Healthy growth for tea

Euromonitor International 24 April 2006

Heightened awareness of health issues has boosted consumer demand for tea. Regular publication of medical studies has upheld the perception that tea helps to alleviate suffering from a series of digestive and stress-related complaints, and has further encouraged the burgeoning awareness of the health benefits attributable to tea consumption. Furthermore, the tea category has benefitted from the negative publicity concerning caffeine intake as consumers seek alternatives to coffee. Euromonitor International's Non-alcoholic Drinks Analyst Catherine Mars explores key tea trends for 2006.

Medicinal properties gives rise to purpose-marketed teas

Supported by ongoing medical research findings, green tea and fruit/herbal teas are widely perceived to have medicinal properties, and continue to benefit from widespread consumer concern about healthier living. This factor tends to increase prices, marking fruit/herbal tea, green tea and other teas as added-value products. Consequently, fruit/herbal tea and other tea (which includes rooibos and white tea among others), are forecast to lead value growth in the tea category between 2005 and 2010. In the light of the health and wellbeing trend, Euromonitor International anticipates the rise of purpose-marketed teas such as 'digestive tea' and 'calming tea' which engage consumers and provide a point of differentiation in saturated markets.

Could red and white be the new green?

Looking forward, other tea is forecast to be the next hot tea sector with the highest growth rate in both retail value and volume terms between 2005 and 2010. In a quest to maintain vibrancy within the tea sector, beverage manufacturers are always looking for the next best thing. On this note, there has recently been a surge of interest in white tea, with an increasing buzz about its health attributes, and medical claims suggesting that it contains more antioxidants than any other type of tea. 2005 saw the debut of organic Vanilla Apple White Tea in the US by fruit/herbal brand leader Celestial Seasonings, while smaller UK player Clippers introduced a new line of organic white teas in 2004. The popularlity of white tea can already be seen in the ready to drink tea category. In April 2006 Unilever launched Lipton White Tea with Tangerine and in the same month Cadbury Schweppes introduced a range of Snapple fruit-flavoured RTD white teas. Simiarly, rooibos tea has been making a name for itself in recent years. Growing only in South Africa, rooibos tea (which translates to 'red bush') is naturally caffeine-free (unlike green and white teas) and antioxidant-rich. Euromonitor International expects to see many more rooibos-based teas being launched as consumers become aware of the benefits of this product.

A new generation of herbal teas

We expect growth of the fruit/herbal tea sector to be driven by the introduction of new types herbal teas, besides the usual chamomile and peppermint variants. We expect caffeine-free Chinese herbal teas such as chrysanthemum and honeysuckle to become more mainstream worldwide as consumers seek healthy variants. In late 2005 Unilever launched two new Lipton variants in China combining traditional herbs with functional benefits. Lipton Jingying Tea is made from lotus seeds, chrysanthemum and wolfberry and claims to ease eye fatigue for computer users. The scent of Lipton Xinqing Tea (a blend of jasmine, peach blossom and sweet-scented osmanthus) is said to give a sense of serenity and joy. Other herbal ingredients we expect to see more of in tea include ginger, lemongrass and ginseng.

Scope for black speciality tea

While black standard tea has shown sluggish growth in both volume and value terms over the last five years, black speciality tea was the second fastest growing sector behind fruit/herbal tea. This can be largely attributed to premiumisation in developed markets as consumers' tastes become more sophisticated and they trade up to value added products. In fact this sector is expected to continue to outperform the overall tea category between 2005 and 2010. Indonesia and India are the world's largest markets for black speicality tea in retail volume terms jointly accounting for 40% of global sales. In these traditional tea drinking nations, seasoned tea drinkers are becoming more discerning about the brands and products that they choose and increasingly, they are looking to upgrade to premium offerings including black speciality teas such as earl grey, Darjeeling and flavoured black teas. 2005 saw the launch of various flavours of black tea by Hindustan Lever Ltd and Tata Tea Ltd in India including Brooke Bond Red Label Natural Care with five herbal flavours added to it: ginger, cardamom, basil leaves, winter cherry and glycyrrhiza glabra (liquorice). Tata's Tetley range of black teas includes cardamom, masala and ginger flavours. While Indian spicy black teas are the trend in India, black jasmine tea accounts for the majority of black speciality tea sales in Indonesia. While national preferences seem to dictate which types of black speciality tea are popular in different countries, there is no doubt that there is scope for these teas internationally.

Trading up will boost value sales

In recent years, value growth of tea has been spurred by consumers in both traditional tea markets and non tea-drinking nations upgrading to value-added products. For example, consumers are turning to fruit/herbal and green teas in the West,

branded tea in China, and more expensive black standard tea bags in parts of Eastern Europe. As health and wellness is set to continue to be the most important factor shaping consumption patterns of hot drinks, Euromonitor International expects to see consumers trading up to premium products.

Table 1

Market sizes - forecast period growth - retail value rsp

US$ million (constant prices) 2005-10 % World Other tea Fruit/herbal tea Black speciality tea Green tea Tea Black standard tea Instant tea
Euromonitor International

26.0 19.1 13.8 13.6 9.7 2.1 -10.1