Cha Thé Tea

Prepared by Joseph P. Simrany
President, Tea Association of the U.S.A., Inc.

If anyone believes that the United States Tea Industry is not undergoing a dramatic period of change, they should take a quick tour of their local supermarket and observe what is happening. Even within this single distribution channel, change is pervasive and immediately apparent.
When walking through the supermarket, a noticeable new development is that tea can be found in several different locations throughout the store, not just in the "coffee" aisle. But, even in its traditional location, the amount of space devoted to tea has increased tremendously and the number and size of competitive offerings has changed dramatically. In addition, many new sections have been added within the supermarket to accommodate all the new forms of tea that have been introduced in recent years.
You may observe the significant amount of space now being devoted to ready-to-drink teas in the "soft drink" & “water” and “functional beverages” aisles. This, of course, is only the beginning. Traveling around the store, you may also find tea in the dairy department in both bottles and gallon jug containers. Additionally, depending on the size of the supermarket, you might encounter a refrigerated cabinet dedicated completely to tea. More often than not you may spot some form of tea on a promotional display or in a vending machine near the entrance or exit. Most recently, organically grown tea is finding its way into special departments that have been set up to organize these products. Tea is even finding its way into the health and beauty aisle as an ingredient in other products or as a concentrate. Please don’t forget the juice aisle where tea is being added as a beneficial ingredient to several juice products. You may even find tea in the candy aisle in the form of tea-infused chocolate bars.
During this supermarket tour other changes become obvious. Among them is the number of new companies marketing tea in new and unique forms. Traditional packers of black tea now offer herbal blends and traditional herbal packers now offer new black and green tea blends. Bottled water and soft drink companies have expanded their product lines to include ready-to-drink tea and new startup companies are pouring into the marketplace. Green tea once nearly impossible to find in conventional supermarkets is now in widespread distribution, and even Oolong and White tea is occasionally found.
Additionally, Specialty Teas have also found their way into supermarkets in a greater variety than ever before and are available from large packers as well as from smaller regional tea companies. New shapes, sizes, and flavors abound as well as new consumer interest in the tea category. Even the tea bag has jumped the barrier from Traditional to Specialty Tea in new materials and new shapes.
Venturing outside of the supermarket environment, the casual observer continues to be bombarded with changes taking place within the Tea Industry. Thanks, in large part, to the ready-to-drink version of tea, the availability of tea in nontraditional outlets has increased dramatically. Today tea may be found in warehouse clubs, mass merchandisers, gas marts, drug stores, and convenience stores. Also, the availability of tea has benefited from large distribution increases in the vending sector and in the foodservice sector. Even if you don't shop in supermarkets, mass merchandisers, convenience stores, or use vending machines, you're probably still exposed to the changes taking place within the Tea Industry. Evidence of tea’s many contributions to health can be found on television in the form of increased publicity; in newspapers and magazines through paid advertising, on radio through news announcements and interviews, and published in medical journals in ever-increasing numbers.
Even if you're a confirmed coffee lover, there is no escaping the fact that tea’s popularity is ever-increasing. One only has to note the growing availability of Specialty Teas in the thousands of coffee shops across the country. Even for confirmed coffee lovers, tea has a new appeal in the form of a product called Chai - a blend of tea, spices, and milk. And for a new generation of tea drinkers, or simply the young at heart, bubble tea outlets are popping up in major metropolitan areas across the United States. Today, there are over 2400 specialty tea rooms and retail shops in big cities and small towns across America. Also, there are an ever increasing number of upscale hotels offering Afternoon Tea service.
Obviously, most Tea Industry insiders view all of these changes positively because they are serving to make tea more readily available and convenient to millions of potential consumers. More importantly, these changes are useful in raising top-of-mind awareness among consumers. As any marketer will tell you, top-of-mind awareness is critical to future growth.
Why, after so many years, is change so rampant in the Tea Industry? What has occurred to cause a beverage that has been commonly available for hundreds of years in the United States to behave as if it were introduced yesterday? These answers are found by examining the changes, by questioning the trade, by reviewing overall food and beverage trends, and by understanding consumer motivation.
A predominant force driving tea’s new popularity is its convenience. Ready-to-drink tea in bottles, cans, aseptic packaging, plastic containers, or any other packaging configuration brings the ultimate in convenience to consumers. Ease of preparation has never been a strong selling point for tea and, in a nation that demands convenience, has served to act as a constraint on sales until now. It was this same demand for convenience that caused the Tea Industry to introduce the tea bag in 1904 and to create instant tea and iced tea mixes in the 40's & 50's.
Closely linked to convenience is availability. Ready-to-drink bottles and cans made tea more readily available to consumers than ever before, particularly at the point of consumption. Both the convenience and availability factors are entirely compatible with basic trends at work in the business world, specifically the erosion of free time available to American consumers and the resulting trend towards eating meals “on the run.”
An important secondary factor contributing to the popularity of tea is the increasing health consciousness of American consumers. While this trend has been developing over the last three decades, it received a tremendous boost from the NLEA (Nutritional Labeling and Education Act) implemented in May 1994.
The American consumer's concern for health has already had a dramatic effect on the Food & Beverage Industry. Examples of manufacturers trying to meet the perceived needs of this “healthy” consumer are found in every aisle of the supermarket and range from the introduction of bottled water to the use of exotic ingredients to replace fat. Tea is uniquely positioned to flourish in this kind of environment because of the positive consumer perception from which it already benefits and because of the abundance of new scientific research that serves to reinforce that perception.
Another reason why tea has become popular is linked to the marketing programs in which millions of dollars have been spent to launch ready-to drink teas. This effort has served the entire industry well; not only has it ensured the success of ready-to-drink teas, but also has helped to communicate the positive intrinsic attributes of tea in general.
Tea has always been a versatile drink. Its versatility includes the many uses for the leaf as well as the many different benefits derived from its consumption. The range of these uses and benefits is broader in tea than for any other food or beverage.
Given this market environment for tea, is it any wonder that the ready-to-drink sector has been consistently ranked as one of the fastest growing new product entries over the last several years? Additionally, is it any wonder that the total category has grown in excess of 6.85 billion dollars in sales in 2007?
The following estimates are derived from hard facts from both inside and outside sources as well as informed judgments from Tea Industry experts.

ESTIMATED WHOLESALE VALUE OF THE UNITED STATES TEA INDUSTRY

Given this as a starting point, the next logical question is where do we go from here? Does $6.85 billion represent the zenith or simply the foundation upon which the Tea Industry will continue to build? Fortunately we are dealing with tea and with industry people who know how to read the tea leaves. What they see is a long period of growth based on their past experiences as well as their assessment of what opportunities remain to be discovered. Let's take a look into the bottom of their teacups and see what there is to see:

• Ready-to-drink tea will continue to grow in popularity with annual dollar increases in the range of 12 to 15%.
• Foodservice sales will continue to grow, spurred by an increase in customer demand, increased promotion on the part of operators, the expansion of tea offerings to include specialty and herbal selections, increased awareness of the profitability potential of tea, and improved delivery of hot tea. We expect annual dollar increases in the range of 3 to 5%.
• A long-term increase in consumer demand for Specialty Tea, with annual dollar increases in the area of 8 to 10%.
• A slow but steady long term increase in consumer demand for traditional forms of tea spurred by an expanded core group of users, much broader demographics of the "typical" tea consumer, and increasing awareness of the potential health effects associated with tea consumption. Annual dollar growth in the area of 1 to 3% is expected in this category.