It’s Time for Tea

With new flavors and health benefits in tow, the tea market is poised for heady growth.

By
Joanna Cosgrove
Online Editor

Never before have there been so many ways for Americans to consume tea. Spanning instant, brewed leaf, liquid, concentrate and ready-to-drink (RTD), there seems to be a tea for everyone. In comparison to carbonated soft drinks, coffee and water, however, the tea market is described as “one of the most underdeveloped beverages in the United States,” by Tea and Ready-to-Drink Tea in the U.S., a report issued by New York-based Packaged Facts.

Thanks to increasing research linking good health with tea consumption, it would seem tea’s time to shine has come—the Packaged Facts report asserts that the market for tea is expected to heat up over the next five years, growing from an estimated $7.4 billion in sales in 2007 to nearly $15 billion by 2012.

The health benefits of tea are far reaching. In fact, new research presented last fall at the USDA, Washington, D.C., associated tea drinking with maintaining a healthy body weight, as well as reduced risk for chronic diseases such as heart disease and certain cancers. Research also indicates that tea may support healthy brain function.

Joe Simrany, president of the Tea Council in New York, NY, explained tea’s resonance with consumers and why it bodes well for future growth. “For the last 20 years there has been a growing body of scientific evidence that suggests drinking tea is good for you. Much of this evidence has been carried by the media and based on market research [and] the majority of consumers have come to associate tea consumption with a great many health benefits,” he said. “This knowledge has led to greater tea consumption and to a great many new forms of tea that have been previously unavailable, such as RTD tea and specialty tea. These other forms of tea have expanded the consumer base of tea consumers to include young adults and more affluent consumers, which has also led to further increases in tea’s popularity.”

The Packaged Facts study also pointed to tea’s all-natural reputation and lower-than-coffee-or-cola caffeine content as more attractive to health-conscious consumers, especially the older generation: “A functional beverage, tea fits into the well-established movement among aging Baby Boomers to seek out food and beverages that promise wellness and anti-aging effects.”

“As more flavors and packaging options enter the market, tea and RTD teas are increasingly securing a position as an alternative to carbonated soft drinks,” noted Tatjana Meerman, publisher of Packaged Facts. “The days of the generic black tea bag are gone and chai, yerba mate, rooibos and other specialty teas that Boomers are consuming in mass quantities are here to stay.”

Mr. Simrany noted that in just over a decade RTD tea has gone from being the smallest to being the largest segment in the U.S. tea market. “Today we estimate the value of this segment to be over $3 billion, with the potential to double its size over the next five years. Last year this segment grew in excess of 25%,” he said. “Specialty tea (upscale tea) is also a very exciting area, with growth consistently in the low double digits and the prospects for future growth nearly as promising as for RTD tea. Both categories are exciting as they are expanding the consumer base for tea beyond the traditional older female profile.”

According to the Packaged Facts study, RTD teas (refrigerated and shelf-stable) teas accounted for nearly 59% of total U.S. retail tea sales in 2007, followed by leaf teas (20%), RTD dispensed tea (16%), instant teas (5%) and liquid concentrate teas (<0.1%). The study also estimated that specialty teas (“value added,” “premium,” “fair trade” or “organic”) accounted for 36% of U.S. sales, with mainstream teas accounting for 64%.

New Tea Choices

For many consumers the only way to enjoy tea involves the age-old process of putting a kettle to boil and steeping tea leaves the traditional way. Tea houses and tea rooms cater to consumers in search of the high tea experience. The Packaged Facts report estimated there were just 200 tea houses in the U.S. in 1990. Today there are more than 2000, with that number projected to increase 15% annually for the next five years.

On the retail side, the ever-expanding retail real estate devoted to loose leaf and bagged teas is even more evidence of just how far the acceptance of bagged teas has come.

Manufacturers like Celestial Seasonings, Boulder, CO, launch seasonal and wellness teas, as well as specialty varieties in an effort to better connect with the whims of their tea consumers. Celestial Seasonings’ latest offerings include Sleepytime Throat Soother Wellness Tea which features licorice root, slippery elm bark and ginger to soothe sore throats. The company also introduced two new flavors to its popular Cool Brew Iced Tea range: Blueberry Green Tea and Tropical Fruit Herbal Tea. The company’s Cool Brew teas are said to brew in cold water in just five minutes. Celestial Seasonings also re-launched its coffee alternative Fast Lane High Energy Tea, which is formulated with black tea, eleuthero and kola nut as well as cinnamon and nutmeg.

Lipton Tea, Englewood, NJ, also updated its bagged teas to include a nine-product range of premium Pyramid Teas packaged in elegant pyramid-shaped gossamer mesh bags that are said to give the long-leaf teas and pieces of fruit contained within “maximum room to infuse for great aroma, color and taste.”

Last fall, Baltimore, MD-based Flora Health Inc. expanded its functional tea lineup with the launch of four new teas: 94% organic Deep Defense (with astragulus, cranberry, rooibos, peppermint and three types of echinacea), certified organic Pure Peppermint, Holy Basil (a wild-crafted, proprietary blend of Krishna, Vana and Rama with rooibos), and certified organic Soothing Chamomile.

While the loose and bagged tea segment strives to help consumers connect with the brewing roots of tea, the RTD segment is positioned to deliver more mainstream refreshment.

Honest Tea, Bethesda, MD, recently added Citrus Green Energy Tea, Honey Green Tea, Lemon Black Tea, Peach White Tea and Pomegranate White Tea with Acai to its lineup. Each of the teas is USDA Certified Organic and prominently features the level of epigallocatechin gallate (EGCG), a key antioxidant in tea, on the label. Both of the green teas contain 250 mg of EGCG per bottle, while the white teas each have 150 mg per bottle.

As if the company’s approach to tea wasn’t successful enough, it was announced in February that The Coca-Cola Company, Atlanta, GA, had acquired a 40% stake in the company. The new products—sporting their new labels—represent the company’s first effort to broaden its appeal to mainstream consumers.

New York-based Inko’s LLC introduced white tea to the masses with its 100% natural RTD bottled iced teas in 2003. Last month the company expanded its flavor lineup with the debut of its fourth and fifth flavors—Blueberry White Tea and Honeydew White Tea. Both brews, which are made with rare white tea and 100% all-natural blueberry and honeydew extracts, are lightly sweetened and contain less than 60 calories per bottle.

The company said continuing clinical research is being conducted to examine the potential health benefits of white tea, with some studies showing that white tea has a higher level of antioxidants than green tea, potentially making it a superior cancer fighter.

Mr. Simrany said that from his vantage point, the future for tea is very bright indeed. All of the consumer trends currently in place that are positively influencing the category—the concern for health, desire for convenience and appeal for the exotic—are long term and will continue to propel the category to new heights of popularity. “As such,” he concluded, “we predict continued growth for at least the next decade or two. This may seem optimistic but when you consider tea has been around for nearly 5000 years, it is a mere blip in its life cycle.”