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Part 2: One-on-one with The Tea Council of the USA on Emerging Trends

Increased innovation needed to further drive tea sales in the US

1 comment

By Elizabeth Crawford

30-Sep-2015
Last updated on 30-Sep-2015 at 14:24 GMT2015-09-30T14:24:41Z

Increased innovation needed to further drive tea sales in the US

Sales of tea in the US are booming, but the industry still faces tough competition and must continue to innovate to capture a larger “share of throat,” according to Peter Goggi, president of the Tea Council of the USA. 

“Tea has really developed rapidly in the last couple of decades to the point that we have seen CAGR, or category growth, to be about 3.5% a year over the entire category,” Goggi said, adding that the US is now the No. 3 country in the world for tea imports and consumption compared to not even making the top 10 list a decade ago.

Market research firm Mintel predicts sales of tea in the US will continue to climb nearly 20% from $6.7 billion in 2014 to $8.7 billion in 2020. However, it notes in its Tea and RTD Tea report released in July that growth likely will increase only 6.7% from 2015-2020 to reach $7.6 million, which suggests “price increases are playing a part in sales gains.”

This demonstrates that “while the tea industry continues to grow, and [that is] something we are very happy about … we are combating all the other beverage categories, whether milk or water or carbonated soft drinks or coffee. There is so much a person can consume during the day, so we are battling for that share of throat,” Goggi said.

“We are still very low in terms of per pound consumption per year. So, we need to growth the amount of tea per person consumed and then also we are faced with the fact that there exists white space out there. There are still people who don’t drink tea,” Goggi added. “We need to find ways in which we can address their needs and likes and dislikes and meet their requirements for desiring tea, learning about tea and consuming more and more tea.”

He suggests industry can drive consumption through innovation, such as new delivery formats, new flavor blends, refined messaging about tea and increased availability.

Individual servings increase convenience

“We are seeing more and more loose leaf tea being sold in individual lot,” Goggi said. In particular, he noted, “we see different forms in terms of tea bags whether it is plastic tea bags or woven tea bags out of nylon, all really geared up to engage the consumer and their consumption.”

Like tea bags, Keurig-cups of tea, which launched several years ago, make brewing tea easier and boosted consumption initially, although now the format’s future seems unclear.

Mintel notes, unlike coffee, tea K-cups have not sustained their initial growth. Rather, it found, “single-cup declined 8.9% in 2015 sales following three years of steller growth from 2011-2013.”

The launch of Keurig Kold, however, could provide additional opportunities for drinking single-cup iced-tea, it adds.

Ready-to-drink tea holds promise

Ready-to-drink is another promising format driving sales of tea, according to Goggi and Mintel.

“RTD continues to be a stellar growth segment and this really is driven by, I think, a couple of different platforms,” Goggi said. “First is the fact that manufacturers have begun making far better quality ready to drink teas. So, it is much more tea-like in its characteristics as the flavors of tea that you could get if you were to brew it at home.”

Second, he noted, is the ubiquity of RTD tea, which allows consumers to easily sip tea throughout the day.

Third, he said, RTD now comes in more flavors, which is driving consumer experimentation.

Refrigerated RTD tea in particular has “surged in recent years,” because consumers view it as a more affordable, premium RTD tea option, Mintel adds. It also notes a consumer survey showed the ideal RTD tea is “single-serve, lightly sweetened, traditionally flavored (or unflavored), with added vitamins and natural claims,” according to a consumer survey it conducted.

Mintel’s research also suggests consumers are more likely to want relaxing RTD tea rather than energizing ones.

“As energizing drinks dominate functional beverage launches, RTD teas are uniquely positioned to cater to consumers’ growing need for calming/relaxing beverages,” it notes.

RTD tea also can fuel sales because it tends to appeal more to younger shoppers, which can help engage the next generation early so that they create a lifetime tea habit, Goggi said.

Pu’erh brings new flavor, benefits

Pu’erh, or dark tea, is a still relatively unknown tea in the US, but it has significant promise for driving future tea sales, Goggi said.

He explained pu’erh is uniquely manufactured to be inoculated with microbes so that it ferments, which creates an on-trend flavor profile and adds healthful properties.

Educating consumers about pu’erh’s, and all tea’s history and benefits, also will continue to boost category sales overall, Goggi said.

He explained that health messages resonate well with baby-boomers, while millennials respond well to stories about where tea comes from and how it is traditionally enjoyed.

Reflecting on all these growth opportunities and the current trajectory of tea sales in the US, Goggi predicts the industry has “a great, great few decades of growth ahead.”

1 comment (Comments are now closed)

Summary

Great summary by Peter Goggi on the current US tea industry. Peter was my boss from 1991 to 1995, so I know how well he can assess, summarise and present !

One concern I have with the USA is 'how much bona fide tea expertise is there in the industry'? In the RTD sector, the answer is 'a lot'. In the new wave of artisan teas I suspect 'not a lot'. Ditto many of the major tea players. As it is, Lipton, Twinings and Tetley (Good Earth) have their expertise residing in the UK. Interesting Peter that in its very long history in the USA the Lipton company (Unilever) only ever had one US born tea buying/blending expert - yourself !

Great video Peter.

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Posted by Tony Laurent
03 October 2015 | 04h342015-10-03T04:34:12Z

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