Friday 21 June 2024
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Hot tea emulates third wave coffee culture in the US, shows new report

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MILAN – When compared to the hot coffee category, hot tea in the US is still in its infancy. However, the category is benefitting from the success of its relative, with manufacturers borrowing innovations that have helped drive the coffee category, such as novel flavour profiles, innovative production techniques and organic / natural labels.

Much as they do within coffee, these key areas are helping manufacturers to differentiate their offerings and appeal to a growing base of health-orientated and time scarce consumers looking to try something new, says GlobalData, a leading data and analytics company.

According to GlobalData, the value of the US hot tea market in 2019 stood at US$2.8 billion and is expected to record robust growth, at a CAGR of 4.8%, that will see the category’s value reach US$3.4 billion by 2023. This is driven by new innovations such as cold-brews, ‘hard-teas’, as well as healthier varieties, with the inclusion of functional ingredients such as turmeric becoming increasingly visible on supermarket shelves.

Carmen Bryan, Consumer Analyst at GlobalData, comments: “New, distinct flavors are a key driver of the hot tea market. Globalisation and migrating influences from Asia has led to the rise in green and herbal teas, with Western consumers demanding their own spin on these favorites, and new, distinct flavors being a key driver.

In GlobalData’s 2019 Q4 consumer survey, US consumers admit they typically consume traditional black tea most often (48%), while Gen Z consumers reported a definitive preference for green tea (38%) compared to black tea (19%)**. When asked what flavors/infusions they preferred in tea, Gen Z opted for Herbal and Sweet flavors equally at 67%, while millennials preferred Fruity and Herbal teas at a respective 72% and 64%. In contrast, plain or unflavoured options garnered the lowest responses for both generations, tying in closely with the growing demand for healthier alternatives. This is further exemplified by positive social media coverage, ultimately reflecting less demand for classic or traditional flavors among younger generations.

Bryan continued: “Ample opportunities to capitalize exist in the on-trade channel, which is able to easily adopt the aforementioned innovations, as demonstrated by the coffee industry, which has become a key driver of innovation and change in the on-trade hot drinks market. This offers manufacturers the chance to premiumize their offerings, leveraging on unique flavor combinations, as well as natural and sustainable labels that feed into consumers’ perception of ‘high quality’.


“However, obstacles remain to achieving the type of growth coffee has seen, especially out of home. The ready to drink (RTD) tea segment remains a threat to the hot tea market, as it is quicker and easier to consume on-the-go. 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 cuppa.”

There are examples of brands attempting to address the growing issue of on-the-go lifestyles, with Twinings releasing 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 – allowing users to easily carry and consume their tea on-the-go.

Bryan added: “Rather than challenging RTD tea drinks head on, the market may benefit from taking tips from the coffee market whose wave it is riding. Coffee has succeeded by improving the ‘experience’ of making a cup for consumers. Pod machines have made it quick and easy to make a fresh cup of coffee at home, without the clean-up. Further, coffee shops 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.

“Tea needs a re-brand for the 20th century, with a greater focus on the experience of drinking, as well as more complex, substantial flavors to keep consumers coming back for more.”

*** GlobalData’s Global Market Data Analyzer


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