Market Report: Specialty Tea in North America

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A recession mindset still plagues consumers and while specialty tea remains a growth category in both the U.S. and Canada, the pace has slowed.

“Backed by innovation and on trend with consumer health and wellness needs, (ready-to-drink) tea is driving growth in the U.S.,” reports Chris Monk with Nielsen market research. Tea sales are up 3.8% to $4.69 billion in the U.S. and a more modest 0.9% in Canada’s $332 million tea market.

The market overall is “sluggish” with a slight uptick in Canada and a strong consumer preference in both countries for reduced-price sales that outpace regular, according to Monk. In tea this has resulted in unit declines (−4%) leading to a 4.3% market share of beverages sold in Canada (in contrast, unit sales of bottled water are up 27%). Hot tea sales grew by 1% in the past year, RTD tea is down 0.8%.

Chris Monk, Nielsen

Chris Monk, Nielsen

The market overall is “sluggish” with a slight uptick in Canada and a strong consumer preference in both countries for reduced-price sales that outpace regular, according to Monk. In tea this has resulted in unit declines (−4%) leading to a 4.3% market share of beverages sold in Canada (in contrast, unit sales of bottled water are up 27%). Hot tea sales grew by 1% in the past year, RTD tea is down 0.8%.

In the U.S., the decline was less severe (−2.2%) in packaged tea, which contrasts with the very strong 7% growth in ready-to-drink tea. “RTD iced tea and coffee sales are surging, potentially at the expense of hot tea,” observes Monk. Nielsen estimates RTD tea accounts for 5.5% share of the total beverage market. Nielsen estimates sales of $3.12 billion in the 52 weeks ending Aug. 27. Sales of RTD coffee in the U.S. were up 18.4%, totaling $1.1 billion.

WTN160927_Overview_NielsenMarketGrowthSlide_480px“Traditional grocery is losing ground,” reports Monk, while dollar stores are up 11% and club stores report 10% growth in Canada. In the U.S., growth in conventional grocery is flat, with value and club channels up 2%.

Jason Dubroy, Managing Director with TracyLocke consulting, observed that in conventional grocery stores “tea needs help.” Innovation is lacking, he said. Unlike produce departments, which have been transformed to showcases in the past decade, the tea aisle remains much as it looked in 1960, he said, illustrating the point with then-and-now photos.

“Canadians are moving to non-retail venues for tea,” said Dubroy, who pointed out that 63% of shoppers now use three or more sales channels and 8% use all six retail channels, according to Google Insights. He said that five years ago 68% of tea was purchased in conventional retail stores; today, tea’s share of volume between retail and other venues has fallen to 62%, according to Mintel International.

Jason Dubroy, Managing Director at TraceyLocke

Jason Dubroy, Managing Director at TraceyLocke

Annually, the tea associations of the United States and Canada invite market researchers, economists, government regulators, publicists, and producers to share their observations about the North American tea market. Last week, the Tea Association of Canada hosted the 7th North American Tea Conference at Niagara Falls. The event drew 180 and a dozen exhibitors, several from producing countries.

Coverage will continue next week with a report on global tea production from the International Tea Committee and a look at where tea is consumed, from research compiled by Mintel International.

Source: North American Tea Conference presentations are available free to attendees.