U.S. Tea Sales Will Someday Top Coffee

LAS VEGAS, Nev.

Total tea sales will one day eclipse coffee sales in North America predicted three of four distinguished beverage industry leaders at Friday’s opening session: Will Tea Ever be as Big as Coffee?

The panel, moderated by World Tea Media founder George Jage, went so far as to pick the month (May) and day (17) of the event. The year — 2017.

Their confidence is buoyed by global market research from Mintel International which forecast tea sales growth of 50% between 2011 and 2016.  In five years experts predict tea will experience 5% growth in the food service sector and 10% growth in retail.

“We led off the Expo with this session not only to set the tone for the conference and Expo, but for the industry for the next year. Tea has the potential and will ultimately exceed the sales of coffee in the United States. However, with the dynamics of the growth of specialty and premium tea, it will be much different than what we saw with specialty coffee in the early and mid-‘90s,” said Jage.

All panelists pointed to both an increase in customer awareness and dedicated interest from the millennial generation as factors. Charles Cain, Vice President, Tazo Merchant & Operations, Starbucks, sited the ‘release’ the word coffee from its iconic siren logo as an indication of the company’s determination to bring tea into play in its North American stores. The company purchased Tazo tea in 1999 for $10 million. Sales were $1.4 billion last year and growing. Cain predicts that tea will play a big role in future sales at Starbucks.

"We believe that this is the right time to make a significant strategic investment in Tazo and the tea market.  Tazo will continue to play an important role in our Starbucks retail stores, through CPG in grocery, and you'll also see us explore new ways of brining the artistry and heritage of tea to life for our customers,” he said.

“Our intention is to raise consumer expectations for their tea experience the same way that Starbucks did for coffee," ads Cain.

 “Currently, tea is seventh in throat share, as measured by gallons consumed per capita. Close on the heels at No. 6 is fruit juices, moving closer to coffee at the No. 5 spot. But the esteemed panel felt that it is not how much, but what kind of tea and at what price that mattered more," says Jage.

Jage pointed to the fast growth of tea retailers DavidsTea in Canada which is nearing 100 retail stores and Teavana in the U.S. which has surpassed 250 stores. It was tempting to compare the new tea giants to the coffee retail establishment, says Jage. “Could tea ever fit that model?” he asked.

The panel responded that the coffee house model of quick ‘grab and go’ did not fit the more focused patterns of tea consumers. Joseph Cugine, President, Argo Tea, commented on the all-day traffic that tea brings to his tea cafés.  While morning is about coffee and caffeine, the afternoon and remainder of the day see sales of tea increase from mostly female consumers, age 18- to 35-years, who take time to appreciate the beverage and spend on average two hours in the shop. While some customers linger over their cup of tea, most prefer to purchase the leaves, then prepare and consume at home.

"When we looked at the total number of retail locations, coffee has saturated the market with more than 25,000 locations in the U.S. – 11,000+ of which are Starbuck’s," said Jage. Tea retail locations are estimated at 3,500.

"The panel unanimously felt that we will not see 25,000 tea rooms/retail locations in the United States. The coffee retailers alone are seeing tea increase as a part of overall sales, into double digits from the low single digits five years ago. This and other channels will fuel the growth of tea sales. When looking at overall tea sales – estimated at $8 billion with coffee estimates ranging from $25 to $35 billion – three of the four panelists felt tea is positioned to exceed coffee sales by 2017," he said.

Jack Groot, owner of JP’s Coffee and Espresso Bar in Michigan, says that tea growth in his company is exceeding the growth of coffee, but tea still only accounts for less than 10% of his sales. He said that he always carried tea in his shops and over the years has enhanced the quality of teas on offer. His staff is trained in preparation of tea which is particularly important as he introduces more premium teas to his menu.

Groot “pled the Fifth” when asked to name a date when tea sales would eclipse coffee.

"What is important is to understand where the growth will be. Teashops will not eclipse coffee shops in number. They are two very different concepts,” said Groot, “But, tea as a beverage in total U.S. dollar sales could."

Cain agreed that growth “will depend on retail execution and creating customer experience.” When asked by Jage if consumers are ready for education in the proper preparation of tea, David De Candia of Coffee Bean & Tea Leaf said that his customers really enjoy having the extra attention, saying that it enhanced their experience.

Pyramid tea bags will influence future sales as they provide ease of preparation while still protecting the whole leaf. De Candia says he employs them in many of his locations but uses only loose leaf in his concept stores. Panelists saw future growth in “gateway” teas. Flavored teas cultivate market taste and may lead consumers to “pure” teas. The increase in sales of signature blends and flavored teas is being driven by the millennial market. 

We won’t see tea drive-thrus anytime soon, but these panelists are keenly optimistic about the future. What will they be doing on that momentous day when tea casts a shadow on coffee’s dominion?

Drinking a cup of their favorite tea, of course.

Linda Gaylard is a freelance writer and blogger in Canada. View her work at  The Tea Stylist.

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