Took Off, Tea Shops Would Be Profitable

The Consumer
• Note on Product Segments
• Number of Users
• Use by Sex
• Table 4-24: U.S. Tea Consumption: Number of Users by Product Segment and Sex, 1998 (number, percent): female, male, total
• Frequency of Use
• Table 4-25: U.S. Tea Consumption: Frequency of Use by Product Segment, 1998 (percent, users): regular, herbal, instant/mix
• Factors Favoring Use of Tea: General Patterns
• Factors Favoring Use: Regular Tea
• Use of Regular Tea: By Major Brand
• Table 4-26: Demographic Characteristics Favoring Use of Regular Tea (Bags/Loose): By How Most Used
• Table 4-27: Demographic Characteristics Favoring Use of Regular Tea: By Frequency
• Table 4-28: Demographic Characteristics Favoring Use of Regular Tea: By Type
• Table 4-29: Demographic Characteristics Favoring Use of Regular Tea: Major Brands
• Factors Favoring Use: RTD Iced Tea
• Table 4-30: Demographic Characteristics Favoring Use of RTD Iced Tea: By Container Type
• Table 4-31: Demographic Characteristics Favoring Use of RTD Iced Tea: Major Brands
• Factors Favoring Use: Herbal Tea
• Table 4-32: Demographic Characteristics Favoring Use of Herbal Tea: Users and Heavy Users
• Table 4-33: Demographic Characteristics Favoring Use of Herbal Tea: Major Brands
• Factors Favoring Use: Instant Tea
• Table 4-34: Demographic Characteristics Favoring Use of Instant Tea (Unsweetened)
• Table 4-35: Demographic Characteristics Favoring Use of Instant Tea: Major Brands
• Factors Favoring Use: Instant Iced Tea Mix
• Table 4-36: Demographic Characteristics Favoring Use of Instant Iced Tea Mix
• Table 4-37: Demographic Characteristics Favoring Use of Instant Iced Tea Mix: Major Brands

Appendix I: Examples of Consumer and Trade Advertising and Promotions

Appendix II: Addresses of Selected Marketers