Grocery is far and away the dominant, staid, and stable retail channel for selling packaged tea but advances in delivery suggest a surge is in the works.
Online sales of groceries more than tripled between 2013 and 2018, according to market research firm Packaged Facts in the brand new report Online Grocery Shopping in the U.S., 2nd Edition. With a whirlwind of momentum behind it, the industry will continue to grow in coming years, according to analysts.
Between 2018 and 2023, Packaged Facts forecasts online grocery sales will more than quadruple as online options become more available and consumers become more open to trying online shopping or using online options more frequently to purchase their groceries. Amazon and Walmart are currently the key participants in the market, together accounting for nearly 28 percent of online grocery sales. Amazon and Walmart are driving sales by literally driving sacks of groceries door-to-door, but pickup is becoming a favored option for receiving online orders to solve the last-mile delivery problem
A 2017 survey of U.S. tea drinkers by German market research firm Statista found 14 percent purchase their tea online, of which 10 percent identified Amazon as their supplier. Statista estimates 80 percent of tea sales are at supermarkets, with 21 percent shopping at discount stores and 12 percent at department stores. Online sales skew toward dry packaged tea due to the low cost of shipping. However, a revolution in transportation logistics is making heavier bottled and canned teas viable options.
“Three key factors have created a perfect environment for growth of the online grocery market in the U.S. over the last five years,” says David Sprinkle, research director for Packaged Facts. “There’s been increased use of mobile phones and smartphones, interfaces for websites and mobile apps have improved, and there’s been a notable expansion of crowdsourced business models to shopping and delivery.”
Thirsty for Variety
Offerings generally mirror the familiar tea and coffee aisle with major brands and private labels such as Whole Foods accounting for most sales. Pure Leaf, Lipton and Honest Tea are the most frequently ordered iced tea brands. Bai and Jocko White Tea also rank in the top 20. Lesser known specialty teas include Good Earth, Oishi Matcha, and Wickedly Prime. Convenience ranks high on the shopping list, but shoppers encounter a nearly infinite number of specialty beverages online. Combine free shipping with a curated selection and you get Beverages Direct, an online marketplace founded in 1998. Beverages direct is an example of how specialty has evolved due to the remarkable capabilities in timely delivery pioneered by Amazon.
Tea selections at Beverages Direct are currently limited to Honest Tea and Noyu Samurai in green and oolong flavors and delivery is free only on orders for $35 and above. Beverage Direct primarily serves consumers interested in boutique sodas, herbals, tonics, root beer and ginger ale.
“The challenge to established marketers in categories such as tea, which already has an identity as a healthy product, is to further enhance their competitive position given the presence of so many competitors from the healthy and natural foods arena,” writes Packaged Facts. “An example of how the big marketers respond to the challenge can be seen in the new line of Bigelow Benefits, from one of the long-time leaders in the tea category. The new line includes teas that promote a good mood, healthy stomach, and beauty among other benefits.”
Teas are a category in which the appeal of foreign ingredients plays a role, according to Packaged Facts. “U.S. tea consumers are currently enjoying the varieties, such as matcha, moringa, and sencha, that have long been staples of Japanese culture. In the U.S. these are marketed as individual types and used as components in tea beverages that have additionally flavored with fruits and spices, observes Packaged Facts.
Americans spent about $150 billion on packaged beverages last year. Packaged Facts estimates tea retail will reach $10 billion by 2022 with ready-to-drink at $8 billion. Growth rates of tea and RTD tea were 4.5% (compounded annually) for the period 2012-17 and are projected to continue at 4% (CAGR), reaching a combined $19.5 billion in 2022.
As the volume of carbonated beverages continues a 14-year decline, Packaged Facts estimates CSDs in four years will account for no more than 22 percent of sales. Bottled water unseated CSDs as the top choice of refreshment beverage consumers with tea and coffee, and less sugary and healthy beverages continuing the ascent. The Statista researchers found 15 percent of consumers never drink soda while 32 percent drink it a few times per month.
- Because of the acquisition of Whole Foods, the online grocery market has been changing rapidly as store-based grocers have raced to compete with Amazon in the online grocery space.
- Walmart is taking drastic measures to expand its online grocery services and offer store pickup options at all its stores across the U.S. to become the top online grocery provider.
- Creating online marketplaces and collaborating with local producers can convince more customers to shop for groceries online if they are supporting local businesses.
- Baby Boomers and the Silent Generation are the least likely to do their grocery shopping online but represent a major marketing opportunity because they may have mobility issues that limit their ability to drive to a store or to carry groceries.