NEW YORK (Reuters) - Three years ago, Coca-Cola Co (KO.N) ended a joint venture with Nestle SA NESN.VX to sell iced tea in the United States and focused on the ready-to-drink teas it was developing in-house.
The decision is paying off when it comes to sales of two of the soda giant’s tea brands, Fuze and Gold Peak. The company says they both now produce annual revenues of at least $1 billion.
“Increasingly, we’ve seen this category being very fertile and growing in quite a few regions across the world,” said Samir Bhutada, the company’s global director of tea and ready-to-drink coffee, in an interview. The company launched Gold Peak in 2006 and Fuze in 2012.
Global sales in the ready-to-drink tea category have more than doubled in the last decade, and sales are expected to reach $53.9 billion this year, according to Euromonitor International.
For companies that sell soft drinks like Coke and PepsiCo Inc (PEP.N), the category represents an opportunity to diversify the portfolio as both have faced pressure from investors amid a decade long decline in U.S. soft drink sales.
Pepsi’s chief executive Indra Nooyi last year said the company’s Lipton Pure Leaf tea, which it markets through a joint venture with Unilever PLC (ULVR.L), was among its products that achieved more than $100 million in retail sales in its launch year and generated double digit retail sales growth in the second year.
Coke had roughly 9 percent of global market share for tea last year, according to Euromonitor. Gold Peak is positioned as a homebrewed tea for U.S. consumers. Meanwhile, Fuze, which combines tea and fruit juice, has performed well in overseas markets like Turkey and Mexico.
“The concept is to sort of take this as an alternative to sodas, especially as we’re seeing more and more consumer backlash to carbonated soft drinks in Latin America as well as Europe,” said Jonas Feliciano, senior beverages analyst at Euromonitor.
Coke also sells Honest Tea, a premium product that it acquired, and Ayataka, a green tea brand aimed at the Japanese market.
Reporting by Anjali Athavaley; editing by Andrew Hay