State of the Industry

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The State of the U.S. Tea Industry

2014 Year in Review

Prepared by Peter F. Goggi

Tea Association of the U.S.A., Inc.

Tea is the second most consumed beverage in the world, after water; today, approximately four in five of all consumers drink tea. 2014 continued to be a year of growth for the US tea industry, building on a trend that started more than two decades ago. The total wholesale value of tea sold in the USA grew from less than two billion dollars in 1990 to more than 10 billion dollars today.

Several factors are driving the growing demand for tea in the United States. The increase in competitive offerings has encouraged supermarkets nationwide to expand beyond the tea and coffee aisle, with tea products emerging in the juice, health and candy aisles. And, thousands of tea shops are popping up nationwide, providing greater consumer access to finer-quality specialty teas. The demand for innovation and new products have driven an increase in awareness and interest as consumers continue to select tea as their beverage of choice.

Marketing and Innovation in the Industry

As consumer demand has grown, frequent innovation and the marketing of new products have helped keep tea top-of-mind for consumers. Many companies have started developing interesting new tea products and marketing tea in new and unique ways.

  • Established bottled water and soft drink companies have expanded product lines to include ready-to-drink tea.
  • Green tea, once nearly impossible to find in supermarkets, is now widely available; even Oolong, White and other specialty teas are more available than ever, in both supermarkets and standalone shops.
  • Millennials, more so than older generations, are seeking innovation and variety when it comes to current tea offerings. Start-up companies addressing this desire are pouring into the marketplace.
  • The emergence of new categories of tea products, including tea-infused waters, tea energy drinks, tea-based ice cream and other foods fortified with tea, continue to drive interest in tea.
  • New versions of tea-infused alcoholic and malt beverage specialties, such as Hard Tea, have opened an entirely new, young market.
  • The long-banned Pu-erh tea (under the Tea Importation Act of 1896) is finding its way into the American market.
  • Traditional packers of black tea now offer specialty teas and herbal blends.
  • Single Serve Cups are now estimated to be ~ 13% of the Traditional Tea Category.

Tea Stands Out to Consumers through Growing Supermarket Presence

The amount of space supermarkets devote to tea has increased dramatically; tea is moving beyond the traditional “coffee & tea” aisle and can be spotted throughout the whole supermarket. New sections in the supermarket have been added to accommodate the many new forms of tea that continue to interest and excite tea consumers.

  • Significant shelf space is now devoted to ready-to-drink teas in the "soft drink", “water” and “functional beverages” aisle, as well as the juice aisle, where tea is added to products as a beneficial ingredient.
  • Tea can be found in the dairy case, in bottles, wax packages and gallon jugs.
  • With new brands competing for space in the refrigerated section, some larger supermarkets have even dedicated a refrigerator solely to tea.
  • Organically-grown tea is finding its way into specialized organic departments.
  • Health, wellness and beauty aisles have become home to new hair and beauty products that feature tea as an ingredient or a concentrate.
  • Tea-infused chocolate, chewing gum and ice cream line the candy aisles and freezers.

Evolving Retail Landscape Means Greater Access to Tea

Tea has seen steady growth beyond supermarkets as well. Specialty teas are now a staple in thousands of coffee shops across the country, and nearly all upscale hotels offer an afternoon tea service. Following Starbucks’ acquisition of Teavana, stand-alone stores are popping up across the country. It is estimated that there are currently more than 4,000 specialty tearooms and retail shops across the country.

Additionally, ready-to-drink tea products have increased the availability of this health positioned beverage in non-traditional outlets. Most warehouse clubs, mass merchandisers, gas marts, drug stores, and convenience stores now carry tea products, while large distribution increases in the vending and foodservice sectors have further bolstered tea’s prevalence.

Food and Beverage Trends Motivating Consumers

Several food and beverage trends are motivating consumers to choose tea and are a driving force behind its growing popularity in the United States.

  • Convenience/Availability– Consumer demand easily accessible, quick and simple food and beverages that fit into their busy lifestyles. A predominant force driving tea’s popularity is its convenience, and ready-to-drink tea and single serve pods provide the ultimate convenience to consumers. Keurig Single Serve SKUs are currently driving growth in the traditional tea/bagged tea market. The increase in tea shops has also driven consumer accessibility.

  • Health and Wellness – Consumers’ growing awareness of general health and wellness has been an important factor in contributing to tea’s popularity. Many consumers understand the functional health benefits of tea and are reaching for tea as a healthier alternative to sugar-laden beverages. Thousands of published studies in leading medical journals support the benefits of drinking tea, while consistent media coverage surrounding the research continues to educate and motivate consumers to think conscientiously about their beverage choices. Products with tea as an “active” ingredient are becoming more and more visible on shelf.

  • Versatility/Customization – Chefs, mixologists and product developers are increasingly using tea as an ingredient in beverage and food recipes. From ready-to-drink iced tea and hot tea to tea-infused chocolate and skin care products, tea’s versatility offers consumers limitless choices in how they eat, drink and use tea, satisfying a growing interest in customization and personalization of products and brands.

The convergence of the health benefits with the convenience, availability and versatility of tea has helped create a new consumer experience, all while keeping the product offerings fresh and unique. These trends are positively effecting the industry as they serve to make tea more readily available, convenient and interesting to millions of potential consumers. More importantly, these changes are useful in raising top-of-mind awareness among consumers.

The following sales estimates are derived from hard facts from both inside and outside sources as well as informed judgments from Tea Industry experts.

ESTIMATED WHOLESALE VALUE OF THE UNITED STATES TEA INDUSTRY

1990

2012

2013

2014 (est)

Traditional Market

(Supermarket, Drug and Mass Merchandisers)

$0.87 Billion

$2.30 Billion

$2.40 Billion

2.51 Billion

R-T-D

0.20 “

4.80 “

5.10 “

5.23 “

Foodservice

0.50 “

1.12 “

1.18 “

1.20 “

Specialty Segment

0.27 “

1.57 “

1.73 “

1.90 “

Total Sales

$1.84 Billion

$9.79 Billion

$10.41 Billion

10.84 Billion

  • According to the Global Iced/RTD Tea Drinks Report from market research firm Canadean, the ready-to-drink tea market in the U.S. is expected to rise to $5.23 billion in 2014, with an estimated growth rate of 3 - 6 percent through 2018.
  • Foodservice sales will continue to grow slowly, spurred by an increase in operator interest because of the promise of high profitability and increased promotion. This stimulus will be partially offset by difficult economic conditions leading to a reduction in how often consumers will eat away from home. We expect an annual dollar increase in the range of 2 to 3 percent.
  • Specialty Tea will continue its upward climb in 2013 and continue into 2014 as consumers continue to seek out exotic and unique teas. We expect to see an annual dollar increase in the area of 10 to 15 percent.
  • While not immune from negative forces in the economy, traditional tea, because of its relatively low price point and large share of the market, will be most resistant to those forces. Annual dollar growth in the area of 2 to 3 percent is expected in this segment.

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362 Fifth Avenue
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Tel: 212-986-9415
Fax: 212-697-8658
E-mail: info@teausa.com

Suite 801
362 Fifth Avenue
New York, NY 10001 

Tel: 212-986-9415
Fax: 212-697-8658
E-mail: info@teausa.com