What is RTD tea?
Hot teas and ready-to-drink (RTD) teas are two distinct beverage groups which appeal to different consumers.
Looking at North America, RTD tea competes more closely with the carbonated soft drink category and on the go occasions, with flavour being the crucial driver to RTD tea consumption. This is in contrast to hot tea, which is generally consumed as a morning/afternoon energy source or relaxing evening beverage.
According to Future Market Insights (FMI) the global RTD tea market is expected to reach a value of US$33 Bn in 2022 with overall value expected to reach US$70.5 Bn by 2032, rising at a CAGR of 7.9% for 2022-32.
We take a closer look at 4 global trends influencing innovation in RTD tea:
- Health and wellness
- Digestive wellness
- Cross category innovation
- Sustainability
1. Health and wellness
In RTD tea, health and wellness is the key consumer trend that will drive volume growth and innovation in this category. The influence of tea’s deep-rooted association with routine, and the health halo associated with the consumption of tea, suggest the category is well positioned to maintain steady growth despite ongoing inflationary and cost of living pressures.
It's also worth noting that RTD teas focus on flavour innovation and clean ingredient labels, rather than the explicit functional claims more common in the hot tea category.
2. Digestive wellness
The buzz around digestive wellness continues to grow as consumers and scientific research alike make the link between gut health and overall wellbeing.
Kombucha speaks to this trend and offers functionality that resonates with health-conscious consumers of all ages.
Kombucha and mate will continue to advance the RTD tea sector, supported by trends prioritising health and wellness. Whilst still a relatively niche and premium price sub-sector of the RTD Tea category, Kombucha has witnessed exponential growth since it was introduced to the market in North America in 2013. Western Europe, whilst still a relatively small market will see volume growth of 933% 2013–2022.
Interestingly, a relatively recent trend in this space is hard kombucha. The rising adoption of moderate alcohol content beverages among consumers, especially millennials and younger generations, is driving market demand.
The global hard kombucha market size was valued at USD 40.1 million in 2021 and is projected to reach USD 262.78 million by 2030 at a CAGR of 23.23% from 2022 to 2030.
3. Cross category innovation
Is it possible to entice loyal hot tea drinkers over to RTD tea?
Category crossovers could be the answer, serving as a less-intimidating middle ground to users who may not yet be keen on tea’s flavours and benefits or to move habitual hot tea drinkers across to the RTD category.
RTD tea offers the perfect opportunity for brands to expand consumption occasions. If you think about the last two years, there has been a re-alignment of consumption occasions and places. No longer just a morning pick me up; a calming botanical RTD Tea before bed, or a pre-workout natural green tea energy drink are a couple of examples of how brands can grow engagement by diversifying product lines to appeal to both seasoned tea drinkers and curious novices.
Cross category innovation has seen tea appearing as an ingredient in both alcoholic and non-alcoholic RTD beverages as well as more sophisticated flavour pairings.
Flavour tops motivations for consuming RTD tea according to Mintel. Added functionality represents an exciting opportunity for innovation. However, a recent Mintel survey notes that consumers rank both sweetener type (40%) and calories (30%) ahead of functional benefits (26%) when considering important RTD tea attributes, reminding brands not to lose sight of high-level health priorities.
The premiumisation trend will fuel growth of cold brew tea options. It remains to be seen whether cold brew tea will see the same growth trajectory as cold brew coffee. For now, it remains very niche and represents only 3% of all RTD new product launches globally for the past 3 years. (Mintel GNPD, Sept 2019-Aug 22).
4. Sustainability
Of relevance to the tea category is the enduring sustainability trend which will see brands increasingly challenged for transparency in ingredient quality and sourcing.
Beyond eco-friendly packaging, there is a huge opportunity for brands to win market share by addressing the environmental impact of tea sourcing - being transparent about what is being done to protect the planet and the growers.
Your partner in tea
Whether you’re looking for a fresh brewed flavour in RTD Iced Tea or the delicate top notes in a blended beverage, we can supply the perfect tailored solution across a range of applications in this fast-expanding market. Request a sample or demo today.
Sources:
- Future Markets Insights
- Global Data
- Mintel GNPD