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With a 2012 retail value of US$46 billion and over 30 billion litres sold off-trade, RTD tea has emerged as a global beverage juggernaut. While growth remains positive, brands high in sugar are starting to bear the brunt of an obesity conscious consumer base, especially in the United States. In its place, tea that tastes more like tea – fresh brewed, unsweetened, subtle flavours – have emerged to meet growing demand for natural ingredients and lower calorie beverages with a less sweet, authentic taste.

RTD Tea Growth Slows as Consumers Grow Weary of Sugar

RTD tea is the world’s fastest growing soft drink category. With a global off-trade volume CAGR of 8.2% from 2002-12, it has outperformed carbonates (1.7%), juices (4.0%), and even bottled water (7.2%). In fact, as demonstrated by the chart below, RTD tea has outpaced overall soft drinks industry growth every year for the last ten years.

Year-on-Year Off-Trade Volume Growth, 2002-12

Source: Euromonitor International

However, demand for high sugar bottled teas is slowing. In the United States, RTD tea remains a relatively niche category with only 2.6 billion litres sold in 2012. However, the category’s 1.2 billion litre growth over the past ten years far outpaced carbonates and juices, both of which experienced major declines in the last decade. Sugary brands like Arizona and Lipton iced teas lead this category with nearly one billion off-trade litres sold at retail in 2012. But these two brands, along with similarly sweet products like Brisk, Snapple, and Nestea have seen growth slow or decline in recent years – with 2013 continuing this trend. To reverse this forecast, RTD tea manufacturers should examine the evolution of the category in Asia Pacific – a market where the flavour differences between hot tea and RTD tea continues to blur.

Year-on-Year Off-Trade Volume Growth, US Top Three Brands, 2007-12

Source: Euromonitor International

Reduced Calories, Authentic Taste Show Growth

In 2012, RTD tea in Asia has grown into a 22.9 billion litre, US$34.7 billion retail juggernaut. It rivals carbonates and juices as Asia’s most consumed flavoured beverage. Similar to growth in the US, leading brands include sweet varieties like China’s Master Kong, Indonesia’s Sosro, and Vietnam’s Zero Degree Green Tea. But in Japan, the world’s leading RTD tea nation in terms of per capita consumption, tea brands popular for their unsweetened varieties like Oi Ocha, Ayataka and Sokenbicha have all performed well. Concerns about sugar content and consumer demand for natural ingredients have helped less sweet teas grow in Japan and are gaining in popularity in many Asian countries. Sokenbicha, Coca-Cola’s unsweetened blended Japanese bottled tea, has expanded to South Korea and Taiwan. The company is also exploring new markets with Ayataka. This green tea is fourth in Japan (behind Oi Ocha, Iyemon, and Kirin) but is hoping to make a splash in Singapore with its formulation. It is brewed from all natural ingredients, boasts to be the “closest [RTD tea] to authentic Japanese teapot brewed tea”, and has zero calories. And finally, Coca-Cola launched “Habu” herbal tea in Thailand – a blend of roselle, licorice, luo han guo and cogon grass said to “combine modern taste with traditional herbal properties.” At the same time, established brands like Zero Degree Green Tea in Vietnam and Sosro in Indonesia continue to evaluate their diet products to meet consumer demand for health, with Sosro focusing on a jasmine tea marketed with less sugar.

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Image courtesy flickr users ayangmata and Jobri499

Manufacturers in the US are seeing similar success with less sweet products that focus on the subtleties of tea. Chief amongst these is Coca-Cola’s Honest Tea and Pepsi/Lipton’s Pure Leaf, which both promise to be brewed from real tea leaves for a fresh brewed taste. The products are available in unsweetened varieties with zero calories, or in flavours such as Honest Tea’s “Sweet Tea”, “Peach White Tea”, and “Honey Green Tea” (all of which are USDA certified as organic and GMO-free) or Pure Leaf’s “Sweet Tea”, “Lemon”, or “Raspberry”, all with about 70 to 180 calories per bottle. Pure Leaf also has diet versions that use sucralose and Ace-K artificial sweeteners to keep the product at zero calories. Preliminary 2013 data regarding sales of Honest Tea and Pure Leaf is promising, with each brand showing strong growth from the previous year. Meanwhile, full-flavoured RTD tea products like Lipton Iced Tea, Lipton Brisk, Arizona, and Snapple have all seen value declines for 2013. This seems to demonstrate a shift in US consumer attitudes toward RTD teas – one where low calorie teas and teas with healthier, natural ingredients are growing in popularity.

New Age of Authentic Taste?

As consumers in both the US and across the world examine soft drink labels more closely than ever before, calories and ingredients remain important, but taste remains paramount. Unsweetened, brewed RTD teas are a strong option for health conscious consumers thanks to the subtleties and variety of flavours that tea provides, as well as its adaptability with other beverages. This is not to suggest that the global sweet tooth will give way to savoury beverages – rather, it is an acknowledgement that the demand for liquid refreshment now encompasses many more flavours.

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