Innovation, flavours & healthy options fuel RTD tea sales
Pure Leaf continuously introduces new flavours and blends, such as its Pure Leaf Herbal Iced Tea Collection. Image credit: Pepsi Co
Convenience may be a catalyst for RTD tea sales, but the category in North America is also benefitting from continued innovation, expanding flavours and, of course, meeting consumer wellness demands for healthier options. By Shambhu Nath Jha
In 2023, the global market for ready-to-drink tea is assessed to hold a valuation of USD $34 billion, with a projected growth trajectory at a compounded annual growth rate (CAGR) of eight percent from 2023 to 2033. Rising consumer preference for convenient and on-the-go beverage options align with the hassle-free nature of ready-to-drink teas. As per global market research firm, FactMR, the market is segmented by product type (herbal, black tea, green tea, others), by sales channel (direct sales, indirect sales), and by region (North America, Europe, Latin America, South Asia and Oceania, Middle East, and Africa).
RTD tea sales in North America
In North America, the ready-to-drink tea market holds a significant portion of the total market share, amounting to 32.2 percent, and is projected to experience a CAGR of 5.6 percent. In North America, convenience and health-consciousness drive the demand, with consumers valuing portable, on-the-go options and seeking beverages with perceived wellness attributes.
Moreover, increasing awareness of health benefits associated with tea consumption, such as antioxidants and potential stress reduction, has driven health-conscious consumers towards these products. Besides this, innovations in flavours and packaging formats further attract a broader consumer base.
Ultimately, the trend towards natural and organic ingredients in beverages has led to the development of healthier ready-to-drink (RTD) tea options, appealing to a segment seeking more wholesome choices. The RTD market in North America has experienced substantial growth and continues to evolve due to other factors such as:
- Shift away from sugary beverages: Concerns about sugar consumption and its impact on health have led many consumers in North America to opt for RTD beverages as an alternative to sugary sodas and juices. Moreover, the rising rates of obesity in North America have drawn significant attention from healthcare professionals, policymakers, and the general public. Sugary beverages, including sodas and fruit juices, have been identified as a major contributor to excess sugar and calorie intake, making them a target for reduction.
- Diverse flavour profiles: North America October 2023 is a melting pot of cultures and ethnicities, and as such, it boasts a highly diverse population with varying taste preferences. People from different backgrounds have grown up with distinct flavour profiles and culinary traditions. RTD brands recognise this diversity and seek to tap into the various regional and cultural tastes prevalent in the market.
- Premiumisation is on the rise: The concept of premiumisation in the North American RTD beverage market refers to the growing trend where consumers are willing to pay a higher price for RTD options that are perceived as higher in quality, and uniqueness, and often associated with artisanal, small-batch, or organic production.
While TAZO is known for its hot tea offerings, it has also ventured into the RTD market. Image credit: Unilever
Forecast trends for North America
The evolving landscape of the RTD tea market in North America reflects consumer preferences for health, sustainability, personalisation, and diverse flavour experiences. It is important for businesses in this industry to stay attuned to these trends and adapt their strategies accordingly.
Consumers in North America are expected to seek out RTD teas that offer functional benefits, such as probiotics, adaptogens and added vitamins or minerals, to support overall health and wellness. Functional ingredients like probiotics for gut health, adaptogens for stress relief, and added vitamins or minerals for overall wellness are expected to be sought after.
Moreover, as the beverage landscape evolves, RTD teas may overlap with other categories like functional beverages, herbal tonics and wellness drinks. This trend suggests that consumers may have access to a wider range of beverage options with diverse health benefits. The boundary between traditional RTD teas and other beverage categories (functional drinks, herbal tonics, and wellness beverages) is expected to blur, leading to a greater variety of hybrid products.
RTD teas with specific health-enhancing properties, such as those promoting gut health, reducing stress or boosting immunity, are anticipated to gain popularity among consumers looking for functional and health- conscious beverage choices. Moreover, caffeine- free and low-caffeine options address the increasing demand for beverages that provide an energy boost without the stimulating effects of caffeine. RTD teas with low or no caffeine content cater to consumers seeking alternative options to high-caffeine beverages.
RTD tea companies are anticipated to introduce a wider range of unique and exotic flavours, as well as explore innovative brewing techniques and herbal infusions to cater to diverse consumer preferences. It lends into consumers’ desire for diverse and exciting taste experiences. Advancements in brewing techniques, including cold brew, nitro-infusion, and tea concentrates, are reshaping the RTD tea market by offering consumers a wider spectrum of taste experiences and product choices. These innovations cater to the evolving preferences of consumers who are seeking unique, high- quality, and customisable RTD tea options, contributing to the continued growth and diversification of the RTD tea industry.
The RTD tea market in North America, although growing, faces several challenges that industry players need to address to maintain and expand their market share. Some of the key challenges include:
- While RTD teas are often marketed as healthier alternatives to sugary soft drinks, they still face scrutiny over their sugar content, artificial additives and preservatives. Consumers are increasingly health-conscious, and brands must respond by offering low-sugar, natural ingredient options and transparent labelling.
- Environmental concerns, such as plastic waste and the carbon footprint of packaging and transportation, are critical challenges. RTD tea brands are under pressure to adopt sustainable packaging practices, reduce plastic usage, and implement eco-friendly distribution methods.
- Many consumers are not fully aware of the benefits of RTD teas, including the potential health benefits associated with certain types of teas (eg, green tea) and functional ingredients (eg, antioxidants). Brands must invest in consumer education to highlight the value and nutritional advantages of their products
Starbucks’ Teavana Craft Iced Tea line focuses on high- quality, handcrafted tea beverages. Image credit: Starbucks
An intensely competitive market
The RTD tea market in North America is characterised by intense competition among a diverse range of players. Established beverage giants, as well as smaller regional companies, vie for market share in this segment. Key companies in the market are Danone, Harney & Sons Fine Teas, Nestlé SA, Snapple Beverage Corp, Starbucks Corporation, Beam Suntory, Inc, Tata Consumer Products Ltd, The Coca-Cola Company, The Republic of Tea, and Unilever Plc.
- Key players often focus on product innovation and diversification, introducing new flavours, formulations, and packaging to cater to evolving consumer preferences. Moreover, new flavours and formulations cater to diverse consumer tastes, ensuring that the product portfolio remains fresh and appealing. Innovative packaging not only enhances product shelf appeal but also improves convenience, such as resealable bottles or eco-friendly packaging options.
- Competitors in the market focus on marketing strategies that include social media engagement, celebrity endorsements, and health-focused campaigns to differentiate brands and attract a wider audience. Given the growing consumer interest in health and wellness, many RTD tea brands emphasise the health benefits of their products through advertising campaigns. This includes highlighting ingredients like antioxidants, vitamins, and natural ingredients that promote well-being.
- Distribution networks also play a pivotal role, with companies leveraging both traditional retail channels and e-commerce platforms to ensure widespread availability. The rise of e-commerce has revolutionised the way consumers purchase beverages. Many RTD tea brands establish an online presence through their websites or partner with online retailers to provide easy access to their products. This is especially important for reaching consumers who prefer shopping online or those in areas with limited physical retail access.
Some examples of the leading brands in the North American market:
- Pure Leaf, owned by PepsiCo: offers a wide range of RTD tea products. It continuously introduces new flavours and blends, such as its Pure Leaf Herbal Iced Tea Collection, featuring unique herbal infusions like hibiscus, chamomile and peppermint.
- Teavana Craft Iced Tea (Starbucks): Starbucks’ Teavana Craft Iced Tea line focuses on high-quality, handcrafted tea beverages. It has introduced unique and innovative flavours, including Teavana Craft Iced Tea Pineapple Berry Blue Herbal Tea.
- Tradewinds (NestléWaters): Tradewinds, a brand under Nestlé Waters, specialises in specialty RTD teas. It has introduced unique flavour combinations like Tradewinds Slow Brewed Iced Tea with Honey and Ginseng.
- TAZO (Unilever): While TAZO is known for its hot tea offerings, it has also ventured into the RTD market. Its bottled TAZO Tea Latte range offers consumers a unique and convenient way to enjoy specialty tea beverages.
