Snapple Beverage War Spills Onto Continent

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LONDON-As the New Age beverage war crosses the Atlantic, Europeans are getting a taste of a strange new word: Snapple.

Taking its David vs. Goliath battle from the U.S., upstart marketer Snapple Beverage Corp. is gearing up to roll out its exotic juice and tea-based drinks, such as peach-flavored iced tea and kiwi strawberry punch, to Europe this summer.

For now, Snapple's key competition will be the ready-to-drink iced tea entries of cola giants Coca-Cola Co. and Pepsi-Cola Co., already established in some markets through their global partnerships with Nestle‚ and Unilever's Thomas J. Lipton Co., respectively.

Eventually, more directly competitive lines of natural-appearing beverages, such as Coca-Cola Co.'s Fruitopia, just introduced in the U.S., are expected to fight for share in a category that bridges the soft drink, mineral water and iced tea segments.

The first head-to-head battleground is the U.K., where Snapple is figuring out how to adapt its grassroots U.S. approach to promote its four fruit-flavored and three tea-based drinks.

Liptonice also makes its debut with a $9 million ad campaign next month, and industry watchers expect Coca-Cola Nestle Refreshments Europe to introduce Nestea here this summer.

Snapple's marketing style will be as unique as its name, which tested well in focus groups despite its funny sound to Europeans' ears, but its specific approach will be clearer this week when Snapple picks its first ad agency outside the U.S. to introduce the brand in the U.K.

The company wants the new $1 million effort that will come from one of the finalists: BSB Dorland, Euro RSCG and Banks Hoggins O'Shea, to be ready in June.

Its U.S. strategy caught the cola giants napping as it sparked a $1 billion trend toward more natural beverages. Since 1988, Snapple has grown from a small $13 million niche business into a $500 million key player in the U.S. beverage market with a line of some 50 flavors.

Snapple, whose $65 million U.S. account is handled by Kirshenbaum & Bond, New York, now commands 37% of the U.S. iced tea segment, beating Lipton Original and Lipton Brisk's combined 26% share and Nestea's 15%.

The challenge in the U.K. is to persuade a nation of tea-lovers to sample a line anchored by a beverage that is not served hot or with milk. "If you ask people if they want to try cold tea, [their immediate reaction is] no," said Snapple director-Europe Perry Curtis.

So Snapple's plan is to saturate the market to gain awareness. By the end of the summer, Snapple intends to increase its availability from 4,000 to 15,000 retail outlets, from "CNT's", as the miniscule confectionery, news and tobacco stores are called, to huge supermarkets. By summer's end, Snapple will have offered 250,000 samples in tiny Snapple-labeled cups at all kinds of outlets, including hundreds of service stations and at sponsored events, such as an art school's graffiti exhibition to London's much-attended Covent Garden Festival in May.

"People are obviously skeptical but once they've actively been encouraged to try it, the skepticism goes away," said Dennis Miller, general manager of United Beverage Co., Snapple's U.K. distributor.

Snapple also has a price disadvantage. A 330 ml. can of Liptonice will sell for 54-cents compared to 45-cents for a same-size can of Coke, while a one pint (473ml) bottle of Snapple costs about $1.20.

This month, in its first major sales promotion, "Tea for Two," Snapple tackles the tea issue head-on. In point-of-sale displays at 750 Esso service stations, Snapple shows colorful photos of the product and brand name, offering customers who buy two Snapple fruit-flavored drinks a free one-pint tea drink.

In contrast, Liptonice will make its U.K. debut with a more traditional ad campaign by Ogilvy & Mather. In a TV spot, popular heartthrob comedian Angus Deayton parodies conventional soft drink TV commercials in his role as a director. In one of a series of scenes, Mr. Deayton is heard directing the camera crew: "Cut to the couple on the balcony to show Liptonice is enjoyed by couples on balconies." Next comes a tea-drinking sailor on a boat. "Cut to the sailor to show Liptonice is enjoyed by sailors as well as couples on balconies," he says. The spot closes with Mr. Deayton emphasizing, "It's made from tea." Then the camera shows quick shots of a character from each scene saying, "Tea? Tea? Tea?" And he responds, "Oh, well, it surprised them anyway. New Liptonice, made from tea. Surprisingly."

If Coke's Nestea enters the U.K. as expected, it is likely to use its new advertising from HK McCann that reinforces the brand's position as a New Age beverage. Breaking next month in other undisclosed markets across the Channel where the tea is already established, the :20 TV spot features a harassed young woman in a traffic jam. She abandons her car and enters a trailer on the street, where she finds relaxation in a Nestea world.

Reluctant to provide more details, Ann Louden, business development manager, Lausanne-Switzerland-based Coca-Cola Nestle Refreshments Europe, said the commercial positions Nestea as "a great refreshing beverage with a little bit of water, a little bit of lemon and a little bit of tea."

After a 1992 introduction in Italy, Nestea has since expanded to Germany, Spain, Belgium and Switzerland and will add more undisclosed markets by June.

Snapple will start its continental rollout also this summer as it begins local production of a metric 500ml bottle to comply with laws in several countries such as Germany and Belgium.

"We'll be ready to go in Germany, Italy, France and Spain," said Mr. Curtis, although the major marketing effort will not take place until next summer. However, Mr. Curtis wants to start outdoor and radio in Norway this summer even though no agency assignments have been made. It has not been decided how much of the European work Snapple's U.K. agency will handle.

Fueled by new entries, iced tea sales were up 42% in Europe in 1993 to a cool 715 million liters, according to European food and drink consultancy Zenith Interna-tional. Liptonice and Lipton Iced Tea, combined, holds a 27% market share on the Continent and Coca-Cola Refreshments Europe Nestea 5%, but it is in fewer markets.

Morgan Stanley analyst Sylvain Massot predicts New Age beverages will be a small segment because of the different maturity levels of the soft drink markets in the U.S. and Europe and the fact that Europeans already drink a healthier alternative to soft drinks-mineral waters.

Americans, for example, guzzle three times as much Coca-Cola per capita as their European counterparts.

Mr. Curtis' biggest concern, however, isn't the competition. "If Lipton spends a lot of money advertising the category, it's good for us."

Instead, he figures he's already overcome his biggest hurdle. Last summer after being turned down by all major distributors, he finally convinced a reluctant friend to expand into New Age beverage distribution.

"Someday they'll feel a bit like the guy who turned down the Beatles."

Marcy Magiera contributed to this story.

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