sna Adbrands Archive : Nestea / Beverage Partners Worldwide


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Nestea: Brand Profile

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Nestea is the iced tea brand owned by Nestlé, but managed in several global markets by Beverage Partners Worldwide, a joint venture with Coca-Cola. Until recently, the business operated in more than 60 countries, marketing Nestea as well as other ready-to-drink chilled teas. At one stage, it also managed RTD flavoured milks and chilled coffees, including several Nescafe spin-offs. Those were excluded from the joint venture in 2007, and Coke subsequently agreed a separate joint venture with Illy Coffee to market RTD coffees. In a further restructuring in 2012, the BPW partnership was refocused on Europe, Canada and Australia, with most other territories being phased out or now managed solely by Nestle. Despite the marketing prowess of Coke and Nestlé, Nestea still sits some way behind its competitors in most markets and relies for the majority of its business on Europe and developing territories.

Advertising

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Competitors

Nestea's main competitors are the Lipton Ice Tea brand, jointly marketed by Unilever and PepsiCo, the latter's SoBe brand, DPSG's Snapple and independent AriZona. See Non-Alcoholic Beverages Sector index for other companies

Contact

Beverage Partners Worldwide
Muertschenstrasse 27
8048 Zurich
Switzerland
Tel: 41 44 777 06 00

Brand & Activities

Ready-to-drink Nestea is controlled in several world markets by Beverage Partners Worldwide, a joint venture between Nestlé and Coke. In most cases, marketing and distribution duties are managed locally by Coke's sales force. Initially, the only markets specifically excluded from BPW's brief was Japan, where Coke and Nestlé already competed fiercely in the ready-to-drink chilled coffee segment. Although Europe and Asia were seen to be the largest potential regions for iced tea products, the biggest individual market has always been the US. However, this has also proved arguably the most difficult single territory for the Nestea brand.

Despite the power of Nestea's two parent companies, the brand struggled to establish a leading position in the US, with its market share stuck for years at around 5%, far behind the market leaders Lipton, AriZona and to a lesser extent Snapple. As a result, Nestle transferred full control of the brand in the US to Coca-Cola under license. However there was little apparent change to performance, with volumes slumping from around 115m cases in 1999 to 78m by 2000. According to figures from Beverage Digest for 2011, Nestea had only 4.7% value share of the US RTD tea market, compared to AriZona's 40%, Lipton's 32% and Snapple's 10.5%. Gold Peak, Honest Tea and Fuze contributed a further 2.4% between them. The Coca-Cola license arrangement expired at the end of 2012, and Nestle took back full control of the brand in the US, where it now sits under the umbrella of its Nestle Waters division. It was relaunched in 2014, and was able to regain the #3 position behind Lipton. However AriZona continues to dominate the US iced tea segment. At the same time in 2012, the two partners agreed to refocus the attention of BPW on Europe and Canada. In a few other territories, Coca-Cola acquired a license to continue marketing Nestea. In others it was phased out altogether.

Nestea has performed better in other global markets, and in a few, including Spain, it is the clear segment leader. The product range varies from country to country depending on local taste. Spain introduced Nestea Ice in Spain in 2006, under the name Nestea V&T. Other tea products under the BPW umbrella include Nestea Vitao, with natural antioxidants, and Yuan Ye RTD tea in China.

Nestea is available in a variety of different forms in North America, including refrigerated ready-made and powdered instant tea mixes, as well as canned or bottled ready-to-drink. The product range has been simplified in recent years. Previously there were two RTD forms, regular Nestea in a variety of different flavours, and also as Nestea Ice, made with green tea. The latter, a replacement for what was previously called Nestea Cool, was merged into the main Nestea range in 2007. BPW launched a premium tea brand in the US in 2006 under the Gold Peak name, and introduced calorie-burning green tea drink Enviga in Europe during 2006, and in the US in 2007, and acquired a 40% stake in Honest Tea in 2008. Following the reversion of Nestea to Nestle, Coca-Cola retained Gold Peak, now its lead tea brand. Nestle continued to plug away at the Nestea brand in the US, but now primarily in powdered mix form. In 2013 it introduced a range of liquid water enhancers in the US under the Nestea banner to flavour and colour regular plain water.

The Nestle-Coca-Cola partnership has also experimented in the past with other types of product. In 2001, it also took over responsibility for a variety of other products owned by the partners including RTD coffees Nescafe Ice and Nescafe Xpress, and the Nestlé Choglit chocolate and skimmed milk drink in the US. However, this broader partnership led to a certain level of tension. In particular, under the original terms of the deal, Coke was unable to introduce any ready-to-drink coffee products of its own in the US other than via BPW, despite considerable pressure to develop a competitor to Pepsico/Starbucks' wildly successful Frappucino. Coca-Cola had also spent several months developing an "indulgence" RTD coffee co-branded to chocolate manufacturer Godiva. In 2006, Coke and Nestlé agreed to reduce the scope of Beverage Partners to exclude ready-to-drink coffee and milk-based products from early 2007. Instead the business now focuses its attention only on tea-based drinks.

Management

Francois Gay-Bellile succeeded Béatrice Guillaume-Grabisch as CEO of BPW in 2013. Marcos de la Torre is international marketing director for Nestea.

Background

Nestlé was the first company to develop a mass-market form of powdered tea, based on the same technology it had developed for its Nescafe instant coffee. Sold under the name Nestea from the 1960s, this was marketed as a home-mix product and was most widely available in the US. The company developed its first RTD version of Nestea in the early 1970s (before Lipton) and signed up a number of regional bottlers to produce and distribute the drink on its behalf. However it remained only a very small business, and struggled to achieve profitability as a result of the logistical issues involved in liaison with the network of local bottlers. In 1983, Nestlé pulled out of the RTD sector altogether in the US, allowing Lipton to take dominance in that segment, which steadily grew in size following the emergence of Snapple and other manufacturers.

However Nestlé continued to monitor the RTD market closely in both the US and other markets. Conscious of the need to establish an effective bottling and distribution partner, the Swiss company agreed a partnership in 1991 with Coca-Cola to develop RTD tea and coffee drinks worldwide, except in Japan. The stated aim of the new unit, Coca-Cola & Nestlé Refreshments, was to produce a range of coffee, chocolate and tea canned drinks, but it was widely expected that coffee would be its main focus. Indeed the partnership's first venture was the launch of a ready-to-drink iced Nescafe for the South Korean market. However, several of Coca-Cola's bottling partners in the US were already experiencing some success with Lipton's RTD iced tea, distributed under licence from Unilever. As a result, CCNR announced the launch of its own RTD iced tea brand in the US, under the name Nestea, competing head-to-head with Lipton Original. (Unilever quickly recruited PepsiCo as its bottling and distribution partner).

CCNR gradually expanded its business into Europe and Asia in the 1990s, introducing a range of chilled ready-to-drink coffees, such as Nescafe Ice. By the end of 1999, CCNR was operational in the US, Europe and Asia. In 2000, the business began to make some inroads into Latin America, opening offices in Venezuela. At the same time, the company boosted its export from those countries to further territories. However it remained primarily a shell subsidiary of either Nestlé or Coke, depending on the local territory, with no senior management or marketing structure of its own. In 2000, CCNR was the smallest of Nestlé's three joint principal joint ventures with annual sales of around $330m.

In 2001, the partners agreed to extend their arrangement both in the number of its brands and its geographical reach. At the same time, the business was given greater entrepreneurial freedom, with the aim of going head-to-head with PepsiCo's portfolio of non-carbonated beverages, and especially its Lipton iced tea joint venture with Unilever. The expanded joint venture deal was finally cleared by European regulators in October 2001.

Last full revision 4th March 2016

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