Hot tea continues to be the biggest tea subcategory globally: while RTD is following in the footsteps of RTD coffee and has started to build its base in the global tea market.
Hot tea is still hot
Despite the attraction of new RTD variants, hot tea remains the dominant category in both size and amount of innovation.
Innovations in hot tea accounted for around 74% of global tea launches: compared to just 25% for RTD varieties.
Europe leads the way in hot tea innovation (accounting for 30% of all tea launches) while Asia Pacific follows at 26%.
A growing number of tea brands are boosting their emphasis on energy, helping them compete with coffee, especially for morning occasions.
Caffeine in green and black tea is well-known as an energy booster: but herbal teas are now highlighting the use of ginger, turmeric or the stimulant guarana (use of guarana as an ingredient in tea has doubled over the last three years).
And outside of tea, other beverage categories are turning to tea to boost their natural energy credentials: for example using tea in energy drinks.
India has become the top seller of packaged tea (which covers packaged standard and other black, green, oolong, white teas, fruit and flower and herbal inclusions, yerba mate and Pu’er tea) although volumes in both India and China remain close and by far the largest globally with each boasting a strong history and culture in tea.
In China, fresh tea in loose formats remain popular, explaining why India boasts the largest packaged tea market.
Retail market volume of tea and infusions reached 678,200 tonnes in India in 2017, followed by China at 578,800, according to Mintel estimates. Turkey (173,400 tonnes), Russia (134,200 tonnes) and Japan (92,900 tonnes) complete the table of the top five markets.
In China, around 78% of consumers are frequent drinkers of freshly brewed loose tea. RTD products are enjoying high penetration (49% of Chinese consumers say they are regular consumers of these products) while tea bags are frequently used by 45% of consumers.
In per capita terms, Turkey is the largest consumer (2.15kg) followed by the UK (1.15kg), Russia (0.91kg), Japan (0.74kg) and Germany (0.67kg).
The rise of RTD
“The RTD tea landscape is changing dramatically,” says Mintel. “Having suffered for years from a cheap and unhealthy image, the category is now undergoing a lifestyle makeover. Brands are putting more emphasis on natural ingredients and trendy superfood formulations, while leveraging the use of specific tea types.
“Artisanal production attributes, such as cold-brew, are helping to establish a premium tier in the segment. Better-for-you innovations from major beverage companies are further boosting the development of the category.”
In the US, big players such as PepsiCo, Coca-Cola, Nestle, AB InBev and Starbucks have turned their attention to the RTD category: aiming to leverage the growth trajectory of better-for-you drinks.
PepsiCo for example has its Pure Leaf brand, also adding in an unsweetened variety; while Coca-Cola has its Gold Peak brand which includes Chai and Vanilla Chai RTD lattes. Starbucks and AB Inbev have partnered to launch Teavana RTD as a premium offer in the market.
Asia Pacific accounted for 13% of global RTD tea launches in 2017: compared to North America which accounted for 3%.
Innovations in RTD tea include the use of specific tea types along with herbs, spices, flowers and superfoods – such as the combination of matcha and coconut milk or white tea and lotus blossom.
What’s hot? Cold brew
Meanwhile, Asia Pacific has led the rise of cold-brew tea, where tea leaves are steeped in cold water to release full flavors. While this sector is still very niche (the cold brew descriptor is only used in around 1% of launches globally), half of the launches in this category are in Asia Pacific.
“While references to 'freshly brewed' tea in place of extracts and flavorings are becoming increasingly widespread, 'cold brew' is just emerging as an upscale taste and quality descriptor in RTD tea,” says Mintel. “Leaning on developments seen in RTD coffee, where cold-brew is causing considerable hype, the hours-long steeping of tea leaves in cold water is said to release the full flavor of tea, without it becoming bitter and tannic.”
Europe is also a key region for innovation in this category, with the region accounting for 35% of launches.
Crazy for Kombucha
Demand for healthier, functional products has also spurred demand for kombucha innovations: with global launches of RTD kombucha increasing tenfold between 2012 and 2017. Innovations were driven by North America, closely followed by Europe.
“Known in Asia as an 'immortal health elixir', kombucha is becoming increasingly popular in the West, encouraged by media claims that it is a natural cure for gut health and low energy.
“Major players' investments are set to further boost kombucha's appeal: PepsiCo fully acquired kombucha brand KeVita in late 2016 while cold-pressed juice brand Suja - part-owned by Coca-Cola - launched a kombucha range in July 2017. Many modern kombucha brands are positioned around holistic health for both body and mind.”