May 20, 2010, 6:24 AM EDT
(Updates with market sizes in third paragraph, analyst comment in fourth.)
May 20 (Bloomberg) -- Nestle SA will sell a line of premium tea in France that’s similar to its Nespresso coffee to tap demand for high-end drinks.
Nestle will begin selling 25 “Special.T” tea varieties over the Internet in France beginning in September, the world’s largest food company said in a press release distributed in Paris today. To make the new teas, consumers will need to buy a machine similar to a Nespresso coffee maker, also via Internet or through a call center. the tea machines will cost 89 euros ($110), and tea pods will cost 35 cents.
the owner of the Nestea brand wants to expand its tea business as sales of Nespresso, which grew more than 40 percent in 2007, are slowing down. the western European tea market is worth 4 billion euros, while the coffee market is worth 12.8 billion euros, Nestle said.
“I’m not sure what tea will bring to the party,” said Jon Cox, an analyst at Kepler Capital Markets in Zurich who has a “buy” rating on Nestle. “It’s relatively clean and easy already to get a good cup of tea.”
Special.T is targeting women more than men, and Nestle would be “happy” with having the machines in 1 percent to 2 percent of French homes eventually, said Petraea Heynike, head of Nestle’s strategic business units.
Tea Market
the French tea market is worth 500 million euros, and France is the biggest market for capsule-based hot drink machines, she said. Nestle has been preparing the product for three years, she said.
Nestle plans to sell the tea elsewhere in Europe and later expand throughout the world, Heynike said. the brand isn’t starting boutiques like Nespresso, and the machines won’t be available in stores, she said.
Nestle gained 0.3 percent to 53.05 francs at 12:18 p.m. in Zurich trading. Shares of the Vevey, Switzerland-based company have gained 5.7 percent this year.
Sales of Nespresso, Nestle’s fastest-growing major brand, rose 22 percent to 2.77 billion Swiss francs ($2.4 billion) in 2009, slowing for a third year. the unit said March 26 it expects “double-digit” sales growth in 2010.
Special.T will be available in varieties including green, black, red and blue teas, as well as Earl Grey lime and blueberry muffin flavors.
the machines, made by German producer Wik, read each capsule and brew the tea at different temperatures and speeds, depending on the variety, Heynike said.
--Editors: Chris Staiti, Jerrold Colten
To contact the reporters on this story: Tom Mulier in Geneva at tmulier@bloomberg.net; Tara Patel in Paris at tpatel2@bloomberg.net.
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.