Taiwan's Burgeoniong RTD Tea Market

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Features

While Taiwan is famous the world over for its superb high-mountain oolong teas, modern bottling and packaging technology has also popularized the ready-to-drink (RTD) tea segment.

According to the Taiwan Beverage Industries Association, Taiwan produces 14,000 metric tons of tea per year, 45% of which is used to make RTD teas. Taiwan also imports 31,000 metric tons of tea per year, 80% of which is used in RTD teas. The total value of the RTD tea market comes to approximately $800 million ($TWD25 billion) per year.

According to Howard Chang of Taiwan’s Ministry of Economic Affairs, the largest corporations producing RTD teas in Taiwan are Unipresident Corporation, Tingyi Holidings (Kang Shifu), Hey Song Corporation, Tai Sun Corporation, Vitalon Corporation, and Swire Bev (Coke, Taiwan). According to Nielsen Research, Tingyi and Uni-President had 54% and 24% of the market share of RTD tea in Taiwan by value in 2013. Although the top players possess a large portion of the market, there is still opportunity for innovative brands in Taiwan to develop.

Production trends

Taiwan’s most popular RTD teas are black and green, and are sold widely through an extensive network of convenience stores like 7-11 and Family Mart, grocery stores like Matsusei, as well as other retail outlets. According to Neilsen, as of December 2013 there were 4,922 7-11 locations in Taiwan, and 2,901 locations for Family Mart.

The majority of local tea used in RTD production is grown in central Taiwan’s Nantou county, neighbor to Chiayi county, which is home of the famous Alishan Oolong tea. The highest points of production in Nantou level out around 2,625 feet (800 meters) above sea level, the weather is warm for much of the year, and the soil is highly fertile. As a consequence black and green teas can be grown cost effectively for long portions of the year, and are well suited to RTD tea production.

According to Deng Chao Su, section chief of the specialized crop section in Taiwan’s Council of Agriculture, RTD producers in Taiwan also source teas from nearby Southeast Asian countries, with more than 22,000 metric tons of green and black tea imported from Vietnam alone for use in RTD teas.

Taiwan, a global hub of OEM and ODM production in the consumer electronics and medical devices industries, is also expert in OEM tea packaging and bottling. Taiwan Hon ChuanGroup, headquartered in Changhwa, Taiwan, bottles and packages RTD teas for major brands like Coca-Cola and Pepsi, and distributes in seven countries across East and Southeast Asia. It is the largest OEM RTD tea company in Taiwan, with a market cap of nearly $446 million ($TWD14 billion).

Consumption trends

The older generation of Taiwanese tea drinkers tends to favor loose leaf tea over RTD teas, though as the younger generation increasingly prizes international corporate jobs over traditional manufacturing and production jobs, they seek out convenience.

A modern corporate lifestyle comes with all of the health concerns associated with a sedentary office lifestyle. As such, marketing efforts for RTD teas focus on tea as an aid for controlling body weight, improving digestion and circulation, and promote RTD tea as a healthier alternative to sugary soft drinks.

Milk tea is consumed all over the island of Taiwan, and Su of Taiwan’s Council of Agriculture estimates that the market for milk tea in Taiwan is around 40% of the size of the RTD tea market. Milk tea, and variations of milk tea mixed with fruit, jelly, tapioca bubbles, sweet beans, and other flavors offer consumers a wide variety of choice for very affordable prices. Uni-President took 62.1% of the RTD milk tea market in Taiwan in 2013, while Tingyi took 19.4%, showing Uni-President’s extensive market penetration across the island. 

Consumers in Taiwan are gaining increasing familiarity with tea from India and Sri Lanka through the RTD and milk tea segments. As Taiwan continues to import green, black, and Oolong teas for use in RTD and milk teas, there may be increased consumer curiosity about higher-end loose leaf teas from outside the borders of Taiwan, as well.

The future for RTD teas

Food and beverage products from Taiwan have a high level of perceived value in mainland China, where Taiwan is perceived as clean, safe, and healthy. The demand for imported tea in China has grown across all market segments. Rajiv Lochan, of Lochan Teas, exported 500,000 metric tons of black tea from India to China in 2012, and expects that the total export volume to China will continue to rise in coming years. With the language and cultural similarities between Taiwan and mainland Chinese consumers, RTD brands in Taiwan are also positioning themselves to increase exports to China.

Tea has  always played  an important historical and cultural role in Taiwan. With more and more young people in Taiwan shifting out of traditional sectors into corporate jobs, consumers continue to prize RTD teas for their health and convenience. Major players in the RTD tea market in Taiwan will continue investing into convenience store chains like 7-11, Family Mart, Hi-Life, and other retail outlet in order to increase their market share.

As exports of RTD tea to China increase, and the RTD and milk tea segments grow within Taiwan, there will be opportunity for producers in South Asia and Southeast Asia to increase sales to Taiwan. Consumers in Taiwan may favor local tea, though as Taiwan continues to develop and internationalize, consumers are becoming increasingly willing, and curious to drink imported teas.

Austin  Yoder  is  co-founder  of  Tearroir, an international tea brand dedicated to bringing global teas to curious people. Learn more about Tearroir at Tearroir.com.