The concept of “tea time” in the U.S. might not bear quite the same significance as it does in the U.K., however, recent data examining the venerable beverage segment confirmed that American’s are making more time to enjoy their tea. Whether it’s served hot or cold, brewed or ready-to-drink (RTD), sales were boosted by exotic new tea varieties and flavor combinations, as well as the continued confirmation of tea’s health benefits.
According to “Tea and RTD Teas – U.S.,” a report from Chicago, IL-based Mintel International, food, drug and mass market retailers (excluding Wal-Mart) toasted nearly $4 billion worth of tea and RTD tea sales in 2009, capping off a 42% sales increase spanning 2004 through 2009. But that’s just the beginning. Mintel forecasted the market to grow an additional 53% at current prices (41% in inflation-adjusted prices) during the years 2008 through 2013.
The tea and RTD tea market is made up of four segments: RTD shelf-stable/canned/bottled tea, bagged/loose tea, instant tea mixes, and RTD refrigerated tea.
Health and convenience-minded Americans drove sales in the RTD categories. Sales of RTD shelf-stable canned/bottled tea rose 90% to $1.2 billion during 2004-09. Specialty brands offering either purity or premium qualities were particularly successful, especially when their product lines were comprised of black, green, white and herbal teas in a wide range of flavors. The segment suffered somewhat during the recession, as budget-conscious RTD tea consumers sought cheaper RTD alternatives such as private labels, or experimented with brewing their own tea at home.
Bagged/loose tea sales grew 5% to $754 million during 2004-09. Mintel found that much of the growth, which occurred during the last two years of the period, came from increased raw material cost, which was passed on to retail prices. Although this negatively impacted volume, consumers migrating to this segment as a low cost alternative for RTD tea helped buoy sales.
Instant tea mix sales increased 8% to $299 million during 2004-09. Companies like 4C Foods Corp. and products such as Starbucks Coffee Company’s Tazo brand helped this category enjoy faster growth thanks to innovative products. In fact, Mintel asserted that new products made with ingredients like matcha green tea may be the key to adding growth to this category, the most stagnant of the four tea markets.
The RTD refrigerated tea segment grew 98% to $325 million during 2004-09 due to expanded distribution by dairy processors and distributors.
Two attributes were spotlighted by the Mintel report as factors that contributed to product success: formulation innovation and cultivating brand appeal. The top two tea companies listed in the report—Unilever and Ferolito, Vultaggio & Sons—shared $1 billion in sales or 40% of the FDMx market during 2009-10. While Unilever is a top seller and leads two of the three segments in which it participates, sales were flat in each segment. In contrast, brands like AriZona, The Republic of Tea, Bigelow and Tazo continuously developed new flavors to stay on track with trends and attract consumer interest.
Earlier this month, Waterbury, VT-based Green Mountain Coffee Roasters, Inc., a preeminent brand in the single-serve coffee market, sought to make inroads into the single-serve iced tea brewing category with the launch of Brew Over Ice K-Cups designed for use with the Keurig Single-Cup Brewer machine. A 16-ounce cup filled with ice is placed under the brewer. The tea-filled Ice K-Cups tea is brewed directly over the ice and served.
Green Mountain’s Brew Over Ice K-Cups are the latest addition to K-Cup tea offerings, which include a variety of flavors from bagged tea purveyors, Celestial Seasonings and Twinings, as well as chai.
In addition to profiling the tea market, the Mintel report also provided a snapshot of tea consumers. Tea consumption among survey respondents over the age of 55 ranked at 45% during 2004-09. Usage among females increased to 48%, with the notion of “wellness” a primary growth driver. African Americans proved to be the key consumers in the RTD iced tea market—61% reported drinking RTD iced tea compared to 43% for the average.
The RTD tea category had a 45% market penetration in 2009, with RTD iced tea ranking as the most popular tea beverage among those under 44 years of age. About 28% of respondents said they enjoyed freshly brewed hot/cold tea daily, opening a sizable area of potential for sellers of high-end single-serve tea makers. Fewer than 22% of respondents purchased tea based-smoothie drinks, which, according to the report, represented another area ripe with opportunity.
About 77% of households used bagged/loose tea during 2007-09. Similarly, the household penetration for instant tea mixes remained constant at 29% during the same period. Among those whose households used regular bagged/packaged tea, 15% preferred loose tea.
The top reasons polled consumers gave for drinking RTD tea was because they enjoyed the taste (77% of tea drinkers) and found it refreshing (68%). About 42%, reported drinking it for the health benefits, with half of all tea drinkers reporting that a major reason why they drank tea was because of the antioxidants.
With this trend in mind, last fall Fairfield, CN-based Bigelow Tea introduced a line of functional teas called Bigelow Herb Plus Teas. The line of four caffeine-free tisanes is available in Pomegranate Blueberry Herb Plus, Cranberry & Ginseng Herb Plus, Wild Blueberry Acai Herb Plus and Lemon Ginger Herb Plus flavors.
Each tisane contains added functional ingredients. For instance, Lemon Ginger Herb contains the probiotic GanedenBC30—chosen for its ability to withstand brewing heat and harsh stomach acids —to “help support a healthy digestive system.” Pomegranate Blueberry Herb Plus is formulated to support heart health with a dose of omega 3 DHA and vitamin C.
Traditional Medicinals, an herbal remedies leader, garnered consumer confidence by substantiating its tea product claims with clinical studies—something that resonated well with consumers and led to year-over-year growth for the company, with sales more than doubling to $22.4 million during the period 2004-09.
About quarter of respondents who drank tea found organic and fair-trade claims appealing. Among those aged 18-44, the proportion jumped to over a third. Interestingly, 34% of all tea drinkers believed that organic tea drinks/tea bags are better than conventional brands and 28% said that organic tea drinks and tea bags justified the added cost.
Flavored teas also proved appealing. Chai, white tea, ginger and vanilla were liked by more than a third of those who tried them, but less than half of those who drink tea have tried these flavors. Regardless of gender, fruit flavors (54%) and green tea (54%) were popular with more than half of respondents.
A new caffeine-free tea line from The Republic of Tea dovetails the desire for health benefits with exotic new flavor combinations. The company’s Raw Green Bush teas come in five flavors: Natural Organic, Black Currant Cardamom, Plantain Coconut, Mango Chili and Orange Red Carrot. Each of the blends hinges on raw green rooibos, which comes from the same plant as the better known red rooibos, which has a long history among South African Bushmen.
The Republic of Tea explained that the difference between green and red rooibos lies in the curing process. Immediately after harvest, green rooibos is lightly steamed to halt oxidation; retaining the green color in the leaves (the stalks are naturally red). Red rooibos goes through a long oxidation process, fully turning the leaves reddish in color.
The raw state, according to the company, preserves the plant’s natural live benefits. “Studies show these health-promoting antioxidants can boost immunity and protect you from free radicals that weaken natural defenses and lead to premature aging.
Scientific studies also suggest that raw green rooibos has a higher concentration of many of the nutrients found in other teas, including flavonoids, antioxidants and minerals,” the company said. “It is rich in natural occurring elements and contains healthy amounts of iron, magnesium, potassium, fluoride, manganese, zinc, calcium, and vitamin C. It also retains chlorophyll, which has cleansing properties that can promote fresh breath.”