As New Suppliers Enter RTD Tea Market, Top 4 Steadily Decline.

IBISWorldNEW YORK, NY — RTD tea was perceived as an affordable luxury during the recession and as such, did not suffer much from macroeconomic pressures on demand, according to IBISWorld market research.

“Robust product development and the expansion of these new product lines into new markets have driven revenue industry growth in the past five years,” according to IBISWorld Industry Analyst Jocelyn Phillips.

Teas-tea480The industry revenue is expected to increase an annualized 6.1% through 2014, including a 3.3% jump in 2014 to $5.3 billion.

Phillips reports average industry profit margins remained high during this period, particularly as tea prices plummeted to an all-time low in 2013. “Tea has benefited greatly from increased consumer health consciousness in recent years with RTD gaining market share in convenience stores and vending machines, where it can more easily function as a lower-calorie, more natural alternative to sodas and other RTD beverages,” according to IBISWorld’s RTD Tea Production in the US industry (January 2014) report.

As per capita soft drink consumption continues to fall and consumers seek healthier substitute beverages, RTD tea producers will likely experience increased demand and revenue growth. “Industry value added, which measures an industry’s contribution to the US economy, is expected to grow an annualized 8.9% over the 10 years to 2019. US GDP is expected to only grow 2.7% over the same period, indicating the industry is growing significantly faster than the US economy,” according to the report.

“The trend toward health consciousness, coupled with this increased competitive pressure, will further drive new product development in the next five years, which will in turn drive industry demand,” says Phillips. Revenue growth has encouraged new companies to enter the RTD Tea Production industry in recent years, further contributing to the overall level of competition, he said. Margins will be pressed due to increases in the cost of tea and sugar, according to the report.

The RTD segment is becoming more fragmented as new suppliers enter the industry, challenging major players Arizona Beverage Company, Unilever, Dr. Pepper Snapple Group and Nestle SA. Market share concentration among the top four manufacturers has thus steadily declined over the five years to 2014, reports IBISWorld.