Market researchers at the onset of the year publish forecasts on various segments of the tea industry. Companies that produce these reports include Euromonitor, Mintel International, Nielsen, IRI (Information Resources, Inc.), and Packaged Facts, as well as specialized ventures: Statista, Fact.MR, and Technavio.
World Tea News reviewed market reports, executive summaries, press releases, and email correspondence submitted by several market researchers to compile the following overview for 2019. Forecast periods are generally five years. The review excludes reports on tea extracts, tea essence, teaware, solubles, and green tea supplements.
Global Hot Drinks
Euromonitor predicts cautious optimism with more than half of the beverage professionals in its Industry Insights panel indicating that the sales value in their category in 2022 will be at least 5 percent higher than 2018.
Bullet points include:
- E-commerce and internet retailing, sustainable packaging and ethical/fair trade sourcing are expected to be the most influential trends impacting sales in the coming year.
- On average 42 percent of industry professionals cite coffee pods/capsules, single-origin/single-region products, and green tea/matcha as the most successful product launches in the past year.
- There is a growing awareness for innovative health beverages beyond coffee and tea – organic, natural and healthy drinks are very much in trend these days (matcha, turmeric, moringa).
Hot drinks remain a store-based category, with 97 percent of all sales taking place in a physical retail establishment but “coffee and tea shops are becoming absolutely vital drivers of trends and innovation in hot drinks – as a segment no brand can ignore them,” according to Euromonitor’s Voice of the Industry: Hot Drinks Report
Global Tea Market
The global tea market is estimated to increase incrementally by $12.62 billion during the period 2019-2023, accelerating at a nearly 5 percent compound annual growth rate, according to Technavio research.
Bullet points include:
- Year-over-year growth for 2019 is estimated at 4.48 percent
- Most of the growth (58 percent) will be in the Asia-Pacific region
- Consumption and production are strongly correlated. During the period 2007-2016 production grew 4.4 percent according to the United Nation’s FAO. Consumption also rose by 4.4 percent during the same period. Tea producing countries are now among the largest consumers of tea.
Tea consumption has increased by around 30 to 36 billion liters in volume during the past five years, according to Technavio’s Global Tea Market Analysis 2019-2023
Among hot drinks, tea has increased the most in constant terms for several years, according to Euromonitor. The average person alive today drinks 236 cups of tea a year and 132 cups of coffee (as well as 27 cups of other hot drinks). Globally exporters have been dealing with consumers trading down to value brands because of macroeconomic problems in Egypt, Russia, and Turkey.
Euromonitor predicts “wealthy and mature markets like Japan or the UK will find it difficult to expand tea volumes in the years ahead, but there remains a great deal of potential in pursuing value-added strategies that seek to turn drinkers of mass tea brands into more discerning customers who will spend more for higher-quality products.”
Bullet points include:
- The global market for tea at retail is expected to grow by $7.9 billion between 2017 and 2022, with an average rate of expansion of 4 percent annually in real terms (better than either coffee or other hot drinks).
- Global consumption of tea is forecast to reach 3.3 million metric tons in 2021 with well over half of this growth in Asia
- The top three markets for tea by per capita consumption are: Turkey, Ireland and UAE but China, India and Pakistan consume the most tea. More than half of global tea consumption is in Asia.
- The top three cold tea markets by total RTD volume are China, Japan, and the U.S.
- The top three hot tea markets by total brewed volume are China, India, and Russia.
“Tea has found a way to enter all of the major occasions for packaged beverages: from hydration to refreshment, indulgence to nourishment and functional energy. This gives the tea category, in some form or another, a place in the consumer basket at all times of day. Consumer-led factors make tea a resilient retail product in uncertain times,” according to Euromonitor Research.
In the U.S. ready-to-drink (RTD) tea accounts for about 80 percent of the tea category by value, up by 4 percent since 2015.
RTD was the top beverage category in dollar growth, showing a 18.9 percent dollar increase in 2017, according to Nielsen market research. It is was the second year in a row that iced tea gained share. RTD now holds a 5.9 percent share of dollar sales in the U.S. convenience channel, up 3.5 percent in value and 3.1 percent in unit sales compared to declining unit sales of soda, bottled water, sports drinks and juice, according to Nielsen. Carbonated soda’s dollar share of sales declined 5.7 percent during the same period.
The hospitality industry (HORECA) has gained significant momentum in the past decade given the increasing propensity for consumers to purchase food offerings prepared outside the home. Tea can be the perfect to-go beverage for consumers as the hospitality segment experiments with pop up restaurants, fast casual dining experiences, here-to-stay café and all-day breakfast. A growing interest in this segment by the Consumer Packaged Goods industry seeking to boost revenue has, in turn, increased sales of bottled tea. Fact.MR identified these trends and assessed their impact by region. Bullet points include:
- Attacking Snacking – Increased consumption with snacks is a key growth area for tea industry
- Tapping Teetotalers – Tea-based mocktails are popular with those abstaining from alcohol
- Café chains – Re-evaluating their tea offering to meet consumer desire for specialty beverages
- Green tea – Interest in green tea with fruit and herbal blends are growing
- Teatox – Celebrity endorsements and social media advertising is attracting millennials.
“In a bid to meet consumer demand for ingredient authenticity, tea brands have indulged in R&D efforts to develop tea formulations with authentic taste and aroma,” according to Bottled Tea Market Forecast, Trend Analysis & Competition Tracking – Global Market Insights 2018 to 2027
The global oolong tea market is fragmented and, as the market is in a growth phase, competition among companies is intense. This is why the oolong tea market is expected to post a compound annual growth rate of more than 3 percent through 2023, according to Technavio.
Oolong is popular in Asia and Pacific Rim countries which consume the greatest quantity by far. Domestic markets in the Middle East and Americas trail at 2 percent or lower penetration. Traditional loose leaf, in a range that extends from lightly fermented green to roasted dark, retains the largest share of the segment at 70 percent. But convenient bottles and cans and wider distribution are largely responsible for accelerating sales.
“A key driver for the global oolong tea market is the increasing accessibility and availability through organized retailing. Convenience products such as ready-to-drink oolong tea, oolong tea blends, and mixes are mainly sold by large and organized retailers and the vendors in the global oolong tea market distribute their products mostly through such retailers,” writes Technavio.
Bullet points include:
- Incremental growth of $316.3 million in sales of oolong through 2023.
- Majority of the convenience products such as oolong tea blends, ready-to-drink (RTD) oolong tea, and oolong tea mixes are sold through large and organized retailers
- Asia and the Pacific region remain the dominate market for oolong
“The increasing influence of online retailing will have a positive impact on the market and contribute to its growth significantly over the forecast period, according to Technavio.
“Online retailing assists in eliminating the middlemen and permits the vendors to interact directly with consumers. The online and e-commerce channels also support both business-to-business and business-to-consumer operations. Online retailing offers vendors the freedom to run from a central distribution hub or farm and eliminates the complex network of intermediaries. Therefore, it helps to streamline supply chain operations and improve efficiency and productivity,” according to Technavio’s Global Oolong Tea Market 2019-2023.
Cold Brew & Sparkling Tea
“The adoption of the cold-brewed process in the ready-to-drink (RTD) coffee category has begun spreading to the tea category. As with coffee, the cold brewing process results in a beverage that is reported to be smoother and less bitter and is further said to better preserve the health benefits of the tea than preparing it through a hot brewing method. The Japanese tea marketer ITO EN in 2017 launched a lineup of ice-steeped cold brew ready-to-drink teas in the U.S. The company reportedly uses an authentic Japanese cold brew process called Mizudashi, according to Package Fact’s U.S. Beverage Market Outlook 2018
There were many product launches featuring sparkling tea, a segment that has shown resilience as an alternative to carbonated soda. Major bottlers including Nestlé Waters North America (San Pellegrino sparkling tea) and Starbucks/Teavana are promoting these as low-sugar healthy alternatives.
In Europe the Copenhagen Sparkling Tea Company has stocked famous British tea seller Fortnum & Mason with a bubbly alcoholic tea by sommelier Jacob Kocemba. His corked champagne bottles are filled with a blend of sparkling teas and herbals and sold in Blå (Blue), Rød (Red) and Grøn (Green) with a new “Vinter” tea based on Chai. He named it: Enfant Terrible.
Innovation is what makes the category dynamic and that dynamism is translating into sales.