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Sales of ready-to-drink tea and coffee were estimated at $100 billion in 2021 and will reach $153.2 billion by 2027, according to Research and Markets.
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RTD is the fastest-growing segment within a category expected to expand at a compounded annual rate of 7.3% over the next five years.
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RTD is the fastest-growing segment within a category expected to expand at a compounded annual rate of 7.3% over the next five years.
Ready-to-drink tea resumed its growth trend following two years of flat sales during and just before the COVID pandemic. Sales in the United States grew by 5.8% in 2021 to $8 billion, accounting for over 61% of total U.S. tea sales of $13.1 billion in 2021, according to Statista market data supplier. This rise followed flat sales of bottled and canned tea in 2019 and 2020.
The resurgence overcame supply-chain bottlenecks like those that squeezed many other industries in 2021. Sourcing glass and PET bottles as well as labels caused endless worries for bottlers. So did the rising cost of last-mile delivery.
Securing supplies of tea concentrates and powdered tea was, however, not especially difficult for distributors because very large quantities of these durable, compact ingredients were already on hand since they are ordered in big volumes and stored for years. Bottles, on the other hand, are bulky and so are supplied on a just-in-time basis, often from overseas, to reduce warehousing costs. When the pandemic shuttered bottle production facilities, it quickly interrupted the downstream flow of supplies.
Demand was driven by consumers seeking at-home convenience and placing direct orders online.
Sales of ready-to-drink tea and coffee reached $100 billion in 2021 and will rise to $153.2 billion by 2027, according to Research and Markets. RTD is the fastest-growing segment within the tea and coffee category and is expected to expand at a compounded annual rate of 7.3% over the next five years. The versatility and health halo of green, white, and black tea make it the ideal basis of beverages blended with flavor enhancements. RTD teas increasingly feature such inclusions as Gaba, ginger, or lemongrass blended to improve mood or state of mind. Some bottled teas are bolstered with vitamins, minerals, and antioxidants.
COVID dealt iced tea sales a sharp blow by closing diners and cafes in some of the busiest U.S. cities, but now foodservice sales are back on the rise. Refrigerated teas topped $1 billion in sales, and shelf-stable teas accounted for $2.7 billion, up 10%, according to SPINS market research.
The top five RTD brands — Pure Leaf, Arizona, Lipton, Gold Peak, and Snapple — accounted for $3.5 billion of sales in 2021, according to market research firm IRI. Pure Leaf, manufactured by Lipton and PepsiCo, is the category leader, approaching $1 billion in U.S. sales, followed by Arizona at $600 million. In the natural food channel, top seller Honest Tea, owned by Coca-Cola, will be phased out by the end of 2022. Co-founder Seth Goldman reacted to the news by announcing a new brand called "Just Iced Tea.”
Euromonitor beverage analyst Matthew Barry observed that compared to other beverage categories, sales of tea were especially vulnerable to the sales limitations imposed by the pandemic since an unusually high proportion is consumed at food service. Statista estimates that 52% of spending and 5% of volume consumption in the tea segment will be out-of-home by 2025. In 2019, that proportion was 48%. The decline was most evident in iced tea consumed at lunch by customers like office workers in city centers, tourists, and hotel guests.
The fastest-growing niche in RTD tea is spiked, with moderate levels of alcohol similar to those of beers. One example is Hoop Tea, a brand acquired in November by Anheuser-Busch. According to market research firm IRI, the giant beer company's low alcohol and not-so-low alcohol "Beyond Beer" segment captured more than $1 billion in sales during the pandemic.
The Maryland-based Hoop Tea features a line of 5% ABV hard seltzers that include flavors like White Tea Mango, Peach Black Tea, Goji Berry Green Tea, Orange Hibiscus, and Kiwi Berry. Other hard teas include sparkling teas and nitrogen-infused tea with beer-like foamy heads, which are marketed to health-conscious consumers. Twisted Tea, owned by Boston Beer, is the category leader with a market share of 90–95%.
Let’s not forget tea containing cannabis. In July, Boston Beer began selling THC-infused tea in the Canadian market. The brand is called TeaPot, a line of teas sold in 12-ounce (355 ml) cans, each containing 5 mg of tetrahydrocannabinol, the plant’s main psychoactive compound, along with 30 mg of naturally occurring caffeine. Most cannabinoid beverages sold in the past contained only CBD, cannabidiol, which is not psychoactive. In the U.S. states where marijuana use is legal, sales of all types of cannabis-enhanced beverages were $252.9 million in 2021, according to the Brightfield Group.