Ice adds spice to tea and coffee market

Related tags Iced tea Coffee Tea

Tea and coffee are the staple beverages drunk by thousands of
people the world over but despite its longevity, the category is
far from stagnant. This is because of the popularity of iced tea
and coffee, sales of which are expected to continue to grow in the
next few years, according to Canadean.

Tea and coffee are undergoing something of a revival in fortunes at the moment, largely because of the success of the iced variants which have been launched onto the market in recent years.

Drinks industry analysts Canadean claim in a recent study that the success of iced tea and iced coffee is due in no small part to the fact that they have a broad appeal to a wide range of consumers in a small number of markets.

Canadean's report shows that worldwide consumption of iced tea and coffee is expected to have risen more than 9 per cent in 2002, and the company is predicting an average annual growth rate of 7 per cent over the medium term, taking volume to nearly 25 billion litres by 2005.

This rate of expansion, which Canadean said was on a par with that for packaged water but more than three-and-a-half times that for carbonates, reflects the products' appeal to consumers with an interest in a healthy lifestyle in all age groups.

"Manufacturers have made the most of the opportunity by utilising convenience packs, investing heavily in brands, developing new marketing channels and innovating in product segments,"​ said Canadean. "However, despite their success both beverages rely on relatively few national markets, the top ten accounting for 90 per cent of sales."

Japan, which in both volume and per capita terms is the biggest single consuming nation, currently spearheads the Asian regional market - the world's largest. But although Asia is expected to contribute almost 90 per cent of the world's volume growth for the next three years, according to the report, half of this will be accounted for by China compared with little more than a fifth by Japan. In China and countries with a strong Chinese cultural influence, ready-to-drink oolong, green and black teas have been making strong inroads.

A further third of sales are taken up by North America and West Europe which between them will add more than 9 per cent of the incremental volume to 2005. Meanwhile in spite of strong growth rates in the Central and South America and Middle East/North Africa regions, per capita consumption has yet to reach half a litre and is not expected to rise. The negative influence of weather dependency, premium pricing due to the prevalence of imports and local taste preferences will all impact the market there and keep the opportunity for growth to a minimum.

As far as brands are concerned, Unilever's Lipton Iced tea and Nestle's Nestea and Nescafe are the strongest international players, but there is strong regional competition from companies such as Coca-Cola in Asia and Cadbury Schweppes in Australia and the US. The remainder of the industry is heavily fragmented since the success of the category has encouraged a stream of entrants, many of them major players from other sectors.

Canadean​ said it expected tea sales, which currently account for more than four-fifths of the category volume, to further expand as the industry develops flavours and varieties. However, most of this growth will come from existing markets as consumers in new markets will take time to discover the product. The analysts stressed that it was vital for strong brands to ensure that the category is not damaged or even destroyed in some countries by cheaper introductions, especially distributors' own brands.

As for coffee, well, its opportunities for growth are fewer than those for tea, according to Canadean, but again strong branding and quality products will be essential if the category is to grow in the next few years.

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