PepsiCo and Starbucks, already partners in a deal to sell bottled Frappucinos, are turning their attention to bottled tea. The two companies plan...
NEW YORK — PepsiCo and Starbucks, already partners in a deal to sell bottled Frappucinos, are turning their attention to bottled tea.
The two companies plan to give the Tazo brand greater exposure and expand distribution, as sales of ready-to-drink teas grow. Tazo bottled iced tea and juice teas are now sold in Starbucks and other outlets. Starting in mid-October, the bottled teas will be made available nationwide through the PepsiCo bottling system.
Under the new deal, Starbucks, PepsiCo and Unilever will make and sell Tazo drinks, taking advantage of a distribution partnership that was established earlier to sell Lipton ready-to-drink teas.
“I think it’s a big deal,” Beverage Digest editor John Sicher said. “Initially it won’t represent a lot of volume, but Tazo is a good brand and will be a good addition to the portfolio.”
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Sales of ready-to-drink teas grew 6.6 percent in the year ended in July, significantly slower than the double-digit growth in the three years before that, according to The Nielsen Co.
Sicher said sales of ready-to-drink teas grew more slowly so far this year than last primarily because of the easing in consumer spending, and that tea sales would rebound sharply when the economy improves.
Sales of bottled teas give a much-needed boost to PepsiCo’s domestic drinks business as U.S. consumers buy fewer soft drinks. Tazo teas, made in Portland, are seen as a premium product and more healthy by some consumers, Sicher said.
PepsiCo and its bigger U.S. drinks rival, Coca-Cola, compete for growth in energy drinks, juices and teas to appeal to health-conscious consumers who want to avoid soft drinks.
The Tazo deal follows Coca-Cola’s purchase of a 40 percent stake in organic tea maker Honest Tea. Coke paid $43 million for the stake in February and has the option to buy the rest of the company after three years. Coca-Cola also sells Nestea.
Purchase, N.Y.-based PepsiCo and Seattle-based Starbucks have been partners since 1994 when they made a deal to distribute Starbucks’ bottled Frappucino, Doubleshot espresso and other bottled drinks.