Spotlight - Ready-to-drink tea showing healthy growth

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As consumers look for healthier alternatives to traditional soft drinks choices, ready-to-drink (RTD) tea has become an increasingly dynamic category. Jeanette Bengtsson of Euromonitor International reports on the some of the key product innovations driving category growth across the major regional markets.

Thanks to its healthy image, ready-to-drink (RTD) tea remains one of the most dynamic categories on the global soft drinks market. The sector has grown by an average of 9% every year between 2001 and 2006 in off-trade volumes, outperforming the overall soft drinks market by over three percentage points.

Health issues have been a key driver behind this growth. Tea has been linked to the alleviation of digestive and stress-related complaints, while the high antioxidant content is said to reduce the risk of heart disease and cancer. Sales have been boosted as consumers, concerned about high caffeine and sugar intake, have sought alternatives to coffee and carbonates.

Ironically, despite being recognised as a healthy alternative to sugar-laden soft drinks, RTD tea is often sweetened with sugar. But reduced sugar and sugar-free RTD tea variants are now becoming more common. Additionally, manufacturers are reacting to consumer demand for value-added RTD teas with fortified products, in order to compete with functional drinks.

Although the majority of RTD tea products currently available on the market are black tea-based, development of the sector is expected to mirror the hot tea market where green tea, fruit/herbal tea and other tea (such as rooibos, white and oolong tea) have been major growth areas in recent years. Green tea and fruit/herbal tea are expected to drive growth in global RTD tea, with off-trade volume sales forecast to reach over 24bn litres by 2011 according to Euromonitor International.

Tea, particularly green tea, is an intrinsic part of Asian life and culture. China and Japan are the most sophisticated and important markets for RTD tea, collectively accounting for almost two thirds of global sales by off-trade volume. RTD green tea is the main driver of growth in RTD tea in these countries, underpinned by positive publicity surrounding its health and weight reduction benefits. Euromonitor expects the introduction of further value-added products will continue to attract consumer interest and influence product development in other regional markets going forward.

Some RTD tea manufacturers in Asia have sought to develop products with more specific functionalities, to differentiate themselves in an increasingly competitive marketplace. These include probiotic RTD green teas, which are supposed to boost the body's immunity from allergies; RTD green teas targeted at diabetics which help to control blood glucose levels; and an RTD green tea fortified with an amino sugar that helps to alleviate osteoarthritis pain. Another innovative Japanese RTD green tea targeted at smokers contains 11 herbs and fruits to help protect the body from the negative influence of nicotine.

While the RTD green tea sector is not as well developed in the rest of the world as it is in Asia, manufacturers are now recognising the impact green tea has had in the hot tea category globally and RTD green tea products are starting to gain momentum. Recent launches in green RTD tea include a line of Snapple Green Teas from Cadbury Schweppes, and Nestea Green Tea from Beverage Partners Worldwide. In terms of functional RTD green tea, The Coca-Cola Company was one of the first movers, launching its V&T green tea drink in Spain in July 2006. The product is trumpeted as a 'cosmeceutical', highlighting its anti-ageing and other health benefits. In late 2006, Beverage Partners Worldwide entered the weight loss niche, launching Enviga, a calorie-burning carbonated RTD green tea.

Although RTD green tea remains the main focus of functional development, Euromonitor
International expects this trend to spread to other types of specialty RTD teas in the future. In fact, functional and fortified oolong and blended teas have already been introduced in Japan, the forerunner in all things functional.
Euromonitor International also believes there is scope to further expand the RTD tea market with product developments such as fruit/herbal RTD tea. At present, the availability of RTD fruit/herbal teas is minimal, and is largely confined to Asia. Given the performance of this format in hot tea, Euromonitor International sees clear potential for sizeable expansion in the RTD fruit/herbal tea segment. Fruit/herbal tea has been a star performer in hot tea, with volume sales increasing on average by 5% between 2001 and 2006.

As is being seen with fruit/herbal tea, Euromonitor International anticipates RTD tea based on other teas, such as red, white and oolong tea, also to drive growth. New product activity in these segments of the RTD tea market over the last year includes the launch of several RTD rooibos teas in South Africa, notably Freshpak Rooibos Ice Tea. With regard to white and oolong tea, development has been seen in the US, where Cadbury Schweppes has launched Snapple White Teas and New Leaf has introduced Blue Tea RTD oolong tea. Looking forward, a significant rise in the number of launches in this area is expected.

Developments in the US, the third largest market for RTD tea by off-trade volume sales, are significant as this powerhouse is expected to lead the way for other non-Asian countries. Consumer preferences stateside are shifting beyond the standard teas towards 'healthy' teas as well as new flavours in RTD tea, and most of the recent US sales growth has come from newer brands that meet these demands.

In addition, new and more exotic RTD tea flavours, such as mango, pomegranate, blackberry, tangerine and passion fruit, are now hitting the US market. These exotic tastes are designed to further appeal to the consumer who might have stayed away from traditional RTD teas due to their bitterness. White tea is the latest 'in' tea type in the US, largely due to growing public awareness of the high levels of cancer-fighting antioxidants it contains.

As consumers develop more sophisticated tea-drinking habits, the capacity for premiumisation increases, which means that value growth in RTD tea should broadly keep pace with growth in volume terms. Manufacturers worldwide are sure to tap into the strong trend for trading up. Functional RTD teas offer significant potential for premiumisation, as manufacturers look to use anti-ageing, weight loss and other health claims to leverage higher prices.

Overall, the health and wellness trend is set to have a positive impact on RTD tea, with global off-trade volume sales forecast to grow at an average rate of 6% annually between 2006 and 2011 according to Euromonitor International. However, growth is forecast to decelerate over the next five years, suggesting growing maturity in the sector globally. That said, market maturity is likely to spur further innovation by manufacturers.

Source: Soft Drinks International

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