According to Euromonitor forecasts, Latin America will be the fastest growing tea region between 2013 and 2018, increasing by 31% in retail value to reach US$1.7 billion. Brazil is expected to account for more than half of Latin America’s absolute value growth, recording the third fastest retail value growth of any global market, behind only Cameroon and Peru. Brazil’s strong coffee tradition both in terms of consumption and production often obscures the country’s indigenous tea culture which is tied heavily to the perceived medicinal qualities of herbal teas. As health and wellness concerns increasingly taking centre stage in consumer decisions, Brazilian interest in tea is likewise on the rise.
Strong Tea Growth Despite Preference for Coffee
The Brazilian tea market is expected to increase by US$ 219 million over the next five years, marking the sixth largest absolute value growth of any global market, trailing only China, India, Pakistan, Indonesia, and Russia. This is even more impressive given the fact that it is the only market among these growth leaders where tea is secondary to coffee as the country’s favourite hot drink. Indeed the average Brazilian drank nearly 60 cups of coffee for every one cup of tea in 2013. While tea is unlikely to rival coffee anytime soon, the steady high-single digit growth of the Brazilian tea market will enable it to jump five places over the next five years, moving from the 20th largest market in the world in 2013, to the 15th largest market by 2018.
The most popular tea types in Brazil are fruit & herbal teas which accounted for 90% of retail tea sales in 2013. Herbal teas have long been consumed in Brazil because of their strong association with medicinal properties. Many of the most common traditional types of herbal teas are endemic to Brazil and cultivated on small farms. Popular flavours include ‘carqueja’ which is believed to be able to naturally lower blood sugar, ‘erva –cidreira’ (lemongrass) which is thought to improve mood and mental performance, and ‘eva-doce’(fennel) which is drunk to treat a variety of ailments including heartburn and colds. Another popular Brazilian herbal tea is ‘boldo’ that has a flavour profile between cinnamon and pepper, and is grown in the souther half of the country. Boldo is believed to be good for digestion and is also regarded as the ‘hangover herb’ used by Brazilians as well as Chileans and Argentines where the herb is also popular, after a long night out. The majority of these traditional herbal teas continue to be sold unpackaged and unbranded in open markets known as feiras. Because of the medicinal and health properties associated with these herbs, many Brazilian consumers tend to prefer to purchase teas from feiras because they are perceived to be more pure and unprocessed than those sold through modern retail channels.
Increasing Opportunities in Retail
Despite the prevalence of the unpackaged tea market in Brazil, as health and wellness concerns become more important to Brazilian consumers, the retail tea market has begun to thrive. Brazilians are increasingly demanding healthier foods and drinks to combat weight gains and diet-related diseases. The government has also made healthy eating a focus by campaigning to stop child obesity and instilling healthier eating habits for young children and teenagers. While the medicinal properties of herbal teas contribute to their longstanding healthy image, non-traditional types of tea in Brazil are beginning to increase in popularity largely due to positive publicity about their health benefits. Despite their small base, green tea and other tea (including mainly white tea and rooibos) experienced strong growth in 2013, increasing by 23% and 28% respectively in terms of retail value. Besides the high level of antioxidants found in both green tea and other teas, green tea is also perceived as a slimming aid.
Manufacturers are also boosting tea sales by using blends of traditional herbs with other fruits and herbs. Dr. Oetker, the third largest brand in Brazil, launched a line of functional teas called Chá Funcionais. One popular blend in this line is ‘Doce Forma’ (Sweet Fitness) – positioned as an overall well-being tea that mixes boldo, carqueja, and eva-doce, with hibiscus flower, orange essence and wild rose. By combining of traditional herbs along with other herbs and fruits, this type of blend may be able to attract even those consumers that are accustomed to purchasing teas in the open market, since they offer the desired medicinal properties in new, exotic flavours. Other variants in the Chá Funcionais line include ‘Doce Sonhos’ (Sweet Dreams), and ‘Doce Refeição’ (Sweet Meal).
Brazilian Tea Sales By Type: Retail Value 2013 v. CAGR 2013/18
Source: Euromonitor International
In contrast to fruit/herbal, green and other teas, black teas are struggling in Brazil. This is both a product of consumers generally preferring the flavour profile of fruit and herbal teas, in addition to the increased demand for more premium tea types that also offer health benefits, with black tea seen as too mundane. Without significant innovation or the introduction of more premium products, the decline of black tea sales is expected to continue into the forecast period.
Time for International Players to Take Notice
Despite the healthy forecast for the Brazilian tea market, international players have yet to invest seriously in the market. Domestic tea brands continue to lead overall retail sales in Brazil, accounting for just over 46% or retail tea value sales in 2013. Leão, bought by the Coca-Cola Company in 2007, is by far the most popular brand, recording US$ 227 million in sales in 2013. Dr. Oetker, a German brand owned by Oekter-Gruppe, accounts for the largest international presence, holding a 13% share of the market since 2007. Although ABF’s Twinings brand – the second biggest tea brand in the world – has recently increased its efforts in Brazil, as of 2013 the brand accounted for less than one percent of the market, while global leader Lipton (Unilever) is entirely absent. Stronger penetration in Brazil presents international tea players with an exciting opportunity to expand not only in one of the fastest growing tea countries, but to also gain a stronger foothold in the nascent but growing Latin American market.