The growth trajectory of ready-to-drink (RTD) teas is attracting investments from leading U.S. beverage companies, dominated by new products and range extensions. Innovations from PepsiCo, Coca-Cola and Starbucks could further RTD tea’s connection with iGeneration and Millennial consumers.
The innovation activity reflects the rich potential of RTD tea, which has benefited from consumer preferences for healthy beverages. Many consumers, depending on their ages, view tea as healthier than carbonated soft drinks, coffee, juice and sparkling water.
RTD tea is the leading segment in the U.S. tea market, accounting for approximately 60 percent share, according to Mintel’s report Tea: Spotlight on Bagged/Looseleaf Tea – US. Sales of canned or bottled tea were estimated to reach $4.5 billion in 2016, which is growth of 7.1 percent between 2015 and 2016. Mintel predicts further strong growth for RTD teas.
In 2016, companies were most likely to introduce new products and range extensions. The expanding variety provides consumers with more choice in brand, tea type, sweetness and formulation. Innovation activity suggests that new products or varieties could capture more consumers than packaging redesigns. However, companies can combine packaging redesigns with introduction of line extensions, which was a tactic used by Nestlé with its early 2017 Nestea brand refresh.
Unsweetened and “slightly sweet” products connect with RTD tea consumers who prefer a product with less sweetness. For example, 20 percent of U.S. adults would make a tea that is unsweetened and 32 percent would choose a lightly sweetened formulation. These formulations are more likely to appeal to older RTD tea consumers.