Tea Trends Flowing into 2018

Several 2018 beverage trends bode well for the tea business.

• Five of every $25 spent dining out is for beverages.
• Beverage servings increasingly are non-alcoholic.
• Millennials, now the largest cadre of consumers, favor tea.
• Sales of loose leaf tea in 2017 grew in volume and value.

“The tea category is very well positioned for today’s health-focused consumers,” says Beverage Marketing Corp.'s Gary Hemphill, managing director of research: “We’re projecting solid growth in the years ahead.”

2017 Packaged Tea Sales

Wholesale tea sales are estimated at $12 billion last year with RTD accounting for $7.14 billion. Hemphill says the fastest growing segment in tea is ready-to-drink, up 3.1 percent in 2016 and expected to grow by 3.5 percent in 2017. RTD accounts for 46 percent of total tea volume, while tea bags represent 44 percent. Loose leaf accounts for less than 1 percent of tea by volume but grew by 4 percent in the first half of 2017, he said. Flavored and fortified water showed the greatest gain in volume at 12.3 percent. Carbonated soft drinks experienced their 13^th straight annual decline (-0.8 percent). Consumption of liquid refreshment beverages overall grew by 3.4 percent and topped 32.9 billion gallons. RTD tea was 1.7 billion gallons of that total. Demand for tea sold in single-serve capsules continued its decline, according to retail sales data from IRI. In the 52 weeks ending Nov. 5, the entire category lost 11.5 percent dollar share in grocery, drug, convenience and mass market stores, earning $116 million on 15 million units sold.  Hemphill reported a similar 11.1 percent decline in 2015-16. The beverage landscape is changing. “Niche categories continue to outperform traditional mass-market categories,” explains Hemphill, who noted a slowing of sales in early 2017 but still lists RTD tea as a “winner” with a gain of 4.8 percent, up 641 million gallons in the 10 years ending 2016.

Foodservice Tea Market

Market research firm Technomic reports $181 billion was spent on away-from-home beverages in 2016. This is equal to about 113 billion beverage servings. Inexpensive, refreshing and healthful, tea is a major beneficiary as sales of regular and diet soda, milk and fruit beverages declined. "Beverages account for $1 out of every $5 consumers spend away from home," writes David Henkes, Technomic senior principal. "They are a critical part of the overall experience, and because of their central importance, it's absolutely crucial for restaurant operators and their suppliers to understand how innovation impacts consumer satisfaction." The 2017 Away-From-Home Beverage Study notes that “key attributes like taste and refreshment still dominate the consumer mindset, there is an increased emphasis on beverage health and functionality due to demographic (i.e., generational, ethic) and regulatory (e.g., regional soda taxes, mandatory calorie labeling) shifts.”

Consumer Beverage Trends

Consumers are more conscious than ever about making responsible food choices, and increasingly want to know what is in their food and how it is produced, says Lu Ann Williams, director of innovation at Innova Market Insights. She labels the trend “mindful choices” in the company’s Top Ten Trends for 2018 report. “While coffee is clearly trending among millennial and Generation Z consumers, tea is also seeking to reinvent itself among the younger generations. With the taste and experiential associations of coffee and the healthy image of tea, the industry is increasingly using coffee and tea as ingredients and flavors outside the hot drinks and iced tea and coffee subcategories across a wide variety of products as varied as energy bars, yogurt and jam,” she said. Utilizing traditional marketing surveys Mintel International annually identifies beverage trends, two of which for 2018 mention tea. What Mintel found in Global Food & Drink Trends 2018:

• Consumers say that managing and releasing stress is an important factor in a healthy lifestyle.

Mintel cites TranQuini from Australia as an example of a relaxation beverage that is a non-carbonated blend of green tea, lemon balm, chamomile and lavender. Innocent SuperJus from France contains vitamins, raspberry, cherry and apple juice to give a boost in the morning.

• Texture is the next facet of formulation. Vibrantly hued drinks attract attention in image-centric media, but texture can also make products captivating for customers seeking food and drink that is perceived as fresh, functional, filling or simply fun.

Mintel found 43 percent of Chinese 20- to 49-year-olds ready-to-drink tea consumers are interested in RTD options with fruit bits. Mintel’s Global Food and Drink analyst Jenny Zegler writes that “in our new post-truth reality, consumers require complete and total transparency from food and drink companies. Widespread distrust places pressure on manufacturers to offer thorough and honest disclosures about how, where, when, and by whom food and drink is grown, harvested, made and/or sold. The need for reassurance about the safety and trustworthiness of food and drink has led to increased use of natural as well as ethical and environmental claims in global food and drink launches.”

• Consumers want authenticity. The vast majority of 2,000 consumers (86 percent) surveyed in Australia, U.S. and U.K. believe authenticity is important when deciding the brands they like. But more than half (57 percent) think that fewer than half of brands create content that resonates as authentic.

“Authenticity is king,” reports Peter Cassidy, co-founder, CMO and Chief Product Officer at Stackla, a user-generated content (UCG) platform. Consumers are inundated with content, and the only way brands can cut through all that noise is with authentic content, he explains. The company identified several findings for marketers in its study:  The 2017 Consumer Content Report: Influence in the Digital Age. "On average, people can identify if an image was created by a professional or brand vs. generated by a consumer 70 percent of the time,” he said. "The survey revealed that 56 percent of millennials have decided to eat at a restaurant because they saw a friend post about it on social media.” There you have it: Demand is rising, premiumization of tea is well underway. Sales of loose leaf are nudging upward after flat-lining for the past two years. Mindful, authentic marketing works. Social media is a powerful opportunity for the pure of heart. The coming year will present its challenges.

See: Brace for a Retail Reset in 2018

But retailers who anticipate a fast-changing retail environment and remain “on trend” as they respond to changing conditions will thrive. Sources: Beverage Marketing Corporation, IRi, Technomic, Mintel International, Slice Intelligence, Pentallect, Think With Google, Colliers Market Research, MillerPulse