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Iced tea makers prepare to pour it on.

By Kuhn, Mary Ellen
Publication: Food Processing
Date: Monday, May 1 1995

Summer season may bring a shakeout.

You don't have to read tea leaves to figure out that the summer of 1995 ought to be a pretty interesting time in the ready-to-drink iced tea category.

For the past couple of years, just about every beverage

maker in the business has set out to stake a claim in the fast-growing segment. And this past fall, with Quaker's acquisition of onetime niche player Snapple, the category gained its third major corporate competitor.

The presence of newly named Quaker Beverage Co. raises some tantalizing marketing questions: Did Quaker make a costly mistake in shelling out $1.7 billion for a brand that may be losing some of its cachet? What impact will the Snapple acquisition have on soft drink giants Coca-Cola and PepsiCo, both of which are forging aggressively ahead in the category?

What about competition between the two soft drink companies? Last year, Pepsi pulled into a leadership position with its Lipton partnership, while Coca-Cola and joint venture partner Nestle SA lagged in their bid for market dominance. But Coke and Nestle have reworked their alliance, and Coke is adding iced tea to the Fruitopia line. As Tom Pirko, president of the New York-based consulting firm Bevmark, observes, "When Coke decides to pull it together, there's no reason that it shouldn't run neck and neck with Lipton. This is the year that they really join the game. We'll have to wait and see."

Then, too, there's the issue of rising iced tea star Arizona, along with a host of smaller players seeking to duplicate the entrepreneurial achievements of Arizona and Snapple.

All of which sets the stage for some ferocious competition in the months ahead. "I think we've seen the battle become increasingly intense over the last three summers," says John Clevenger, senior consultant with Meridian Consulting Group of Westport, Conn. "It's only going to get more so this summer."

"I think the category has historically been very competitive, and it will continue to be very competitive in the future," agrees Margaret Stender, vice president of marketing for Snapple.

A shakeout of some sort is likely, Clevenger says. "It's going to become a classic category management question of how many brands are necessary to give the consumer the variety they crave," he predicts.

"The strong will survive, but there will be a lopping off of the second-tier manufacturers," says consultant Don Stuart, a partner with Cannondale Associates of Wilton, Conn.

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