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Tea’s Health Halo Creates Opportunities for Carbonated RTD Tea to Grow

October 21st, 2015

As consumers in many countries seek to reduce their consumption of carbonates, they are turning to other alternatives such as carbonated RTD tea and bottled water. Carbonated sodas are increasingly viewed as unhealthy because they typically contain artificial flavours, colourings or sweeteners, in addition to a high sugar and calorie content. While mindful of health concerns, consumers still want a refreshing beverage. Soft drinks makers are marketing multiple non-soda options to appeal to health-conscious consumers. Among these non-soda alternatives, carbonated RTD tea has one of the best future prospects, as it answers the call for a fizzy beverage with a better health image than carbonates. Carbonated RTD teas offer a refreshing beverage and come in a bevy of multiple flavour options, from lemon to ginger to raspberry. Though most of these carbonated RTD teas contain sugar or another sweetener, they are still perceived as healthier products because tea contains antioxidants.

New product development in carbonated RTD tea boosts sales

At the global level, off-trade value sales of carbonated RTD tea grew by 17% in 2014 to reach US$839 million. Rapid growth of carbonated RTD teas has been aided by extensive new product development. Colombia’s carbonated RTD tea category grew from zero to US$14 million by the end of 2014 as two companies introduced carbonated RTD teas to Colombia. Quala SA launched the brand SunTea Gas in July 2014, offering the appeal of carbonates and the healthy properties of tea, followed by Postobón SA with the Twist brand in October 2014.

New product launches have similarly aided sales of carbonated RTD tea in Germany. Club Mate, a mate-based carbonated RTD tea produced by Brauerei Loscher, has been around since 1924 but the caffeinated beverage has recently become popular among young Germans. Success has led to numerous copycat launches featuring mate including the May 2013 launch of Sol Maté from Sol Mate AG. In the case of PepsiCo Deutschland , they have had success not by targeting young consumers but by launching a less expensive carbonated RTD tea for at-home consumption. The company introduced a 1.25 litre PET bottle for its Lipton Sparkling carbonated RTD tea brand in March 2014. Previously, the brand had been sold only in 330ml beverage cans. The larger size is priced about 50% lower than the smaller cans. The combined effect of multiple new product launches helped Germany’s RTD carbonated tea off-trade value sales grow by 10% in 2014 to reach US$15 million.

Health claims boost kombucha sales in the US

In the US, health claims are aiding growth of carbonated RTD tea. Through 2014, the majority of carbonated RTD tea sales came from kombucha, a sparkling, fermented probiotic tea. Producers of kombucha tout the probiotic cultures contained within as detoxifying, aiding the digestive and immune systems. While many of kombucha’s health claims have not been substantiated by medical testing, many consumers believe that this product can help them live a healthier lifestyle.

The introduction of better tasting varieties of kombucha have also contributed to kombucha’s growth. While the earlier kombucha options could be described as “acquired tastes”, the newest kombucha varieties are sweetened with natural sweeteners and feature flavours that closely resemble artisanal carbonated sodas.  The yuzu lemon variety of B&R Liquid Adventure’s Bucha Live is a gourmet spin on lemonade, while the passion mango ginger variety of Reed’s Inc Reed’s Culture Club Kombucha offers a tropical feel. In turn, carbonated RTD tea sales have swiftly started to rise in popularity among consumers, with off-trade value sales growing by 23% in 2014 to reach US$529 million.

Health halo and versatility of carbonated RTD tea creates positive outlook

The future prospects for carbonated RTD tea are very positive, as producers will be taking advantage of beverage consumers shopping around for a healthier alternative to carbonates. Not only does carbonated RTD tea have a health halo but it has a similar “mouth feel” as carbonated soda, and lends itself to a wide variety of flavours. As carbonated RTD teas have a light body, they are as refreshing as a carbonated soda. Tea offers versatility as it goes well with numerous fruits and herbs, allowing beverage makers to create a wide range of flavour combinations. Soft drinks players are expected to capitalise on carbonated RTD tea’s many benefits to introduce more products during the forecast period.

2015 has already been a busy year for carbonated RTD tea launches in the US driving up consumer awareness and lowering prices. Talking Rain Beverage Co entered in January 2015 with Sparkling Ice Tea. This move is expected to significantly grow the carbonated RTD tea category, as Americans are very familiar with the Sparkling Ice brand, as a flavoured, zero-calorie carbonated bottled water. Up to now, carbonated RTD tea has traditionally been dominated by high-priced, health-positioned brands such as GT’s Kombucha that cost about US$3.99 per 480 ml bottle. Pepsi-Lipton Tea Partnership’s February 2015 entrance into carbonated RTD tea with its Lipton Sparkling Iced Tea was accompanied with television commercials in March 2015. Americans are very aware of the Lipton brand as it is the second leading brand in still RTD tea.

As two well-known beverage brands enter the category, consumer awareness of carbonated RTD tea is expected to rise. Shoppers will be more able to afford these products, as Lipton and Sparkling Ice are priced around US$1.50 (about US$1.00 when discounted) per 503 ml bottle and 355 ml can, respectively. At the same time, there is some danger that as carbonated RTD tea goes mainstream; it will lose a bit of its health halo. Both Lipton Sparkling and Sparkling Ice contain artificial sweeteners, while the kombucha products are naturally-sweetened. Health-aware consumers who regularly read nutrition labels are likely to see that these lower-priced carbonated RTD teas are similar to a diet soda with a bit of tea flavour. That said, many consumers are likely to appreciate the lower-cost option provided by Lipton Sparkling and Sparkling Ice as well as their wider availability. The addition of these new lower-priced products as well as continued growth in kombucha should lead to strong growth for carbonated RTD tea in the US. Off-trade value sales are projected to grow by 24% in constant value terms between 2014 and 2019 to reach US$657 million. New product development in carbonated RTD teas is expected to bring in more consumers in Colombia, Germany, and other countries. Global sales of carbonated RTD tea are expected to grow by 26% in constant value terms to reach US$1.2 billion over the forecast period.

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Virginia Lee

Virginia Lee is a Senior Beverages Analyst at Euromonitor International. She is a global consumer trends speaker and native of South Korea. Virginia writes about company strategies, marketing, and new products. She has been widely quoted by the media including the Wall Street Journal, New York Times, and Advertising Age.

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