Total out-of-home tea sales in the UK hit £283m ($372.1m) in 2017, and Allegra’s recent report estimates that they will top £313m ($411.6m) in 2018. However, it observes that there is still less growth and innovation within tea offerings out-of-home than in the burgeoning coffee market.
Finding a market that sticks
Costa Coffee is the largest coffee chain in the UK with more than 2,000 locations. By far, it also dominates the nation’s out-of-home tea market even without a specific tea focus. The UK lacks any national tea chain as widely known as Costa, despite the Brits’ famous love of tea.
“You usually think of the UK as a tea-drinking culture, but definitely in the last 20 years that’s been replaced out-of-home by coffee. Tea is still in the shadow of coffee,” Bradley Journeaux, research manager at Allegra World Coffee Portal, told BeverageDaily.
Costa sells Twinings Tea, a mainstream British staple. The report found that 38% of consumers chose it as their top brand with a heavy skew toward those younger than 30. But the reality is that even with the option of a favorite brand, only 29% think that out-of-home tea is a good value for their money.
The average price of a black tea out-of-home is £1.92 ($2.52), while the price of a 100-count pack of Twinings Tea sells for about £9 ($11.83) on Amazon.
“People just aren’t prepared to pay for something that they could get for 10p [$0.13] at home if they prepare it themselves. They’re less willing to do that. If you look at coffee, you can potentially get a much better cup of coffee in a coffee shop than you can at home,” Journeaux said.
The inflated cost isn’t worth it to consumers based on the product, resulting in a need for better innovation and more diverse options within the out-of-home tea market.
Fruit, herbal and green tea
The report reveals that innovation in the out-of-home category is coming from the fruit, herbal and green sector, rather than black tea. And 58% of teamakers added more specialty teas to their menus in the last three years in an effort to keep up.
The specialty teas that are hitting the market mostly tap into current premiumization and wellness trends flooding the beverage industry worldwide. Matcha, kombucha and other functional tea flavors are leading the pack and providing a significant boost to out-of-home tea sales,.
Journeaux estimates that there’s more room to grow in the iced tea category, noting that the UK market demand for it is much lower than in the US, resulting in fewer competing products.
Indeed, the iced tea market in the US has recently launched many specialty options such as sparkling, carbonated, low-calorie, clean label and sugar free, all competing within the larger beverage industry against ready-to-drink coffee and soft drinks.
While the UK market is currently based on the scale of consumer demand for traditional tea, Journeaux observes that brands which think outside the box are seeing results. “Those who are investing in a wider range of variety of teas are having quite a lot of success,” he said.