Posted by Sarah Schmidt
Leeyen Rogers, age 25, decided to stop drinking soda for health reasons. Instead, she drinks tea to stay hydrated during her busy workweeks as VP of marketing at JotForm in San Francisco.
She prefers to drink iced tea during the day and hot tea at night for relaxation. For Leeyen, tea is a versatile, guilt-free beverage that doesn’t have the potential sugar crash associated with soda. “I don’t love drinking plain water, so tea is a healthy and delicious alternative,” she says.
Leeyen’s beverage choice is representative of a larger trend influencing American consumer habits. The overall demand for tea has increased due to its perceived health benefits, convenience, and availability. In the United States, volumes in the ready-to-drink tea category grew by 3.7 percent, outperforming carbonated soft drinks, which declined 1 percent.
But will this upward trend continue in the tea industry, or is it just a temporary blip in the market? Read on for more data and insights.
The Expanding U.S. Tea Market
Consumption of ready-to-drink tea is particularly elevated among 18-34-year-olds. But all tea categories — including traditional, ready-to-drink, foodservice, and specialty — have grown in recent years. According to the U.S. Tea Association, the total U.S. wholesale value of the tea industry has more than quadrupled — from 1.8 billion in 1990 to 10.8 billion in 2014.
Many large food and beverage corporations have embraced the tea trend. In the report “Foodservice Tea Market Trends in the U.S.,” Packaged Facts highlights Starbucks’ Teavana and Peet’s Mighty Leaf Tea as prime examples. Some fast food chains have also benefited from tea sales — Dunkin’ Donuts, for example, has described iced tea as one of its “key products.”
In addition, tea restaurant and tea-centric retail concepts are providing interesting varieties of premium teas and tea products and accessories. Argo Tea Café, a chain of tea cafes with more than 50 locations worldwide, is one example, along with DAVIDsTea, a Canadian-based specialty tea boutique that sells more than 150 types of tea.
Tea Flavors and Health Benefits
Tea offers an array of flavors that have broad appeal, which is another possible reason why some consumers choose it as an alternative to soda. With so many flavors of tea on the market, consumers can often find a type they like, or explore a variety of flavors to keep it interesting.
While different flavors appeal to a range of taste preferences, green tea, in particular, is expected to gain momentum. Green tea’s health benefits, rather than its flavor, may be the primary factor at play.
“Consumers have come to associate green tea consumption with health benefits ranging from anti-aging agent to weight-loss beverage to anti-cancer elixir,” explains Packaged Facts. Although green tea accounts for just 11 percent of the tea Americans drink, green tea consumption has been growing at a quick pace. Consumers drink 40 percent more green tea now than they did in 2000, according to the Washington Post.
Health-conscious consumers may be especially drawn to matcha green tea, which was declared “the tea every woman should drink” on The Dr. Oz Show. Matcha is a powdered tea that is a valued tradition in Japanese culture. In the last few years, it has gained widespread publicity in U.S. health magazines.
However, healthfulness is not the only factor that influences consumer preferences when it comes to tea. According to Packaged Facts, great taste is still by far the most important factor for people ordering tea at restaurants. In addition, price, time of day, temperature, and convenience are also influential factors.
What’s Next in the Tea Industry
Unique beverage blends that combine different categories — such as tea and energy drinks — are expected to be a continuing trend. These tea fusions give consumers access to an array of exciting flavor profiles and more premium options that may come with higher price points.
How brands market their teas will also evolve. The locavore trend could provide a marketing opportunity for some restaurants, according to Packaged Facts. By selling blends and specialty drinks that appeal to local preferences, companies can entice consumers in the same way that some wineries and microbreweries have done in recent years.
Even if a specific brand of tea isn’t produced locally, restaurants can still play up its appeal by explaining where and how it is sourced. These stories can help paint a positive picture for consumers and reinforce a premium brand image.
It will be interesting to see how companies shift their strategies and market their tea products in the coming year. A large number of tea flavors and combinations exist, but for many on-the-go consumers like Leeyen, the key drivers of value are fairly straightfoward: it often comes down to convenience, healthfulness, and taste.