Cleide Tinga
The category value showed a positive growth in 2018 compared to the previous year. The value growth was largely attributed to the average industry selling price which recorded an increase for the base year. The average industry selling price increased at a higher rate than the headline inflation rate for the year which stood at 4.7%. The category price was affected by the constant rise of fuel prices which led to increases in transportation costs. The effect can be seen in the surge in the average industry selling price. The increase of VAT to 15% in 2018 and the implementation of the sugar tax are some of the drivers for the high increase in the average industry selling price.
Top end retail held the lion’s share of the category volume accounting for 44.6% of the total volume in 2018. The channel is dominated by major brands, and these manufacturers are believed to have strong relationships with major retail players. RTD iced tea is generally perceived as a premium product and is largely targeted at the middle class to upper middle class, hence the large focus from manufacturers in top end retail and on-consumption channels. The top end retail sector also has a large customer base as consumers do their grocery shopping there. Although this channel did not increase in volume in 2018, this sector is also known for its aggressive promotional campaigns and marketing strategies that naturally drive sales, reinforcing the dominant position for the sector. All outlets declined in volume in 2018, with bottom end retail showing the highest drop in 2018 compared to the previous year. RTD iced tea is losing share to other non-alcoholic beverages that are cheaper and offer better value for money.
“Considering that players in the beverage industry have invented re-sealable cans to cater for future consumption, will players in the RTD iced tea category launch their products in these cans in future or will PET continue to dominate the category” comments Cleide Tinga, a research analyst, at BMi Research.
“It is also interesting to note that the local market for RTD iced tea is on a spiral decline whereas the global market is growing in volume. The category is declining despite innovation including shifts into rooibos and green tea. Has RTD iced tea reached its maturity phase in the product life cycle or will launching further new products make up for the volume lost over the past few quarters?” questions Tinga.
Tinga states that in line with the demand for green tea/healthier drinks worldwide, players in the South African market are launching rooibos RTD iced tea offerings. “In addition, globally there has been a spurred demand for kombucha so in the future will we be seeing this product offering on South African shelves?” queries Tinga.
Whilst the local RTD iced tea may have faced a number of challenges in 2018 that have hampered growth, players in the market say that the outlook for the category is positive. It is estimated that 2019 will show a minimal growth as the category recovers from the downswing. In the medium to long term, the category is forecasted to grow positively.
