PepsiCo needs new strategy for iced tea

It is always easy to be clever after the event but Britvic director of marketing Steve Kay may be ruing the day when he said: “All our research has shown that we are on to another winning brand.” The date was March 1994 and the object of his optimism was iced tea drink Liptonice, a joint venture between Unilever, the maker; PepsiCo, and its part-owned distributor Britvic.

It was expected to achieve sales of 20m in its first year and the producers mistakenly saw the British tradition of tea-drinking as an advantage. Liptonice it was believed would draw on the public’s affection for tea, combining it with an increasing desire for more varied soft drinks.

But the partnership broke up last week leaving Unilever holding the can when PepsiCo and Britvic said they would no longer distribute the drink. Despite initial optimism, the brand’s future in the UK is now in serious jeopardy. Either Unilever finds a new partner or goes it alone through its existing distribution channels – neither option being particularly appealing.

But for PepsiCo it could offer the opportunity to introduce its own iced tea as part of its Radical Fruit range. The range – minus an iced tea – is already available in Spain.

The reason for the parting of the ways in the UK appears to be straightforward enough. The British take a singular view of tea: it’s to be drunk hot and at any time of the day from just after waking to just before sleeping. Even a multi-million pound marketing campaign – at least 10m if we consider both the launch and the relaunch budget with advertising initially through Ogilvy & Mather and then J Walter Thompson – failed to change their minds.

Other European countries take their tea without milk and, along with the US, at specific times of the day. So for them the idea of drinking cold tea, without milk, as just another soft drink is far more acceptable since the associations with hot, milky tea are not as strong.

It also made it easier to position it as a sports drink in Europe and sell it through sports clubs from where it grew steadily after a slow start.

Launched in the UK in March 1994, within ten months Britvic was admitting that “pioneering a new sector is never easy”. Liptonice was relaunched after “radical changes” to give a cleaner, more refreshing taste better suited to British palates, according to the company. All, it appears, to no avail.

So far the three partners have confined themselves to a terse joint statement blaming the “hot drink culture” for the difficulties experienced by Liptonice and admitting that the rate of sale in the UK has not met original expectation for the brand. This compares with Italy, for instance, where iced tea was the fastest growing soft drink last year.

For once, the news of a rival brand’s troubles has not resulted in gloating among the other suppliers.

“It’s a salient lesson for all of us. It’s not always easy to take what’s worked in other countries and make a success of it here,” says Coca-Cola Schweppes Beverages commercial director Kevin White. “Consumers here haven’t got their minds round the idea of iced tea and coffee yet; it will happen, though, over a long period of time.”

Of course, White’s comments do have a sting in the tail since other products which have worked abroad and have just been launched here include PepsiCo’s Mountain Dew and Quaker Beverages’s worldwide money-spinning sports drink Gatorade.

Coca-Cola has its own iced tea in the US and Europe, where it is called Nestea. (Significantly, it is a still drink rather than carbonated like Liptonice.) This grew out of a now defunct joint venture between Coke and Nestlé and the brand is now marketed solely by Coke. It was the success of Nestea in some European markets – Spain for instance – which prompted PepsiCo to put together an agreement with Unilever to produce Liptonice.

In fact the Spanish soft drinks market may well offer pointers to the situation in the UK. Liptonice launched in Spain in 1994, a year after Nestea’s Spanish debut. At the start of this year, however, Pepsi and Unilever ended their joint agreement – mirroring the UK situation – after disappointing sales.

Since the split in Spain, industry sources have suggested PepsiCo will launch its own iced tea drink as part of the Radical Fruit range of “new age” drinks already available on the Spanish market.

This range is not available in the UK but PepsiCo now has the opportunity to introduce it. As part of a range of fruit drinks, an iced tea is likely to present a more attractive option than a single product. In theory, it and can tap into the market created by Quaker’s iced tea range Snapple – though in the US, at least, it has been a troublesome purchase for Quaker which has yet to sort out the distribution.

PepsiCo’s Radical Fruit range has, however, been a success in Spain, and from what its learned following the failure of Liptonice here it may well bounce back.