by Dan Bolton
Copyright 2016 October Multimedia.
Posted with permission of STiR coffee and tea.
When a customer asks with a frown, “Is this tea freshly brewed?” waitstaff cringe.
If they answer “no” more than half of tea drinkers will either chose a different beverage or order no beverage at all. Restaurant patrons say the tell-tale tinny taste of tea concentrates and fountain teas no longer meet even their quick service expectations.
If the tea is not fresh brewed, there is no substitute.
Tea is the logical high-margin alternative to soda for QSR and casual restaurants – but convenient tea is not always a satisfying choice, especially for millennials who insist on superior taste. Eighty-seven percent of millennials call tea their go-to beverage but ingredient lists for concentrates that include high fructose corn syrup, stabilizers, caramel coloring, and red dye 40, phosphoric acid, potassium sorbate, and sodium benzoate are a turnoff.
What tea lovers want is tea freshly brewed in small batches throughout the day typically prepared on a new generation of 1.5 to 3.0 gallon brewers, some with variable steeping times and temperature settings.
Big market opportunity
“While coffee has had the wind at its back, the $20 billion foodservice tea market may have the edge in future growth momentum,” writes Packaged Facts. “Given the current industry momentum and tea’s pivotal role in helping limited-service players grow lunch and afternoon sales, tea sales growth rates will inevitably trend upward over the next few years,” according to Foodservice Trends in the US a 2015 report published by Package Facts.
Nielsen estimates US cold beverage sales at $56.9 billion with 81.6% of that total spent on cold beverages ($46.5 billion). Package Facts estimated $19.9 billion in foodservice tea sales (hot and cold), which was up 4.8% from 2014, and accelerating to 5.1% in 2016. RTD iced tea grew by 8% this year according to Nielsen US Strategic Planner Scanning, which calculates sales for all US outlets (for the 52 week period ending Aug. 27).
US soda consumption is at a 30-year low following 11 consecutive years of decline. As sales slip, restaurants and convenience outlets are turning to companies like S&D Coffee & Tea to take advantage of this opportunity by revitalizing and upgrading their tea selections, starting with brewing methods.
This year John Buckner, vice president of marketing at S&D, the largest tea and coffee supplier to US restaurants, commissioned Datassential to take a deep dive into consumer trends that retailers will find useful. In November he shared these results in a webinar hosted by QSR magazine. Compared to other cold beverages, of the 12,000 consumers surveyed, 55% said that fresh brew is “fresher” and “healthier” (55%) and “tastes better” (51%) and is “more natural” and “less processed” (46%) than rivals. Seventy-nine percent said fresh brewed tea is healthier than tea that comes in bottles, and 82% said tea is more natural when fresh brewed.
The importance of fresh brew
“The most impactful attribute to a successful iced tea program is fresh brew,” reports Buckner. Almost a third (30%) of consumers in Datassential’s Buzz Tea & Coffee panel would order more tea if fresh brewed (preferably at the restaurant), he said.
If fresh brewed isn’t available tea drinkers may settle for iced tea from a soda fountain or a can “but 20% will order a different beverage and another 20% order no beverage at all,” he said, costing restaurants valuable customers. Tea is so profitable that on average, selling a single glass pays for the entire batch (up to 3 gal.). Compared to soda 86% of customers surveyed say fresh brewed tea is more healthy and more natural (86%). Only 8% believe drinking soda is a healthier option than drinking tea.
Seventy-three percent of Buzz panel respondents either like (32%) or love (41%) iced tea and 59% drink it weekly with 78% reporting they enjoyed a glass in the past couple of weeks. A few are indifferent but almost no one in America dislikes iced tea. In restaurants 7 of the last 10 “away from home” iced tea orders were enjoyed with food, explains Buckner, citing the Datassential survey results. In restaurants 34% of consumers label tea their “go-to beverage” and consider it the “best fit” with fried foods, protein entrees, and Mexican food. Respondents also say iced tea goes well with spicy foods, burgers, pasta, sandwiches, Asian food, soup, salad, and barbecue.
Lunch, mid-afternoon, and dinner are the preferred times to drink tea.
It is no wonder then that iced teas now appear on 47% of quick serve restaurant menus and 74% of all menus. What do consumers hope to see added to these menus: flavored iced teas are favored by 53% of respondents followed by iced tea blends (45%) and artisan/hand-crafted tea (42%) along with sparkling iced tea (37%) and tea cocktails (36%). These preferences are even more pronounced with millennials who favor flavored iced teas (62%) want more iced tea blends (55%) and artisan teas (54%) and sparkling tea (47%) and tea cocktails (51%), observes Buckner.
“Tea is an expanding proposition on menus, both hot and cold, helping to fill the void left by those fleeing from carbonated beverages,” shares Jodie Minotto, Mintel’s senior global food trends analyst in Sydney Australia. She said the number of US menus that mention tea was up 4% between Q2 2015 and Q2 2016 according to Coffee and Tea – US (November 2016). “Tea is a key beverage in fine dining restaurants. Tea menu incidence was up 11% in that segment in the past year, while menuing of tea drinks increased in quick service restaurants by 7%,” she said.
Organic is nice but not essential
In 2013, Smashburger the 370-store deluxe burger chain, switched to organic, fresh brewed, fair trade certified teas made by Honest Tea, a pioneer in bottled organic beverages. Two years later the 6,503-location Wendy’s became the first national fast-food chain to offer organic tea when the company rolled out a tropical flavored green tea, exclusively formulated by Coca-Cola owned Honest Tea.
Sophisticated specialty teas in bottles, such as Numi Pu’er, Ito En sencha, Harney & Sons, and Republic of Tea Darjeeling and tea pouches from China Mist, Choice Organic Tea, Art of Tea, Rishi Tea, Davidson’s, Celestial Seasons, and Yogi have found their way into restaurants.
In May 2015 Mintel International found that 70% of consumers believe organics are a healthier option with nearly three in five millennials reporting the purchase of an organic food or beverage in the previous three months. Tea contains flavonoids, no sodium or fat and it pairs well with a number of natural and organic ingredients.
The Datassentials research showed that 69% of tea drinkers would pay extra for organic iced tea. Organic beverages now appear on 12% of restaurant menus, according to Datassential. The greatest growth is in juices, organic liquor, and tea.
Flavor makes a difference
Citrus remains the top taste preference. Lemon is considered an ingredient and not a flavor but few consumers draw that distinction.
Consumers told Datassentials they prefer flavored tea (53%) – not tea that is flavored with syrups. The exceptions are chai and tea lattes like those popularized by Argo Tea (Chai Teappuccino) and Starbucks/Teavana. Respondents said that tea should be moderately sweetened (48%) or lightly sweetened (45%) with either sugar (59%) or honey (36%). Artificial sweeteners and stevia and agave (both natural sweeteners) rank in the 20 percentiles.
Black tea is by far the most important base. In the Datassentials survey 39% prefer black tea and 26% prefer green with almost 25% indicating no special preference.
Lemon, (menu penetration 100%), raspberry (menu penetration 41.1%), peach (menu penetration 32.1%), and sweet teas predominate with berry, strawberry, mint, and tropical about half as likely to appear on the menu. Millennials drive sales of organic, herbal, blueberry, blackberry, pomegranate, kiwi, and Thai teas. Top sellers in green include tropical (citrus-mango-coconut), honey-flavored green teas, and some outliers like lychee, ginger, red bean, jasmine, and hibiscus all of which are showing high growth from a small base. Teas mixed with traditional and flavored lemonade (including some with hard lemonade) are also trending. Innovation is welcome.
Sonic Drive-In bills itself as the “ultimate iced tea stop” with 1.3 million flavor combinations. The latest: pomegranate hibiscus or black cherry frozen sweet tea. “We want to help tea lovers rediscover their favorite drink,” says Scott Uehlein, vp of product innovation at Sonic which operates 3,557 stores. “Whether a frozen clubhouse calls your name or you’re more of a black cherry iced tea type, you can throw yourself a tea party like never before.”
Concentrates and refrigerated teas
Red Diamond is one of the largest tea concentrate brewers in North America. S&D is a major supplier. Other well-known concentrate suppliers include BW Cooper, Lipton, Revoltion Tea, Pickwick, Mother Parkers, and China Mist.
The format is favored by large volume chains. Concentrates are portable, easy to store, require less preparation time, generate less waste and most important — they deliver consistent product. “Bagless tea” in foodservice sized containers (bag-inbox or bottles) are used to prepare hot or cold tea in on-demand single-serve or high volume banquet settings. Concentrates are popular in hotels, resorts, catering and behind the counter at fastfood locations.
During the past few years sales of Argo Teas made without preservatives, artificial flavors or colors have grown to $25 million, accounting for half the company’s revenue. Refrigerated teas grew 9.2% in grocery in 2016 with Red Diamond, Turkey Hill and Gold Peak performing well in both RTD and refrigerated categories. Gold Peak and FUZE tea both exceeded $1 billion sales in 2015.
Tearooms have always brewed fresh tea, usually with the active involvement of consumers who monitor steep time and color in the cup. A few years ago Coffee Bean & Tea Leaf began offering a pot of loose leaf tea with pastry. Baristas brought to seated customers at these Southern California shops a tray complete with timer and laminated card describing the tea’s origin, characteristics, and ideal steep time. Tea sales as a percentage of beverage sales nearly doubled to 20% at these shops.
Starbucks experienced even more spectacular results when it introduced “shaken” Teavana iced teas. The premium teas tasted better, according to customers who said they liked the “craft” touch. Teavana handcrafted beverages and full leaf tea sachets lifted sales across the breadth of the company’s 12,000 US coffee shops. In 2015, Starbucks grew its tea business 12% across all tea categories, posting an unusually strong 29% in iced teas sales at a time when tea sales overall are growing 4% nationally. The company is now heavily pushing its teas in Asia where 6,200 stores began serving Teavana shaken teas this fall.
In July 2015 Mighty Leaf Tea was added to the nationwide menu at Peet’s Coffee & Tea. “The marrying of Mighty Leaf Tea into its menu mix is a masterstroke, bringing two brands with independent heritages and reputations for uncompromising quality together,” writes Package Facts research analyst Daniel Granderson in Foodservice Tea Market Trends in the US (2015).
“The (Mighty Leaf) teas are all natural, flavor-forward, and fresh brewed in small batches every day while the iced tea infusions are handcrafted using lemonade or limeade with hints of mint, tropical fruits, and berries,” writes Granderson.
As consumers scale the ladder from mundane to magnificent is it possible a premium bottled iced tea could find a place at the table? Will restaurants ever chill the satisfying flavor of some of the world’s most distinctive teas?
The biggest obstacles are price and chemistry.
Orthodox style, hand processed teas take only the fresh new shoots of the plant (typically the unfurled leaf bud and the next two leaves), which tend to have higher concentrations of polyphenols, explains Scott Svihula in an article titled Restaurants & Fresh Brewed Iced Tea. The polyphenols, including EGCg, react with calcium and magnesium in the water (which are needed for the extraction process) to form insoluble salts. When refrigerated these cloud the tea and degrade the taste, affecting mouth feel and color and reducing its health benefits.
“So, the better the quality of the tea, the greater the potential chemical change,” writes Svihula, a consultant at Hula Consulting. He said Sri Lankan, southern Chinese and Nilgiri teas from India produce lovely black and green teas that taste great over ice. Keemun has long been a favorite in the West but its distinctive flavor in the Irish and English breakfast blends is nestled amid the Assam teas (chosen for their tannin) and Kenyan teas known for the color.
Flavored teas predominate in the iced tea category in part because the base teas from Argentina are cultivated for their coppery color and brisk taste of tannin without clouding polyphenols. These machine-harvested blacks make great iced teas but do not show well in hot tea competitions.
“Restaurants currently offering premium quality iced teas, some using single-origin teas include Noodles & Company, Cafe Rio: Mexican Grill, Grimaldis Pizza in New York, The Yard Steakhouse, and Kona Grill. They range from fast food to full-service, said Svihula. Suppliers of premium iced teas include Art of Tea in Los Angeles and Walter’s Bay in Texas.
He advises restaurants to mind their chemistry. “Make sure both the brewing water and water for ice are filtered. Most restaurants steep a 1.5 concentrate and dilute with line-temperature water before pouring over ice. Others brew the tea double strength and pour the tea over a column of ice. Fresh brewed, flash chilled teas show off the flavor of the tea, he said.