Tea in South America: Key Markets and Major Regional Trends
Latin America is typically thought of as a coffee-drinking region, and rightlyso. Latin Americans drank a total of 241 billion cups of coffee in 2015, while only drinking 19 billion cups of tea. Total sales of tea were the second smallest of any region in the world in 2015 (ahead of only Australasia). However, tea is a USD $1.2 billion retail market in Latin America, and it is one that is growing in importance. UK-based market research firm, Euromonitor International, forecasts regional volume growth of three percent annually between 2015 and 2020 and expanding consumption in every large market in the region with the exception of Venezuela.
The largest factor behind this growth is the Latin American consumers looking to tea for health benefits. Tea is widely held to
be a naturally healthy beverage that can help consumers lose weight, sleep better or heal a wide variety of minor ailments, depending on the type of tea consumed. Consumers also appreciate tea drinking as a relaxing sensory experience. Part of the growth is also because of coffee drinking: specialty coffee shops proliferating in the region often have tea selections and are helping to educate consumers about the different sorts of teas available.
Tea Infusions are Especially Popular
On a volume basis, black tea is the most popular tea in Latin America (as it is in most regions of the world) accounting for 70 percent of regional sales. Fruit and herbal teas are a distant second at 25 percent. However, when it comes to value, fruit and herbal teas jump out in front, at 56 percent of regional consumption, while black tea falls to just 34 percent. This is because black tea is viewed as more of an everyday drink, whereas fruit and herbal tea infusions are special occasion beverages for relaxing and de-stressing. As a result, they are priced much higher.
Black tea will see solid volume growth at 3 percent annually during the forecast period, but will lose ground to fruit/herbal as well as green tea, both of which will grow at faster rates. This is because both herbal and green teas are seen to have more of the health benefits that are so appealing to Latin American tea drinkers.
Small But Growing Consumption
Chileans drink the most tea, but Brazilian consumption is growing faster. Chile is the largest regional tea market, with 40 percent of the region’s tea consumption despite having only three percent of its population. It is also a notable outlier as one of the few countries in the region where tea is more popular than coffee. This tendency dates back well over a century, when tea drinking was brought over by British settlers and sailors. Chileans later developed their own version of afternoon tea known as “Las Onces,” helping to entrench tea drinking into Chilean culture. Although it is a relatively mature market, Chile will still be responsible for nearly half Brazil’s growing economic problems have not made much of a dent in the growth of tea yet, although they have benefitted lowercost domestic brands at the expense of pricier imports. This could change however. As tea is not a staple of the Brazilian diet, it is vulnerable to belt tightening should middle-class Brazilians decide to cut back on non-essentials.
While Chile and Brazil will grow the most, Colombia will grow the fastest. Euromonitor forecasts that the size of the Colombian tea market should expand by about 10 percent every year for the near future. While that is quite impressive, it is important to note that tea consumption in Colombia is still small (about on par with Brazil at 11 cup per capita annually) and even with 10 percent annual growth the Colombian market will still only be USD $80 million in 2020. The difference is that unlike Brazil, the Colombian economy is expected to grow at a healthy clip, which means Colombian consumers will find it easier to spend money on non-essentials like tea.
Tea is Becoming More Common
While tea consumption levels may be lower in Latin America than they are elsewhere, that also means that the category has more room to grow than it does elsewhere. Euromonitor forecasts tea to grow five percent annually in value terms and three percent in volume terms from 2015- 20, in both cases the second-fastest rate. While tea is not going to displace coffee or other hot drinks anytime soon, it will grow more common in Latin America every year, and producers who ignore this region of potential tea drinkers do so at their own peril.