Iced tea invasion turns up heat for soft drinks war

TWO FORMER window-cleaners and a shopkeeper from Brooklyn, New York, have achieved the rare distinction of provoking a multi- million-pound battle in Britain with PepsiCo and Unilever. The product? Iced tea.

Eight years ago Arnold Greenberg, Hyman Golden and Leonard Marsh set up Snapple, a company selling iced teas and fruit drinks made entirely from 'natural' ingredients.

Today the company is worth pounds 937m, has a turnover in excess of pounds 322m, and trades in more than a dozen countries around the world.

A year ago the company launched a handful of its exotically named drinks, among them Lemon Flavoured Iced Tea, Mango Madness and Melonberry Cocktail, in Britain.

Within six months of Snapple's arrival, it had sold around 100,000 cases worth over pounds 2m at shop prices in its launch area within the M25.

Harry Drnec, the man who introduced fashionable Sol lager to Britain, is co-ordinating distribution.

'We are not going to replace colas, and we're not going to supplant hot tea,' said Mr Greenberg, the company's chief operating officer.

'But we think there's a big market for iced tea and our other products in Britain.' Plans are now afoot to begin an ambitious expansion programme outside London.

Iced tea is the fastest growing soft drinks category in the world, and sales have tripled in the past four years.

In Britain, where four billion litres of soft drinks are sold each year, that represents a significant opportunity.

Within a few months of its launch Snapple quickly gained a foothold in Britain, particularly among 18 to 45-year-olds who are prepared to pay a high premium for a trendy 'New Age' beverage which offered a healthy alternative to canned fizzy drinks.

'Iced tea is a growth area that the major companies are now focusing on,' said Mark Lynch, an analyst with S G Warburg. 'It was an area ignored by Coca-Cola and Pepsi and that has been exploited by people like Snapple who have done a good job in building up the market.'

In March, seven months after Snapple first appeared in London, PepsiCo teamed up with Unilever and Britvic to produce a rival iced tea, called Liptonice, under the collective brand name Lipton.

Cheaper, and more mainstream than Snapple in its appeal, various forms of the Lipton brand have been on sale across the Atlantic since 1992, where according to S G Warburg the iced tea market is now worth more than pounds 125m. Last year Lipton accounted for a quarter of that figure, while Snapple cornered more than a third of it.

In Britain, Lipton backed up its launch with a pounds 6m advertising campaign by Ogilvy & Mather with a voice-over from Angus Deayton, celebrity presenter of television's Have I Got News for You.

'We wanted to challenge people's perceptions that iced tea is just cold tea, but in a humorous way,' Gill Noble, senior marketing manager at Unilever, explained. 'We thought Angus Deayton's humour wasbound to appeal to people.' In July, Snapple retaliated with a quirky campaign from Banks, Hoggins O'Shea, at a modest cost of only pounds 1m, which featured real shopkeepers from London in unscripted interviews.

'Our job was to emphasise that Snapple wasn't coming from the big guns like Pepsi or Coke,' said John Banks, a partner in the agency. 'So we avoided all the traditional shots like boy-meets-girl to make people think it was their product, a friendly product.' The campaign has pushed sales estimates for the year to 600,000 cases worth pounds 14m.

Though the advertising campaigns are targeting the same market, there are significant differences between the products being promoted.

Snapple's drinks cost around pounds 1, are made with still water and sell in large glass bottles. All of them are recognisably Transatlantic in origin.

In contrast, Lipton has concentrated on basic iced lemon tea, made with carbonated water, sold in traditional 330ml cans, and costing a third of the price of a Snapple drink. Liptonice has been specially formulated to suit British taste buds.

Gill Noble at Unilever reckons the market in this country for Liptonice this year alone will be more than pounds 20m and she expects that to rise 15-fold to more than pounds 300m over the next five to 10 years.

Other companies are expected to join the fray. In the United States Nestle and Coca-Cola have a joint venture to make an iced tea product called Nestea, established in 1991, which has a fifth of the American iced tea market, and is already on sale in a score of countries round the world.

'There are no current plans to launch it in this country, but we haven't ruled it out,' said a Coca- Cola spokesman.

Industry experts agree that after Sainsbury's aggressive attack on the cola market earlier this year, the makers of 'The Real Thing' will be watching Lipton's and Snapple's progress carefully.

(Photograph omitted)