Reading Tea Leaves: Predictions for the US Tea Ind

For many years tea aficionados have been heralding a tea renaissance that would establish specialty tea as a permanent fixture in American culture. There has been one nagging problem that has so far prevented tea - specialty tea - from claiming a firm position in the 21st century American beverage scene. Until the year 2000, there was very little media coverage focused on tea. Emerging markets flourish with consistent and positive media coverage to help capture the hearts and purse strings of Americans. 2000 and 2001 were banner years for positive tea media coverage, with reports on tea-health connections, fine tea service in four-star hotels and tea' products of every kind. The result was a major increase in sales of specialty tea, especially green.

Iced Continues in Popularity
Iced Continues in Popularity

For serious trend watchers it's worth noting the US tea industry is following a similar evolutionary course to the dietary supplement and natural foods industries during their painfully slow maturation into billion dollar plus markets. Both tea and natural foods are casebook examples of birth-to-maturity marketing cycles. In 1970 the entire US health food industry, including dietary supplements had annual sales of less than $250 million dollars. Thirty years later total sales exceeded $25 billion (foods, beverages, personal care, supplements, organic produce). The US tea industry had sales of under $1 billion in the 1980's, topped $4 billion in the mid 1990's and is postured for a record decade.

As tea entrepreneurs, bankers and market analysts watch an infant US specialty tea industry expand, many question what a mature North American tea industry might look like in the future. Will there be multi-hundred store units offering specialty tea? Will tea ever outsell coffee - at least specialty tea? Will tea ever top ten, fifteen or twenty billion dollars in annual sales? Even the most enthusiastic tea industry participants answer no to some or all of these questions. In the interest of keeping an open mind to far out possibilities, remember that salsa now outsells ketchup in the United States, a fact that twenty years ago was unimaginable by condiment manufacturers. And, the mainstream Robusta coffee industry was caught off guard as sales of specialty coffee topped a billion dollars in the 1990's and now consists of over ten thousand retail units (specialty coffee) in the US alone. In 1990 few Americans had logged onto the Internet, let alone knew why they should. Today there are few people that don't log on daily and the numbers are growing. Fads become trends in months not years, and niche sales segments become mainstream markets sublimely, before exploding with critical mass, momentum and acclaim. The US tea industry is gaining considerable momentum and ready to walk after many years of promising, yet slumbering activity.

Both specialty tea and natural foods were long considered the staples of specific demographic niches before they became mainstream faire. Tea was long considered a "beverage for the ladies" while natural foods were long the lone territory of Hollywood stars, health "nuts" and hippies. Today natural foods (and the dietary supplement industry which spawned from the natural foods industry) are fully integrated into all demographic segments and considered a powerful mainstream American industry. Tea is posturing for this same societal integration and acceptance.

Tea was gulped in the form of commodity grade quality ice tea and mediocre hot tea for decades, before eventually taking on sufficient marketplace momentum to top one billion dollars in annual sales. The giant leap that eventually topped US annual tea sales over four billion dollars were catalyzed by RTD teas and a generation mildly fatigued from too many lattes. The new market drivers will be health and lifestyle related for "boomers" seeking affordable ways to stay fit, relax and socialize.

Hundreds of boutique tea brands, stores, distributors and accessory lines will fuel the growth of the specialty tea industry. Between 2004-2006 many companies will be acquired, go out of business or merge as the large corporate players enter the specialty tea market seriously and with unlimited resources. Much of the creativity and passion that built the specialty tea segment will be redesigned into sleek, sometimes unrecognizable tea products and services. Small enterprises will stay afloat offering ultra-high end gourmet estate teas from around the globe, while mid-size companies will face fierce competition from larger competitors seeking to "commoditize" (lower prices, diversify distribution and control market share) the specialty tea industry.

The 75+ million "baby boomers" entering their middle age years together will focus much more than their parents did on staying healthy and fit. Tea will become the preferred beverage choice of this generation who gulped coffee throughout their twenties and thirties and then turn to tea for its soothing, yet gently energizing effects. Continued health research on tea will further drive millions of new tea lovers into a permanent connection with tea. Some households will abandon coffee, while others will simply cut back and purchase better and healthier grades of specialty coffee, in, addition to their monthly allotments of tea. Tea will become a standard offering at all specialty coffee outlets as operators realize tea is not a drip or blip on the marketing screen. The major "hot" demographic for specialty tea will be women and men between the ages of 35-55.

While a low priority in 2001, eventually Federal regulators will damp down on unscrupulous parts of the tea industry to deal with inappropriate label claims involving disease, health conditions and inaccurate nutritional labeling. As the yogurt, wine, olive oil and other consumer commodities have undertaken for their respective industries, the tea industry will either establish its own regulations (decaffeination standards, how much real tea must be in an RTD to allow the product to be labeled as tea, etc.) and work with FDAIFTC to integrate them into practical law, or regulators will pass laws that may not be practical or beneficial for the 21st century tea industry.

While much of the specialty tea sold throughout Europe and Asia is unflavored, unscented black, green and oolong, US consumers arc conversely flocking towards heavily scented and flavored teas sold at moderate price levels. Limited supplies of finer estate (orthodox) teas will limit the growth of the high-end specialty sellers. These higher grades of unflavored/unscented estate teas -orthodox - will have sharp price increases as demand grows and supplies remain static. While there are superb growth opportunities for orthodox tea estates started to support 21st century market conditions, there will be a gap between 2004-2010 as millions of tea aficionados demand premium tea grades and supplies are tight.

The following is reprinted from the fourth edition U.S. Tea Is "Hot" Reportâ„¢. This indispensable tea industry report provides in-depth information on the U.S. and world tea industries, including statistics, trends, distribution analysis, B-2-B business resources and much more. The report is protected by US and international copyright law. Further reproduction is strictly prohibited.