UK Tea Tastes Turn Premium

Despite the UK’s declining tea sales, which decreased by 8% in retail volume terms between 2008 and 2013, retail value growth has remained steady, increasing by 1% in real growth over the same period. The inverse volume and value growth indicates that while Britons are drinking less tea, their choices are becoming more premium. In addition to the increasing popularity of tea types like green tea and fruit and herbal teas – which carry a higher price tag than traditional black standard tea, premium tea brands are also on the rise.

Shifting Tea-Type Preferences

The premiumisation of British tea culture is evident in the increasingly popularity of different tea types. Black standard tea, the most traditional and inexpensive type of tea in the UK, decreased by 9% in retail volume between 2008 and 2013, accounting for nearly the entirety of the category’s overall volume decline. In contrast, alternative tea types such as green tea, fruit/herbal tea, and other teas which include white teas, oolong tea, and rooibos, each recorded double digit volume growth over the same period. These different variants are priced much higher than standard black teas. Fruit and herbal teas, which recorded the highest absolute volume growth between 2008 and 2013, are also the most expensive type of tea, with an average unit price of nearly six times that of black standard tea.

Retail Volume Growth by Tea Type, 2008-2013

Source: Euromonitor International

Premium Brands Succeed, while Mass Brands Struggle

In addition to the shift towards more expensive tea types, UK consumers are also increasingly drawn to more premium tea brands. In 2013 Twinings by Associated British Foods and Yorkshire Tea from Bettys & Taylors Group, both premium tea brands, recorded the largest value increases of any tea brand in the UK, while the two largest mass brands, Tetley from Tata Global Beverages and PG Tips from Unilever, recorded the biggest decline in sales, dropping by US$ 1 million and US$ 9 million, respectively.  Yorkshire Tea, in particular, has been deliberate in cultivating a premium image through its advertising campaign that associates its tea with cricket – a British sport with strong upper-class connotations. Aware of the increasing demand among UK consumers for higher quality teas, in 2013 Tetley launched its own quality-focused tea line, called “Estates Selections,” which emphasises the tea origin and premium taste

Potential for Super-Premium

The increasing interest in higher-quality tea also spells opportunity for smaller, ultra-premium brands. One such example is teapigs, a subsidiary of Tata. Launched in 2006, teapigs sells only whole leaf tea, in the form of either loose leaf or tea temples – their name for pyramid tea bags. Quality is key to teapigs’ positioning. Even their ‘everyday brew,’ which they equate to a builders brew– a strong, everyday black tea – is blended from three different estates. This attention to quality is reflective in price: a 250 gram bag of loose ‘everyday brew’ tea from teapigs’ retails for over five times the price of an equivalent pack-size of PG Tips Everyday Tea. According to Tata’s most recent analyst presentation, teapigs is growing significantly, leading to its 2014 launch in Australia, Canada and the US. Currently, in the UK teapigs is available online, in addition to select grocery retailers in the UK, as well as several foodservice outlets such as Wagamama.

Increasing Polarization

Despite the success of premium brands and the increasing demand for more expensive tea types, private label continues to hold a significant presence in the UK tea industry, increasing by 21% in nominal retail value between 2008 and 2013. The steady growth of private label tea in the face of premiumisation reflects the polarisation of the British tea market, which is increasingly split between premium and economy. While this presents new opportunities from brands like teapigs, mid-tier brands like Tetley and PG Tips may continue to see sales decline.

The polarization of the British tea industry can be seen as a consequence of the overall decline in tea consumption in the UK. For steadfast tea drinkers, private label and economy brands are a completely sufficient source one’s daily tea fix, while greater quality and premiumisation is needed to sustain the attention of the growing number of equivocal consumers.  The increasing popularity of coffee has contributed to this demand. In addition to driving consumers away from the tea category altogether, coffee, thanks largely to the rise of specialist coffee shops and new formats like fresh ground coffee pods, has evolved into a premium industry in the UK, with consumers increasingly interested in independent and specialty brands. The search for a premium experience is bleeding into the tea industry, although it remains to be seen how much UK consumers’ are willing to trade-up for a cuppa.