Price War Talk Stirs Up Beverage Market

A price war may be brewing in ready-to-drink iced tea, even though it is still winter, with market leader Snapple’s stock falling Thursday on talk of price cuts from Lipton, its nearest competitor.

Snapple Beverage Corp.’s stock slipped $2.75 to $28 in Nasdaq trading after an analyst voiced concerns about competitive pricing.

Iced teas account for about 55% of Snapple’s sales.

Hambrecht & Quist analyst John-Michel Valette said Lipton iced tea, second in sales to market leader Snapple, could be applying price pressure in Denver, an important test market.

“Yesterday I saw the first signs that Pepsi (producer of Lipton iced teas) may be taking a very aggressive posture on price,” he said.

He cited a Denver supermarket chain flyer advertising two-for-a-dollar Lipton iced tea. The usual price is 79 cents each. Snapple sells for 89 cents in that market.

“If there is a price war, this would be extremely regrettable for the beverage industry,” said Jesse Meyers, editor of Beverage Digest newsletter.

Citing the example of branded soft drinks, Meyers said that “price discounting has made soft drinks commodities.”

Snapple had no comment on the stock move or on the analysts’ remarks.

The company said it has plans to introduce new drinks in its 58 fruit drink and iced tea lines in 1994, including mango-flavored tea, and kiwi-strawberry and mango soda.