Customers Crave Premium and Value-Priced Teas

As customers seek more healthful beverages options, look for robust tea sales in 2012 and beyond.
Packaged Facts projected that the retail tea market is set to grow from approximately 6.6% in 2012 to 8.7% in 2014, reaching $8.3 billion in that year.

Tea was up 5.1% in 2011, according to Chicago-based research firm Mintel International, which predicts the category will grow 50% between 2011 and 2016. Mintel noted super premium tea sales were up while, at the other end of the spectrum, value teas also saw strong sales. This shows customers are gravitating toward super premium brands and away from mid-ranged brands, while those looking for value opt for private label, leaving mid-priced teas challenged.

The value-priced packaging appears to be resonating with teens and young adults, according to Mintel. Fruit flavored teas remain the most demanded ready to drink tea in the market place.

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Weigel’s Stores, which operates 57 stores in Powell, Tenn., has seen the flavored tea trend take off with its customers. The chain makes its own private label brand of tea that is available in six different flavors. It devotes 2-3 shelves for its private label half gallon and pint sizes and three-quarters of a door for other types of bottled teas.

“We use all-natural flavors, cane sugar and no high fructose corn syrup, so that’s another driving force that leads customers to buy our tea,” said Bill Weigel, president and CEO of Weigel’s.

Last year total bottled tea sales—including Weigel’s private label brand—saw a 15% increase over 2010. “Tea sales are strong and should continue to rise in 2012,” Weigel said. “Tea is becoming a big item, and I think the health trend is driving it. Soft drinks are going down and tea sales are rising.”

George Puro, the author of Packaged Facts’ report “Tea and Ready-to-Drink Tea in the U.S.,” said one trend to watch in 2012, is the continued crossover of tea into other categories, most notably alcoholic beverages.

“AriZona just expanded its Arnold Palmer brand to a Hard Half and Half, a spiked version of its popular iced tea,” Puro said. “Anheuser-Busch’s Michelob brand got in on the act by introducing Ultra 19th Hole Light Tea and Lemonade, which will launch nationally in April.”

Meanwhile, sales of Boston Beer’s Twisted Tea have been strong, jumping 37% last year to $85.6 million in food/drug/c-store/mass, excluding Walmart, according to SymphonyIRI data for the 52 weeks ended Dec. 25, 2011.

Juices Flat
While tea sales are soaring, however, juices and juice drinks have been seeing modest declines in recent years, according to Beverage Marketing Corp.

Juices themselves have seen bigger declines than juice drinks, which are doing relatively well. One reason could be that apple and other juices came under scrutiny in 2011 due to the presence of arsenic found in some juice products. A recent Mintel survey found 32% of respondents remain concerned about the presence of arsenic in apple juice.

Mintel noted that juices and juice drinks saw a 1% increase in 2011, and sales are largely expected to remain flat in 2012, but long-term growth is expected to be about 14% between 2011 and 2015.

Did You Know…

According to Packaged Facts’ “Tea and Ready-to-Drink Tea in the U.S.” report, ready-to-drink tea sales in the U.S. were estimated at $6.5 billion in 2011, up 5.2% in the last year.

• In 2011, tea showed resilience in c-stores and other channels. Share of U.S. retail sales of packaged tea by channel in 2011 included supermarkets (28.2%), Walmart (22.8%) and convenience stores (19.9%), supercenters/mass merchandisers (13%) and other (4%).

• Packaged Facts surveyed a representative sample of 2,000 U.S. adults in June 2011 and found that 1,453 of them, or (72.65%), drink tea.