The iced/ready-to-drink tea market is hot, and beverage companies, both large and small, are introducing new products at a rapid pace to capitalize on the trend. Consumers are attracted to the products’ convenience, health and wellness connotations and the variety of products manufacturers offer.
Based on Information Resources, Inc. (I.R.I.), Chicago, sales-tracking data and other sources, Packaged Facts, a publishing division of Marketresearch.com , New York, has estimated the retail market for tea and R.-T.-D. tea will reach $6.85 billion in 2005, up 9.4% from sales of about $6.26 billion in 2004.
According to Packaged Facts, sales will continue to increase as the health benefits of tea are disseminated by the media, as manufacturers develop new flavors, packaging and types of tea to intrigue consumers, and as consumers look for alternative or complementary drinks to coffee and soda.
Sales for the U.S. tea and R.-T.-D. market will continue to grow at steady, if not "runaway, rates," the research company projected. Specialty teas are penetrating mainstream channels, and green tea, in particular, is giving new life to the bagged/loose tea category. Blended black tea sales may drop, but dollar sales should keep building, as most specialty teas retail at higher price points.
Ready-to-drink teas continue to grow, especially in the convenience channel, and refrigerated teas are doing well. In all, Packaged Facts estimated the market will reach more than $10 billion in 2010, with a compound annual growth rate of 8% from 2005 through 2010.
While loose and bagged tea is the leading tea category in food, drug, and mass channels, R.-T.-D. teas comprise the greatest segment of the total tea market. Packaged Facts analysts estimated that these beverages made up about 72% of all tea sales in the U.S.
Refrigerated tea, another form of R.-T.-D. tea, accounted for only about 2% of the total market, but is growing at a faster clip than any other segment.
"One of the key things driving the iced/R.-T.-D. segment is it is a relatively easy product to work with," said John Michalik, director of North America for Canadean, a beverage research company based in the United Kingdom. "Products are easy to formulate and differentiate using different types of sweetener and flavor combinations."
As the related story ( see below) indicates, there has been an extraordinary amount of effort devoted to bringing new iced/R.-T.-D. tea products to market.
"Iced/R.-T.-D. teas are also an area of the beverage market where products marketed by Coke and Pepsi (that own the Nestea and Lipton brands, respectively) can take advantage of the strong health connotations these products have," Mr. Michalik said.
Capitalizing on health
Tea contains flavonoids, which are naturally occurring compounds that are believed to have antioxidant properties. According to the
New York-based Tea Association of the U.S.A., antioxidants work to neutralize free radicals, which researchers believe, over time, damage elements in the body, such as genetic material and lipids, and contribute to chronic disease.
Recent research has explored the potential health attributes of tea through studies in humans and animal models, and through in vitro laboratory research. For the most part, studies conducted on green and black tea, which are both from the Camellia sinensis plant, have yielded similar results. Recent research suggests that tea and tea flavonoids may play roles in various areas of health and may operate through a number of different mechanisms still being explored.
Recent findings include:
▪ The antioxidant properties of tea flavonoids may play a role in reducing the risk of cardiovascular disease by decreasing lipid oxidation, reducing the instances of heart attacks and stroke and may beneficially impact blood vessel function, an important indicator of cardiovascular health.
▪ Tea flavonoids may lower the risk of certain cancers by inhibiting the oxidative changes in DNA from free radicals and some carcinogens. Tea also may promote programmed cell death, or apoptosis, and inhibit the rate of cell division, thereby decreasing the growth of abnormal cells.
▪ Tea-drinking has been associated with oral health and bone health.
▪ Compounds in tea other than flavonoids have been shown to support the human immune system.
At an international conference on diet and cancer, held this past July, researchers funded by the American Institute for Cancer Research (A.I.C.R.), Washington, presented evidence that a major component in green tea may short-circuit the cancer process in a new way that scientists had not foreseen.
Institute experts also released the results of surveys that showed only 15% of Americans say they drink green tea on a typical day, and less than 1% of Americans are currently drinking enough green tea to match the average per capita consumption in Asian countries.
The A.I.C.R. experts highlighted the low levels of green tea consumption in the U.S. in relation to what they called "intriguing evidence" from studies conducted among Asian populations that suggest a protective effect for green tea. They also pointed to the rapidly increasing number of laboratory studies exploring green tea’s effects on a cellular level.
"We have determined that a unique quirk of biochemistry allows green tea’s protective effects to extend to many different kinds of cells," said Dr. Thomas A. Gasiewicz, a professor of environmental medicine at the University of Rochester Medical Center. "In fact, the active green tea substance — called EGCG — seems to target one protein that is particularly common throughout our bodies, and it does so with a degree of precision that cancer drugs still aren’t able to match."
The protein in question is called HSP90, which is present at higher levels in many cancer cells. Scientists believe that in some circumstances, HSP90 helps to trigger the cascade of events that eventually leads to cancer.
"If further research confirms that EGCG’s ability to bind to such a basic and pervasive protein enables it to extend its protective effect throughout our bodies, it explains a scientific mystery," Dr. Gasiewicz said. "Studies that track the diets of human subjects over several years — particularly studies conducted in Asia, where green tea consumption is common — have associated regular usage of green tea with lower risk for cancers that are different from one another."
While A.I.C.R. is promoting the health benefits of green tea in fighting cancer, the Food and Drug Administration is not convinced. This past June, the F.D.A. rejected a proposed health claim that green tea may reduce the risk of certain types of cancer. After evaluating three studies, the F.D.A. concluded that it is highly unlikely that green tea reduces the risk of prostate cancer. The F.D.A. did note it will continue to evaluate new information that becomes available to determine if changes to its decision are necessary.
Not part of American culture
Though iced tea is a distinctively American and very popular drink, according to Packaged Facts analysts, hot tea never has been a part of the cultural identity of Americans, as it is in many countries around the world. Yet more consumers are exploring the tea option, if not as a daily habit like coffee, as a relaxing alternative throughout and at the end of the day.
Herbal teas, with their emotional and mood-related positioning, are especially suited to be part of an "aging boomer" or "yoga mom" lifestyle that seeks natural health, stress relief, and self-care.
The overwhelming interest in green tea in the United States is also a surprise, according to Packaged Facts. The flavor isn’t typical of American tastes, and it takes some time to learn to appreciate its nuances. Yet, anecdotally, tea marketers have said that it’s the fastest-growing part of their business by far, so much so that it’s a challenge to keep up with supplies and production.
In conclusion, the Packaged Facts researchers noted, "Consumers still need a great deal of education about quality teas, just as education is required to appreciate specialty cheeses, coffee, chocolate or wine. With many more options on the shelf, consumers may have some awareness of products like white tea, rooibos or yerba maté, but have yet to try them. That bodes well for the tea market; with many new adopters yet to fully enter the market, there’s plenty of room for continued growth.
"At the same time, Americans have a need for speed and a taste for strong flavors that may make it difficult to win them over to tea. This is less of a barrier in the R.-T.-D. market, with products packaged for convenience and ease of use, and with endless possibilities for flavor blends. These products, of course, are less likely to yield the health benefits of a freshly brewed cup of pure tea, but for refreshment value, they have strong appeal.
"The specialty tea market, made up of many small companies, may see some brands fail in the competitiveness of the marketplace. It’s difficult to differentiate among the many specialty tea brands, and those companies with tremendous resources, such as Tazo, may squeeze out smaller players."
Mr. Michalik, the Canadean director, does not see consolidation occurring in the market yet.
"I don’t see much acquisition to bolster market share occurring in the near term," he said. "There are a lot of smaller and medium-size companies, and there appears to be room for growth. The Arizonas, SoBes and Snapples will continue to produce, and players like Snapple may up the ante a bit. As the market matures, that situation will probably change."
New products 2005 to date
The following is a sample of product innovation this year in the iced and ready-to-drink tea market:
Jones Soda launched a new line of organic teas called Jones Organics in six flavors: strawberry white, cherry white, berry green, mandarin green, tropical red and peach red. All are sold in a 14-oz glass bottle.
The Pepsi-Lipton Tea Partnership introduced Lipton Iced Tea, a new line of iced teas sold in 16.9-oz and 20-oz polyethylene terephthalate (PET) bottles, as well as 16.9-oz, 6- and 12-packs.The range is available in four flavors: lemon, diet with lemon, green tea with citrus and diet green tea with citrus.
The Joe Tea Co. introduced Joe Tea, an iced tea sold (initially in the Northeast) in lemon and peach flavors in 20-oz glass bottles.
The Republic of Tea introduced a new line of five R.-T.-D. bottled white iced teas – including the first decaffeinated bottled white iced tea. The no-carbohydrate, no-calorie, unsweetened, organic range includes: orange blossom, kiwi pear, decaf, vanilla coconut, pineapple guava and honeydew melon. This line is sold in 12-oz PET bottles.
The Republic of Tea also introduced three of its R.-T.-D. iced teas (ginger peach decaf, passion fruit and raspberry quince) in 96-oz bag-in-box packaging.
HP Hood L.L.C. (under a license from Arizona Beverage Co.) launched AriZona Fresh Choice, a range of chilled iced teas in three flavors: lemon, green tea with ginseng and honey and diet green tea with ginseng and honey. The range is sold in 12-oz PET bottles with full length shrink sleeve labels.
Liberty Imports Inc. introduced Brazil Gourmet Nectar Tea with real juice concentrate and puree available in 16-oz textured glass bottles and four tropical flavors: mango, guava, passion fruit and mango-passion lite.
Coca-Cola introduced Nestea Ice, a new line of rapid cooling iced teas in two flavors: lime iced tea and lemon green tea, offered initially in 20-oz single serve PET bottles.
Source: Canadean Ltd.