As executives at Hain Celestial traversed parts of the U.S. talking to shoppers about tea in 2018, they quickly realized their understanding of who was consuming the beverage needed to evolve.
Following a national tour spanning four different markets, the organic and natural products company observed that the drink had caught on with fresh-out-of-college, young adults who would have seemed more likely to settle down with a beer and plate of chicken wings in the evening than a hot cup of its calming Sleepytime tea.
Dubbed internally as the "Sleepytime bros," the discovery prompted Hain Celestial to expand its marketing of the brand to younger consumers while accelerating the expansion of a newer line of wellness teas to keep people in the category as they age. More than four in five consumers drink tea, according to the Tea Association of the U.S.A. Among all age groups, millennials are the most likely to drink tea, with 87% consuming it.
"It was absolutely part of the inspiration [for the new teas] and it kind of made us believers in addressing this demographic with a benefit-forward platform," said Tim Collins, the general manager of Hain's Celestial Seasonings, the New York company's tea business. "We really started to see the opportunity ... that maybe we didn't realize prior."
Celestial Seasonings has been in the tea business for more than 50 years, carving out a powerful franchise with its Sleepytime brand built on herbs, teas, spices and botanicals, including chamomile, spearmint and lemongrass.
But as consumers started searching for teas with more health benefits, Celestial Seasonings launched its Tea Well line in 2019 before expanding it two years later by adding varieties such as Mood Tonic, Sleep with melatonin, and Gut Health, which features a blend of prebiotics, probiotics and fiber.
"The everyday black and green or matcha tea, they will be staples, they will be core. But the expansion is really coming from SKUs that have benefits to them, specifically to the unique need states that someone is looking for."
Chief commercial officer, Hain Celestial
Tea is the second most widely consumed beverage in the world after water. In the U.S. alone, Americans drank more than 85 billion servings of the liquid in 2021, with roughly half of the population enjoying it on any given day, according to the Tea Association of the U.S.A.
Wellness has provided a much-needed boost for a category in need of refreshment. Packaged tea sales have been flat or trending downward in recent years, with the exception of a sharp spike in 2020, according to NielsenIQ data, as more people stayed at home drinking tea and kept a closer watch on their health during the pandemic. U.S. packaged tea sales resumed their downward slide last year, dropping 4.8% in the 52 weeks ending Jan. 29, 2022.
As people curtail their intake of sugary sodas and juices while boosting consumption of more functional offerings, wellness teas with attributes like probiotics, relaxation, energy and immune support have grown in popularity. Celestial Seasonings, Twinings and other tea makers have taken notice.
Packaged teas with probiotics, for example, have risen each of the last four years to nearly $29 million for the 52 weeks ending Jan. 29, 2022. Those with immune health benefits have jumped for three consecutive years to just under $34 million during the same period, NielsenIQ data showed.
After Mark Schiller took over as Hain's CEO in November 2018, Celestial Seasonings started digging deeper into the tea category to study the products on shelves and determine whether they were meeting the needs of the consumer.
Executives poured over marketing data and conducted in-store shopping trips with customers. The company also used virtual reality to watch how people shopped, studying their movements and eye patterns: Did they spend time scanning shelves or did they grab a tea and leave because the selection was too overwhelming? And when they did buy a tea, were they content grabbing a standard variety or did they want something that provided them with a specific benefit?
Collins noted of the 100 best-selling SKUs in tea before the pandemic, fewer than five were launched in the prior eight years. The problem, he said, was that shelves were crowded with brands offering consumers many of the same attributes and flavors; there was little being done to differentiate one brand from another. Most people, unless they were diehard tea drinkers, would quickly grab a box and move on with their shopping.
The company quickly spotted an opportunity. By convincing retailers to reduce the number of the same tea flavor they carried on shelves, it could fill those slots with SKUs that attract new shoppers to the category or increase usage occasions among existing consumers — bringing growth to the broader tea segment as a whole.
"The everyday black and green or matcha tea, they will be staples, they will be core," said Chris Boever, Hain Celestial's chief commercial officer. "But the expansion is really coming from SKUs that have benefits to them, specifically to the unique need states that someone is looking for."
Tea manufacturers are optimistic these trends could provide a meaningful tailwind in growing the category.
The U.S. is a small consumer of tea per capita in the world compared to other countries. It not only trails global heavyweights like Turkey, Ireland and the United Kingdom, but Americans drink 50% less of it than people in Canada. With its inherent health halo and the rollout of more functional varieties, manufacturers hope that U.S. shoppers will naturally gravitate to tea.
Few brands have become as synonymous with tea as Twinings, the 316-year-old company known for its black, Earl Grey and English Breakfast varieties. As interest in functional teas increased, Twinings watched as consumers would buy one of its black teas, for example, and then turn to another brand for their wellbeing needs. Executives decided they had to find a way to keep the customer within the company's portfolio of brands, and they were confident Twinings could tap into its experience with teas and herbals to do it.
Admittedly late to the game, Twinings debuted its own line of wellness teas in 2018 that Mike Currie, vice president of marketing for the company in North America, conceded it wasn't unique or different enough from other offerings already available. The new teas, marketed under the Twinings banner, did little to establish it as a formidable player in the better-for-you space.
"We're not going to succeed unless we go all-in on this," he said. "We learned we can't just come out with something that's a 'me too.' "
Twinings regrouped, relaunching its new line of wellbeing teas last year under the Superblends banner in Sleep+, Energy+, Immune Support+ and Heartea+ varieties.
This time around, Twinings not only touted the basic function of the teas but included "boosts" like vitamins, adaptogens and flavorings to differentiate the brand from the organic and natural manufacturers who are reluctant to include anything in their products unless it came from plants, Currie said. So far, the Superblends appear to be resonating with consumers. The brand has been growing on average 31.2% month-over-month since September and is on track to reach internal sales targets, according to the company.
"We really need to bring something new to the category just to get people to try it," Currie said. "That's going to be where we win in the future, just being able to combine the best of nature and Mother Earth and the best of what man can deliver in terms of flavors and functional benefits."