Millennials and Generation Z consumers are demanding an upgrade in premium and super-premium tea varieties, and manufacturers are delivering, according to BevNet.
PepsiCo's Pure Leaf is currently the No. 1-selling brand in multi-outlet retailers, according to market research firm IRI, BevNet reported. Sales of Pure Leaf's super-premium Tea House Collection, which is brewed with organic, loose-leaf tea, jumped by more than 96.7% to $50.7 million in the 52 weeks ending June 17.
"Younger U.S. consumers tend to prioritize all-natural and plant-based ingredients," Howard Telford, head of soft drinks research at Euromonitor International, told BevNET. "Both concepts are inextricably linked to what the younger consumer considers to be a 'healthier' beverage and — crucially — linked to what the consumer is prepared to pay more for on the shelf. This supports some of the trading up effect in the tea category.”
The influential millennial and Gen Z demographic groups are demanding more from tea just like they are from a host of other foods and beverages. They want more premium and super-premium varieties, and their expectations of what tea should be are changing, pushing the market to adapt. Generally, these younger consumers want healthier beverages brewed with high-quality leaves and botanicals, containing no artificial flavors, and often sold in ready-to-drink glass bottles.
This trend is similar to what the beer industry has gone through in recent years as consumers shift to lower-calorie beverages featuring no alcohol or lower-alcohol levels, as well as to craft beers and higher-quality premium and super-premium cocktails. Coffee producers also have had to adapt in order to cater to millennials and Gen Z consumers looking for more cold-brew, ready-to-drink and gourmet products — a far cry from the instant coffee popular with some of the older generations.
The tea space may have more room for premium and super-premium entrants since most younger consumers probably haven't been tea drinkers as long as their older counterparts. What may be different between the generations is that millennials and Gen Zers tend to want clean-label and sustainably and ethically sourced tea — plus a "healthier" caffeine jolt — as many of them are used to getting those qualities from high-end coffee and other favorite beverages.
Besides Pure Leaf's popular organic, loose-leaf offerings, Starbucks' Teavana ready-to-drink bottled teas check most of the boxes for younger consumers by offering premium tea leaves — herbal, green and black — along with botanicals, no artificial flavors, and 100 calories in a 14.5-ounce bottle. Teavana — promoted as "Craft Iced Tea" — is sold at Starbucks outlets and is produced and distributed under a partnership deal with Anheuser-Busch InBev, BevNET noted.
Other tea products showing up more often include hybrids such as the Arnold Palmer, which usually contains half iced tea and half lemonade, Thai milk tea, boba or bubble tea and even cheese tea topped with a frothy combination of cream cheese and condensed milk. Sparkling iced tea is already in stores, and Canada's Phivida is making hemp-infused iced-tea blends.
Trends hitting the market are more cold-brew teas and even nitro-infused products, plus shared backstories behind the ingredient sourcing, processing and functional appeal of certain teas. Consumers are likely to be intrigued by Japanese green teas, Kenyan purple teas, Uruguayan yerbe mate and other global tea styles, Euromonitor International's Howard Telford told BevNET.