Tea's healthy image keeps its market growing even in recession

Packaged FactsNov 6 2009

If the recession has proven anything, it's that American consumers are willing to pay a premium for healthy products. Due to its compelling image as an innovative yet accessible beverage that is good tasting, good for you, and budget friendly, tea has remained profitable, with 2% annual gains in 2008 and 2009, according to "Tea and Ready-to-Drink (RTD) Tea in the U.S.: Retail, Foodservice and Consumer Trends," by leading market research publisher Packaged Facts.

Over the next several years, tea's health halo will gradually return the market to the double-digit gains it experienced prior to the recession, particularly as additional research solidifies tea's healthful and functional properties. Packaged Facts estimates the U.S. market for tea sold through retail and foodservice channels at $9 billion in 2009, forecasting a 5% increase in 2010. Steadily rising annual percentage gains are projected through 2014, when growth will reach 10% and sales will exceed $12 billion.

Consumers also flocked to tea due to the high quality of the beverage. Many new product introductions in the tea category include exotic flavored teas, tea and fruit infusions, and premium loose tea bags that are at the forefront of innovations in both the retail and foodservice arenas.

"Tea's healthfulness is still, of course, the beverage's primary appeal, but in the current market environment consumers are increasingly recognizing good quality, customized tea as a comforting, affordable premium beverage splurge," says Don Montuori, publisher of Packaged Facts.

Additional factors driving overall market growth will be the greater involvement of international beverage behemoths including Coca-Cola, PepsiCo and Nestlé; a greater emphasis on tea in the foodservice channel via expansion of specialty brews into restaurants of all kinds, as well as coffee/tea chains à la Starbucks and Peet's Coffee & Tea; hybrid tea beverages crossing over into competitive categories including sparkling water, energy drinks and superfruit juices; and the additional penetration of RTD teas into convenience channels including convenience stores and alternative outlets such as bookstores.