The Evolving Landscape of RTD Tea in the US

The ready-to-drink (RTD) tea market in the United States is undergoing a dynamic transformation driven by evolving consumer preferences and innovative product offerings. As health-conscious consumers seek alternatives to sugary beverages, reduced-sugar RTD tea and kombucha are gaining momentum. However, there is duality in the category since many consumers still consider full-sugar products unhealthy. The category constantly balances the appeal to indulgence and leverages its natural and healthy claims. For example, according to our claims and positioning research, the number of products in RTD tea that claim no/low sugar grew by 8.4 percent in 2024, with 25.4 percent of the SKUs having at least one claim related to no sugar content or low sugar content.  In the same year, the number of products with no artificial sweeteners rose by only 3 percent. As the category tries to reinvent itself, we see how established players face challenges while new entrants bring fresh perspectives and offerings.

The State-of-the-Art in RTD Tea

RTD tea was once a stable and resilient category in the USA with very limited impact from outside sources and with acceptable growth rates given its large consumer base and mature status. However, more recently and especially after the Covid pandemic, RTD tea has faced declining sales due to its high sugar content. On the other hand, the demand for healthier beverage options has led to a surge in the popularity of reduced-sugar variants. Consumers are increasingly aware of the negative health implications of excessive sugar intake and are actively seeking products that align with their wellness goals.

Kombucha has also been through a small boom-and-bust cycle. After the drink gained immense popularity with young urban consumers looking for a healthy drink alternative, the category saw some troubling signs when it struggled to maintain growth during the pandemic and saw some declining volumes in 2023. Now, the category has also experienced renewed growth, driven by its perceived functional benefits and expanding flavour offerings, but also a slower unit price growth rate compared to the rest of the drinks segment. Despite facing competition from other functional beverages, kombucha’s unique taste profile and association with gut health and immune support have contributed to its enduring appeal.

Major RTD tea brands have faced challenges in maintaining their market share, with Arizona and Gold Peak being the exception. Arizona has leveraged its strong positioning and continues to drive volume growth by increasing prices slower than competitors, the price of the brand’s signature canned products remains unchanged. Arnold Palmer and other brand extensions to Arizona also give the brand a lot of flexibility to attract different types of consumers. Meanwhile, Gold peak has focused on highlighting its natural ingredients and approach marketing from a minimalistic lens where they just focus on the quality of their product and ingredients. With some big brand experiencing declining sales the competitive landscape has intensified, with new entrants like Seven, The Ryl Co, Green Canvas, Nesalla, Valley Isle, and Vitalitea Hawai’I and many more offering innovative products and targeting specific consumer segments. The success of these smaller brands underscores the importance of agility, creativity, and most importantly, a strong focus on consumer needs. This consumer-centric approach is a key factor driving the success of these smaller brands in the market.

Less Sugar, Fewer Category Lines, More Tea!

As consumers prioritize health and wellness, RTD tea brands are expected to continue introducing low-sugar and functional options. Expanding flavour profiles and experimenting with new ingredients will be crucial for attracting and retaining consumers. Additionally, highlighting the natural health benefits of tea, such as antioxidants and potential immune-boosting properties, can differentiate RTD tea from other beverage categories. However, brands need to tread carefully; we don’t want to repeat the past and repeat the errors kombucha made by restricting category growth to just a single claim or just a niche of consumers. Therefore, an approach that appeals to a wider audience with less sugar, natural ingredients and simple yet powerful need-state positioning seems to be the best approach for RTD tea.

While gut health, led by kombucha, is the main functionality element in the category, there is also potential for RTD tea to expand its positioning into energy and other mental needs states. Despite the potential backlash from high-caffeine content in different beverages, RTD tea’s moderate caffeine levels could position it as a more balanced option. RTD tea can offer a unique energy experience that sets it apart from other caffeinated beverages.

At the same time the lines between RTD tea and other beverage categories are blurring, especially between soft drinks and alcoholic drinks, where hard teas have seen a significant uplift in the last year. Brands like Twisted Tea and many new ones like Jack Daniels Hard Tea are leading to a proliferation of combination products and brand extensions. This trend presents opportunities for attracting new consumers but poses challenges in retaining them. Brands must focus on connecting their brand extensions to their core products and adopting a value growth strategy.

The future of the US RTD tea market is promising, but brands must adapt to the evolving consumer landscape. By focusing on health, flavour, functionality, sustainability, and targeted marketing strategies, brands can position themselves for success in this dynamic market. The potential for growth and innovation in the RTD tea market is vast, and it is up to brands to seize these opportunities and shape the future of the industry.

Erwin Henriquez is senior consultant at London-based Euromonitor International, a global data analytics firm. Based in Chicago, he works closely with in-country analysts in 16 countries in the Americas to ensure top-class research for the drinks and tobacco industry.​ Henriquez produces analysis of the most relevant trends for both industries such as the intersection between functionality and consumption occasions, the impact of regulation on healthy consumption trends and the search for value through premium products.​ He writes about the main opportunities and challenges in both industries to inform clients about strategic opportunities.