The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.Learn More
London’s Caffè Culture Show is an exciting annual event for foodservice operators, attended by a wide range of European businesses, including premium beverage manufacturers, beverage machine makers and artisanal bakery operators. At this year’s event, held at London’s Olympia over 14-15 May, Euromonitor International’s analysts observed that premium tea players were busying promoting leaf tea while capsule makers showcased the convenience of their Nespresso-compatible capsules.
Although there are no clear statistics regarding the actual sales of Nespresso-compatible capsules, Euromonitor International forecasts that over 2013-2018 the coffee pod category globally is set to achieve a net increase of US$5.5 billion, with such growth potential continuing to attract new manufacturers of Nespresso-compatible capsules. Having seen its category share fall, Nestlé needs to seriously rethink its strategy with regard to how to defend its global position. The pending merger of Mondelez’s coffee unit with DE Master Blenders’ hot drinks business could make the situation even more challenging for Nestlé.
Premiumisation in tea has taken off in Western Europe despite the resilience of private label. This is very much a manufacturer driven-trend, with brand owners seeking to drive volume and value sales through the introduction of new flavours, tea types and packaging formats. Consumers are demanding diversity in hot drinks and they are also becoming more educated with regard to how to appreciate the natural flavour and freshness of whole leaf tea. This trend is being seen in both the retail and foodservice channels. Single-serve tea capsules and pyramid tea bags with leaf tea appear to be niches with bright prospects. Practically, this situation also asks a question of strategic planners – how much of their production should be focused on whole leaf tea?
At the trade show, exhibitors The Drury Tea & Coffee Company, eteaket tea and Teapigs all enthused about the future development and potential of premium tea.
Unilever’s Tea Fusion single-serve tea machine was one interesting item on display at the show. Unilever’s Lipton, the world’s number one tea brand, has the widest geographical coverage in the industry. With Lipton positioned as a mass- market brand, especially in developed markets, Unilever realised that it needed a premium tea brand. Tea Fusion, endorsed by Lipton, is thus positioned as a premium machine.
The expansion of Nestlé’s Special T machine in Europe and Japan was certainly not lost on the world’s leading tea player, thus prompting it to develop its own innovative tea solution. Euromonitor International estimates that retail value sales of tea pods amounted to around US$300 million in 2013, growing by 20% on 2012. Tea Fusion is perhaps Unilever’s indirect answer to Special T. Thus far, Tea Fusion is targeted at the foodservice channel only while Special T is designed for both retail and foodservice. Multi-beverage machines and single-serve coffee machines are popular in Western Europe while single-serve tea-specific machines remain a niche. It is still too early to assess the category’s chances of success but premiumisation in tea and a general increase in occasions for drinking premium tea suggest potential widespread acceptance of the concept. Again, consumers and foodservice operators need to be aware of the fact that single-serve coffee pod machines may not be the ideal solution for a perfect cup of tea as the optimum pressure and temperature for brewing coffee and tea are different.
The Tea Fusion team is part of Unilever Food Solutions and the machine was launched in January 2014 in the UK as well as in the Netherlands and Belgium. The team offers customers a full package of teas, the brewing system, premium point-of-sale materials, ongoing promotional support, servicing and training. The company’s current machine partner is Germany’s major beverage machine expert Spengler. One of the risks associated with such innovative machines is that they are vulnerable to copycat versions, hence the situation faced by Nestlé and Nespresso today.
Specifically, Tea Fusion can produce a cup of tea within one minute. It offers a consistently fresh brew every time, with its waste compartment able to hold 40 capsules. It is also very user-friendly. All the water used in each brew ends up in the cup, hence there is no waste, and a final rinse avoids cross-contamination. Currently, the 12 types of loose leaf teas and infusions offered by the company have been selected to complement the brewing process, and the teas are all fully Rainforest Alliance-certified. The tea leaves are all hand-picked and are sealed in capsules to keep them fresh and retain their delicate flavour.
To conclude, Unilever’s recent activities clearly show its determination to push its development in premium tea. In April 2014, Unilever opened its first store in London for newly-acquired Australian tea specialist brand T2. Kevin Havelock, President of Unilever’s Refreshment business, is reportedly optimistic about the future of T2 and sees “scope for hundreds of stores around the world”. Tea Fusion and T2 can be seen as two premium brands which complement each other. As Starbucks has acquired Teavana and also has global aspirations in the premium tea space, T2 and Tea Fusion’s ambitions are not unrealistic.