As I demonstrated in
my previous post, we are witnessing a fundamental shift in the Australian tea
market away from black tea, and towards a mixture of green tea and “herbal and
fruit infusions.” We are also seeing a gradual shift away from tea overall,
thereby making this battle of the brands more intense. For this fundamental shift away from black
tea is being replicated in a similar shift away from Lipton, for decades the
mainstream tea drinkers brew of choice (and black tea specialists), and towards
the far more fancy offerings of Twinings.
As Australians
consumers have switched from black tea to the more relaxing assortment of
“herbal and fruit infusions”, so have Twinings (or Twinings Of London, to use
their full and rather more pompous name) not only taken the lead over Lipton in
the last couple of years, but have left Lipton in the dust!
The two trends are
clearly related.
In the following graph, "green" represents brands that are on-the-go and making market share gains (and quite obviously it is Twinings that is the big winner here) whilst red represents brands that have stopped, or more accurately, have gone backwards (in this case Lipton is the big loser).
... there has been a huge swing towards Twinings and also to a grouping of smaller brands termed as "Others". Brands such as Madame Flavour and Higher Living, who will surely be big enough to justify their own market share figures next year.
And just to emphasise just how much Twinings have been the winners of the Australian tea market since 2012 - and how much Lipton have been the losers - we also have this graph (the size of the logos representing their market share)
And if course there has been an almost as large swing away from Lipton, and to a lesser extent Dilmah and Bushells, and to an even lesser and virtually insignificant extent: Madura.Let's see what these swings mean in dollar terms. Twinings have gained just over A$20m in retail sales, Lipton has lost almost as much at A$17.6m, and the "Others" collection of brands is now A$12m bigger than it was just three years ago.
That’s not to say that
Lipton isn’t innovating. They have
“intense” black tea bags. And
decaffeinated black tea bags. And they
are rather big in green tea, where they are currently pushing a “non-bitter”
variety, which means I guess that they are targeting green tea drinkers who don’t
actually like green tea, thereby widening the category’s appeal.
Lipton is also quite
big in “milk/latte style teas” – essentially chai tea – but that too, is a
category in decline. As recently as
2012, milk/latte style teas sold almost as much as green tea. Now it’s only about half as much.
In summary then,
Lipton is strong in three categories (black, green and “milk/latte style”), two
of which are in serious decline.
Where Lipton is not
big is in “herbal and fruit tea infusions,” which – making up just over 18% of
the Australian tea market up 14% in 2012 – is the Australian tea industry’s
great multi-coloured hope.
And it is here that
Twinings – particularly with their Herbal Infusions range of peppermint,
chamomile & spearmint, chamomile honey & vanilla, lemon ginger and
whatever else their band of mad tea scientists can come up with– is shining.
Offering a rainbow of
herbal flavours is not the sole key to Twinings success. Just in case you are
not sure if a Camomile Honey and Vanilla tea is not exactly your cup of tea,
they’ve become quite adept at offering these fancy flavours in smaller pack
sizes, whereas most Lipton tea is packed in boxes of one hundred. This isn’t
just to encourage trial. Since consumers of herbal tea are rather more
adventurous than their black tea drinking brethren, it also gives consumers the
option to pack their pantries with a range of flavours, depending on strikes
their fancy.
These boxes are also
charged at a premium, which further helps them gain market share.
And gain market share
they have! Back in 2012, Twinings had
24% value market share, a couple of percentage points behind Lipton, who had
been market leader for as long as anyone could remember.
Twinings now have just
over 30% value market share, leaving Lipton – at 21% - in the dust. All of this despite being priced at a considerable premium to, well, every other brand on the market.
And there you see quite irrefutable evidence of the power of a product differentiation strategy, in this case differentiation based on tiny boxes of "herbal and fruit tea infusions."
Twinings success isn’t
only due to “herbal and fruit tea infusions”.
The brand’s growing popularity leads to growing shelf space, and they have
used this shelf space to promote the world of tea beyond just English Breakfast
and Earl Grey. If you want to try a bit
of Darjeeling, Assam or Russian Caravan, chances are that Twinings will be the
only brand in store.
Ironically, Unilever –
the owners of Lipton – have also been the owners of the T2 range of specialist
tea stores – and were arguably the key catalyst for the whole herbal tea
revolution - since 2013.
Lipton haven’t been
the only victims of Twinings success.
Dilmah, it could be argued, have been impacted even more. Having
positioned themselves as a more sophisticated black tea, they too have seen
their market share eroded as consumers shift to Twin-“hey look, we’ve got the
Royal Seal Of Approval”-ings, falling from 13.1% in 2012 down to 11.6% in
2015.
And whilst it’s highly
unlikely that many Bushells drinkers have crossed over to Twinings, they too
have been hit by the declining black tea market, falling from 7% in 2012 down
to 5% in 2015.
Just as Australians
have become connoisseurs of coffee (although – as will be mentioned in a future
post – instant coffee still outsells the “real thing”) it was only a matter of
time before they discovered there was more to tea than what they may previously
have supposed. And with both Sydney and Melbourne holding tea festivals, the
Australian tea market is likely to get far more wonderfully complex.
The question is, which
brands will be able to take advantage of this shift in tea drinking
preferences? Will Lipton be able to
learn from its’ T2 stable-mates and become a force in the new face of tea? Will the new kids on the block such as Higher
Living and Madame Flavour ride the wave to future riches? Will the mid-level 5%-ish market share brands
such as Nerada and Madura be gradually squeezed out the market? Or will the future be entirely owned by
Twinings?
Only time will tell.
P.S. You know what
goes well with a cup of tea?
That’s right, a
biscuit.
And that’s the
category we’re going to look at next!