Tea or Coffee: What do Consumers in the Americas Prefer? – Part 1: The Changing Tea Market

Coffee is the preferred drink across the Americas, with only two exceptions – Chile and Bolivia – where tea is preferred by consumers.  Tradition, expanded availability, development of new drinking occasions, flavour innovation and health and wellness trends are driving consumer preferences to new types of coffee and tea across the Americas and worldwide.

The region has significant differences by country when it comes to consumer drinking habits, tastes, offerings and the presence of international brands, making it an attractive market for manufacturers. The key to success is understanding the many differences between the countries and responding with products that reach out to the diverse consumers across the region.

Health Benefits Boost Sales of Tea Across the Region

In Canada, positively impacted by immigration trends and a Tea-by-category-NA
tendency towards healthier beverages among Canadians, tea continues to pick up steam. Growth is mainly driven by specialty black and green teas, supported by positive media and health authorities’ coverage of health benefits. Fuelling the growth is the expansion of specialized shops and retailers, such as David’s Tea, which offer expanded assortment of products and help drive consumption levels.

While in Chile, over the last five years, manufacturers and consumers have increased their respective focus and interest regarding the healthy properties of tea. From antioxidant properties to stimulant and fat burning uses, tea has become even more popular in Chile due to the added value that the product offers to its consumers. Chile was already a remarkable tea consumer country, but in the last five years, different varieties like green, red and white teas have increasingly become popular amongst different consumer sectors, but particularly women.

Tea-by-category-in-LatAmIn Costa Rica, tea continues posting dynamic growth rates (retail current value growth of 9% in 2014) within the local market as a consequence of the greater reliance on natural homeopathic remedies to prevent disease, the desire for products that go beyond satisfying basic needs and the return to simple pleasures associated with family and home. As a result, domestic manufacturers are not only opting for developing their own health-oriented blends in accordance with the most popular benefits but also adopting trendy ethnic flavors such as Mondaisa’s new Chai and Sabemás herbal blends. In the same line, the increasing acquisition of affordable luxuries such as specialty tea, the consolidating development of a culture boosted by emerging shops and the growing availability of differentiated imported products is converting all tea types into something more premium, as is experienced in other countries. Similarly in Perú, tea has been traditionally perceived as a functional beverage. The health related benefits of the product have always been recognized, especially those related to green and herbal varieties. Green tea is perceived as a healthy product and also able to facilitate weight control. Herbal tea is perceived as a healthy product able to treat many different diseases and discomforts. Traditionally herbal tea in the country has been considered as a medicinal product, able to treat and cure many discomforts. For example, it is possible to find a blend of herbal teas that is able to reduce the discomfort generated by a flu or cold, stomach discomforts, sleeping disorders and for weight control, amongst many others. Peru is a country with high levels of self-medication; consumers with poor or no access to health services treat their diseases directly using natural products and ingredients. Because of this, medicated herbal teas are very well perceived and highly used.

In Bolivia, green tea leads growth in 2014. Consumers following the health and wellness trend are the main target of brands in the country. These consumers are mainly young adult females. Black tea enjoys high penetration and its growth remains constant but slow. Companies make use of local flavours in their specialty brews to attract consumers looking for more elaborate products. Traditionally, loose black leaves are prepared with cinnamon and cloves. Companies use these ingredients for their brands and successfully attract consumers from all socioeconomic segments.

Excellent performance in the consumption of tea shows that the product is still not mature for Uruguayans. Herbal, green and red segments are clearly perceived by consumers as healthy functional beverages, especially in the case of herbal varieties with a years-long tradition amongst older generations. Companies are marketing more flavoured options which are more expensive than most black tea alternatives.

New Consumers / New Occasions as a Route to Success

Although drinking tea is not a typical Brazilian habit, new initiatives are proving that a good marketing strategy is the basis for success. The Gourmet Tea, a specialized store offering high-quality traditional varieties with origin certificates, from the choice of the blend to the form to serve them, is here to prove that there is no time barrier to enjoy a cup of this hot beverage. Still a niche initiative, it shows that the market in Brazil could offer more than green, white and red varieties.

Per capita consumption is still very low in Mexico, though green tea in particular has seen a rise in popularity in recent years.  Green and herbal teas are positioned as functional, and often times premium, beverages with high levels of antioxidants and fat burning properties, which make them more popular amongst health conscious and higher income consumers.  Growth in the on-trade* segment is outpacing that of retail, with an improving selection of green and herbal teas available in on-trade* establishments targeting high and middle income consumers.

The Dominican Republic is not a traditionally hot tea drinking country; nevertheless iced versions have become popular. Lipton leads in shelf space in most supermarkets, other well-known brands are Snapple, Tang and Clight. RTD tea is now regularly consumed in restaurants, cafeterias and supermarkets. Also concentrate powdered tea is widely used since it’s an attractive low cost alternative. Tang and Clight are well known brands and come in pouches or sachets and have a very low cost compared to bottled or canned powdered tea.

Not all News is Good News

In Argentina, tea loses against competitive “Yerba mate” options. Tea volume sales consumption saw a second continuous decrease in 2014, reflecting stronger competition from value priced other hot drinks, particularly yerba mate, which the federal government has subsidized and regulated since 2008, and spends millions of ARS reducing retail prices in order to keep consumption affordable for lower income groups. Consumers are increasingly turning to healthy products and incorporating fruit/herbal tea as an after dinner drink as these type of products have received attention in gourmet television shows, increasing their appeal. Tea in general has a healthy image with green and fruit/herbal varieties having the healthiest image. Green tea is related to anti-oxidant and anti-ageing properties while fruit/herbal teas have many different claimed benefits depending on the herb such as digestive aid and, soothing and calming effects. Young consumers are beginning to view these products as something fashionable as they are exposed to them through new on-trade chains such as Starbucks.

In Venezuela, there is no culture of tea reflected by low per capita consumption (0.02kg). In contrast, Venezuelans are big coffee consumers. Nonetheless, Venezuelans usually keep in their pantry some herbal infusions, with the most common being chamomile, toronjil, anise and malojillo, to treat ailments related to stomach/digestive diseases, sleep problems, as well as to calm nerves in stressful situations. Some green varieties have emerged over the last five years as an ally to lose weight. Nonetheless, tea did not show substantial volume growth in 2013 and 2014; volume sales have remained stagnant since 2012. High industry prices and diminished product varieties because of a lack of access to foreign currency are the factors behind the poor performance of tea. In spite of some manufacturers such as Alfonzo Rivas & Cía promoting tea as a cold beverage in an attempt to increase consumption occasions, and taking into account that the tropical climate of Venezuela does not encourage regular intake, this action did not have a major effect on demand.

In a coffee country such as Colombia, tea remains a premium product, only consumed by high income and niche consumers. Nevertheless, functionality is one of the main growth drivers. This has underpinned the increasing popularity of green tea, which is consumed by consumers who are worried about weight control. Obesity affects a significant share of population in the country due to busier and modern lifestyles, making this type of product very popular. Though tea garnered limited consumer interest historically, big local firms such as Agricola Himalaya Ltda have invested significantly to educate consumers about their products’ benefits, from sleep assistance to energy boosting depending on the product. There are even products oriented towards concentration, which have been positioned towards students, who tend to prefer coffee for studying purposes. Tea is also becoming popular for minor aches such as headaches or colds.

In Guatemala there is very little tradition for packaged tea consumption. As of 2014, current value sales account for approximately 2% of total sales of hot drinks in the country.  Products such as herbal/traditional/medicinal and slimming teas are the main drivers of growth for this category. This type of product has been able to gain a stronger positioning in consumers’ minds, as they find specific benefits for different ailments in a natural product. Companies in the category are not typically innovative or dynamic, but in the latest years many have focused on this type of product, launching products such as Ixbute which is crafted to boost lactation.