A report by the Tea Association of the U.S.A. projected hot and cold tea sales to soar past $10.41 billion.
Ever since the economic downturn of 2008, the U.S. economy has been struggling to get back on an even keel. Because of the tumultuous financial conditions and the resulting political maneuvering designed to restore some semblance of normalcy, business conditions have been far from ideal. Despite this less than ideal business climate, the tea industry in the U.S. continues to flourish, building on a trend that started over two decades ago which has seen the total wholesale value of tea sold in the U.S. grow from under $2 billion dollars to well over $10 billion today, according to a report by the Tea Association of the U.S.A.
The growth of the tea industry over this period of time is even more impressive on a pound basis with 170 million pounds imported during 1990 compared to the nearly 277 million pounds imported in full year 2012. This represents a 2.5% compound annual growth rate. This real growth of the tea industry in the U.S. is even more impressive with the last three year rolling average for tea imported into the U.S. growing more than 4%.
“The prospects for future growth of the tea industry in the U.S. remain exceptionally good,” the report said. “Some industry forecasters are predicting that the wholesale dollar value of the tea industry will double over the next several years.”
Retail Watch
In supermarkets and convenience stores, a noticeable new development is that tea can be found in multiple locations throughout the store, not just in the traditional “coffee and tea” aisle. But even in its traditional location, the amount of space devoted to tea has increased and the number and size of competitive offerings has dramatically expanded. Additionally, new sections have been added within the supermarket to accommodate all the new forms of tea that continue to interest and excite tea consumers.
“Significant shelf space is now being devoted to ready-to-drink teas in the soft drink, water and functional beverages aisles,” the report found. “There are even separate sections for the merchandising room temperature gallon jugs of RTD tea. Traveling around the store, you will find tea in the dairy case, in bottles, wax and gallon jug containers. New brands abound, competing for space in this valuable refrigerated section. Depending on the size of the store, you may even encounter an additional refrigerated cabinet dedicated solely to tea.”
Specialty Teas have found their way into supermarkets in a greater variety than ever before and are available from large packers, smaller regional tea companies and even imported brands from Europe, Africa and Asia. New shapes, sizes, and flavors abound as consumers ramp up their interest in the tea category.
The emergence of new categories of tea products including tea infused waters, tea energy drinks, tea based ice cream and other foods fortified with tea continue to drive tea’s interest. In addition, look for new versions of tea infused alcoholic and malt beverage specialties such as Hard Tea.
New Growth
Why, after so many years, is change so rampant in the Tea Industry? What has occurred to cause a beverage that has been commonly available for hundreds of years in the United States to behave as if it were introduced yesterday? These answers are found by examining the changes, by questioning the trade, by reviewing overall food and beverage trends, and by understanding consumer motivation.
“A predominant force driving tea’s new popularity is its convenience,” the report said. “Ready-to-drink tea in bottles, cans, aseptic packaging, plastic containers, or any other packaging configuration, brings the ultimate in convenience to consumers. Ease of preparation has never been a strong selling point for tea and, in a nation that demands convenience, has served to act as a constraint on sales, until now. It was this same demand for convenience that caused the Tea Industry to introduce the tea bag in 1904 and to create instant tea and iced tea mixes in the 1940’s.”
Closely linked to convenience is availability. Ready-to-drink (RTD) bottles and cans make tea more readily available to consumers than ever before, particularly at the point of consumption. Both the convenience and availability factors are entirely compatible with basic trends at work in the business world, specifically the erosion of free time available to American consumers and the resulting trend towards eating meals on the run.
“The last several years have not been kind to most businesses and tea has not been excluded,” The report said. “However, the long term consumer trends for tea are so strong that it has been less affected by the bad economy than most other industries. Traditional tea available in all retail outlets remains about the least expensive food or beverage available on a per serving basis. RTD teas are priced competitively with other beverage options and offer a much greater value because of their multiple contributions to health. Even Specialty Tea is within reach of virtually all consumers and remains an affordable luxury in both good and bad business cycles.”
Given this as a starting point, the next logical question is where do we go from here? Does $10.41 billion represent the zenith or simply the foundation upon which the Tea Industry will continue to build? Fortunately we are dealing with tea and with industry people who know how to read the tea leaves. What they see is a long period of growth based on their past experiences as well as their assessment of what opportunities remain to be discovered. Let’s take a look into the bottom of their teacups and see what there is to see:
* Ready-to-drink tea will continue to grow in popularity and rebound from the recent recessionary period with annual dollar increases in the range of 12-15%.
* Foodservice sales will continue to grow slowly, spurred by an increase in operator interest because of the promise of high profitability and increased promotion. This stimulus will be partially offset by difficult economic conditions leading to a reduction in how often consumers will eat away from home. We expect an annual dollar increase in the range of 2-3%.
* Specialty Tea will continue its upward climb in 2013 and continue into 2014 as consumers continue to seek out exotic and unique teas. We expect to see an annual dollar increase in the area of 10-15%.
* While not immune from negative forces in the economy, traditional tea, because of its relatively low price point, will be most resistant to those forces. Annual dollar growth in the area of 2 to 3% is expected in this segment.
“Given the experience of the last several years, the intrinsic qualities of tea, and the lifestyle and consumption trends that appear to have become firmly established in the marketplace, only one logical conclusion seems possible; the future for both iced and hot tea in the U.S. looks very hot,” the Tea Association of the U.S.A. concluded.
