The 73 million Millennials and 61 million members of Gen Z have already reshaped American markets in multiple ways. The tea industry is no exception, and manufacturers and retailers who want to capture bigger shares of these demographics need to be very savvy about the preferences of these younger consumers.
Millennials are those who were born between 1981 and 1996; Generation Z or “Gen Z” are those born between 1997 and 2012.
British research firm GlobalData told World Tea News that the value of the U.S. tea market in 2019 stood at $2.8 billion USD and is expected to record “robust growth,” at a Compound Annual Growth Rate of 4.8 percent, which will see the category’s value reach $3.4 billion USD by 2023. “This is driven by new innovations such as cold-brews and ‘hard-teas’, as well as healthier varieties, with the inclusion of functional ingredients such as turmeric increasingly visible on supermarket shelves,” GlobalData reported.
Much of that growth will come from younger consumers. According to the Tea Association of the U.S.A., 87 percent of American Millennials drink tea. Gen Z’s consumption habits are just now being studied, as the youngest members are less than 10 years old, and the oldest only in their early 20s. Yet, as research published by BevNET.com revealed, both groups favor higher-quality products, often containing botanicals, and are frequent purchasers of ready-to-drink tea products. The same research also showed that these two groups “want clean-label and sustainably and ethically sourced tea,” and are likely to seek out “global tea styles,” such as Kenyan purple teas.
Gen Z consumers reported a definitive preference for green tea, at 38 percent, compared to black tea at 19 percent (GlobalData 2019 Q4 consumer survey – US). When asked in the same survey what flavors/infusions they preferred in tea, Gen Z opted for “herbal” and “sweet” equally at 67 percent, while Millennials preferred “fruity” and “herbal” at 72 percent and 64 percent respectively. Plain or unflavored options garnered the lowest responses for both generations. “This ties in closely with the growing demand for healthier alternatives, further exemplified by positive social media coverage, ultimately reflecting less demand for classic or traditional flavors among younger generations,” stated GlobalData consumer analyst Carmen Bryan.
Millennials and Gen Z are also driving the demand in boba, milk teas and other non-classic categories. In the trend-setting San Francisco Bay Area, retailer Milk Tea Lab, with stores in San Francisco, Alameda, Pleasant Hill, Concord and San Jose, offers customers their choice of black, oolong or jasmine tea, combined with choices that include grass jelly, handmade boba, and egg or tofu pudding. The San Jose location has begun offering a “hot pot” prepared for groups of three in the same type of cauldron used for shabu shabu.
Andrew Chau and Bin Chen started Boba Guys (profiled in World Tea News in 2016) as a San Francisco pop-up in 2011. Their rapidly expanding boba empire now includes multiple stores in the Bay Area, Los Angeles, and New York. One of the factors behind their success is the ability to adapt to their Millennial and Gen Z customers, including innovations such as nitro tea, which they introduced in 2016. Their partnership with local Black Sands Brewery enabled them to innovate a process that “creates a cascading beverage that brings out a tea flavor that is silkier and sweeter without added dairy or sugar.”
But the demand for traditional teas, often combined with more extensive background knowledge, can be a market driver as well. Ali Roth, owner of Berkeley, CA’s Blue Willow Teaspot and wholesale Blue Willow Teas, specializes in Japanese loose teas, and also offers classes in the Japanese tea ceremony in her retail outlet. She reports that approximately 30 percent of her regular customers are Millennials or Gen Z members.
“These age groups are much more interested in the story behind the teas than the specific teas themselves,” said Roth. “Teas’ specific origins, the people making them, unusual processing methods are all intriguing factors that, especially younger enthusiasts, want to know.
“Tea trends are also picked up a lot more in this age range so matcha and puerh are very popular right now, as well as some oolongs,” said Roth.
She is also seeing increased demand from younger consumers for lessons in the tea ceremony. “A lot of that is people interested in the history and mindfulness practice, seeing how they can learn from the tea ceremony and adapt some of the practices to fit a more modern context,” she said.
Although Roth caters to all age groups, she noted that she is “beefing up” her Instagram presence, because it’s such an important avenue for getting messages out to the younger group of her patrons.
However, as GlobalData’s Bryan emphasized, “The RTD tea segment remains a threat to the hot-tea market, offering a quicker, easier route to a tasty tea drink. Convenience is a deciding factor for many consumers, and if given the choice, they will often opt for an RTD tea/beverage rather than waiting the few minutes it takes to brew a cup.”
Bryan cited the Twinings release of a new cold-brew flavored tea last year, designed to be infused in a cold bottle of water, and Tea Of A Kind’s “tea set,” which comes with one ready-to-go bottle and three eco refill caps, as examples of the convenient alternatives being demanded by Millennials and Gen Z.
Bryan suggested that the hot-tea market can capitalize on the ideas pioneered by the coffee industry that have proved so attractive to these demographics, including pod machines, and emulating the “vibe” of a modern coffeehouse, which “provide a third space where consumers can sit down, relax and socialize, a huge driver of out-of-home coffee consumption, while also catering to the on-the-go mentality of modern consumers.”
The hot-tea segment of the tea industry, she suggested, “needs a re-brand for the 21st century, with a greater focus on the experience of drinking, as well as more complex, substantial flavors to keep consumers coming back for more.”
All segments of the industry will profit from close scrutiny of Millennial and Gen Z preferences — along with the innovation and flexibility needed to keep up with those preferences.