Good reasons for the rise in private label teas

Image courtesy of Firsd Tea

The US tea market is nowhere near saturated, and while multinational and national brands remain popular, private label and store brand tea sales continue to grow. Guest author Jason Walker explores the reasons why PL teas are on an uptick. By Jason Walker

Private label and store brand teas continue to grow by captivating consumers with better quality, great taste and improved value. Private brands and store brand teas maintain their rise because of their ability to capitalise on the:

  • Right Selection – successful private brands combine the best-in-class in flavour and function from across top-selling national brands;
  • Right Fit – private label tea brands maintain consistency with other branded product lines and meet customer expectations for quality and convenience (eg, organic, Fair Trade, “free-from,” non-GMO, etc);
  • Right Value – whether your private brand is premium or discount-focused, the tea brand is competitively and attractively positioned.

Before diving into the weeds, there are a few key numbers to keep in mind about the growth and size of the tea market in the United States:

  • $10 billion tea market by 2020
  • 80 percent of households buy tea
  • 50 percent of Americans drink tea daily, with room to grow.

Room to Grow

The US tea market is nowhere near reaching its full potential. When you look at the per capita consumption levels across countries, there is plenty of room for many countries, including the US, to drink more tea. As it stands, about half of Americans drink tea daily, and at an average of less than a cup a day. Each person in the US consumes about 0.5 pounds worth of tea each year, compared to Turkey (a famous coffee-drinking culture), which consumes about seven pounds of tea per person per year.

American consumers have the spending power necessary to upgrade their tea. Per capita disposable income continues to rise so higher quality and functional teas are becoming preferred over lower-grade, commodity-based teas.

Americans are starting to prefer tea to coffee. Many consumers understand the health benefits related to tea drinking, and they seek the diversity of flavours and variety that teas offer. Millennials, now the largest age demographic in the US, make up 26 percent of all households in America. They are as likely to order a cup of tea as a cup of coffee. In fact, 87 percent of millennials drink tea, but (as consumption levels indicate) they can certainly drink more.

Creating a successful line of teas may start with simple imitation of national brands, but sustained success will require tapping into unmet needs. One of those unfulfilled desires is for green tea.

Zig When Others Zag

The popularity of green tea may appear surprising at first as black tea often claims the lion’s share of the overall tea market. However, recent reports on US market trends (see blog.firsdtea.com/posts/us-tea-market-forecast-tariffs-and-trends) and China’s Increased Green Tea Production (see blog.firsdtea.com/posts/chinas-growing-green-tea-production) point to the rise in green tea capacity and imports into the US. The tide may be turning. It is unclear whether black tea dominates due to consumer preference, or insufficient supply of green tea options — especially for iced tea.

It is inadvisable to put all your chips on the table for green. A better course of action is to create functional blends with a range of base teas, including black, green, oolong, and herbal ingredients. Green tea easily stands at the crossroads of consumer taste preference and functional value — tea drinkers enjoy the taste and appreciate green tea as a health-promoting beverage.

Other types of tea need not be ignored. Oolongs were once over-hyped as a fat-blasting tea that would melt away the pounds. A more moderate message combining oolong tea, healthy metabolism and active lifestyle can leverage the “skinny” associations of oolong without flogging a dead horse.

So, where is private label is moving? Depending on the setting, private and store brand teas face a range of helps and hindrances. The main settings showing private brand tea developments include:

  • Grocery and supermarket store brands
  • On-premise (eg coffee shops).

Private Brands: Grocery

Store brand and private brand teas are on the rise for several good reasons. Store brands are the most important area for the development of private tea brands: some 80 percent of consumers purchase tea from the grocery store. Grocery and supermarkets possess the opportunity to take the greatest advantage of private brand tea because they are best positioned to offer:

  1. Value – quality-for-price
  2. Convenience – community presence, overall access to range of items
  3. Trust – dependable products across segments.

Since nearly all teas (national and store brands) are bought in grocery and supermarkets, these stores hold the best cards to play in terms of leveraging national brands and store brands at the same time. They already move the most national brand tea into the homes of shoppers – they have the data on pricing, popularity of flavours, and tea functions that tea drinkers are seeking. Adding their own competitive store brand to the mix means phasing away shelf space from the national brands as their own store brand gains ground. And this is not an uphill battle – private brands already dominate most national tea brands.

Competition on a grocery shelf is direct and intense, but also allows for more direct comparison. The value claims and pricing are visible side-by-side, so a store brand tea can conveniently display its comparative value over national brands. Supermarkets with successful store brands in other product areas are in touch with shopper preferences so they can leverage multiple items. Their trusted products in other areas of the store give them an advantage in brand trust and familiarity. Their physical store presence in shoppers’ communities can also be an advantage.

Successful store brand teas are part of the bigger picture of a store brand initiative. A recent Information Resources Inc (IRI) report, Beyond Price, Consumers Find Value in Private Brands, points to the momentum successful brands are building with these guiding thoughts:

  • Private Brands Build the Base. Store brands develop loyal shoppers. Between 45 percent and 66 percent of shoppers choose their shopping destination according to the store brand options available.
  • Take Packaging Seriously. 20 percent of shoppers felt that store brand packaging made the product appear to be lower in quality than national brands. Successful packaging communicates value, environmental friendliness, and effectiveness of functional teas.
  • Position for Premium. Millennials may be taking the lead, but most generations are ready and willing to level-up for improved product quality and greater sustainability impact.
  • Imitate and Innovate. While imitation of national brands may get your foot in the door, consumers who turn away from national brands will look to store brands to start leading the pack. For teas, this will mean new and unique flavours and ingredients, distinctive functional benefits and greater social-environmental impact.

Private Brands: Coffee Shops

Coffee shops and other on-premise beverage providers with their own private brand see how their private brand tea creates the right fit across their tea and coffee selection. A selection of mediocre and cheap teabags look out of place beside single-origin, specialty coffees. This is an important fact when tea orders are on par with espresso and iced coffee orders across the country.

The right selection of private brand teas enables coffee shops to offer specialty tea beverages and attract customers during day-parts when coffee is less popular, and tea is a better fit.

  • Jason Walker is marketing director of Firsd Tea North America. Prior to his work with Firsd Tea, Walker served in a variety of roles in tea and beverage business capacities. His experience includes business services for small tea companies, a top-ranked online destination for tea consumer education and co-founding a coffee business. His insights draw upon his diverse range of experience in sales, operations and management in the tea world. He may be reached at: [email protected].

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