Natural and organic are among the most desirable features influencing purchasing decisions, according to Euromonitor International’s latest survey. Globally, tea-based beverages, such as naturally healthy tea and naturally healthy ready-to-drink (RTD) green tea are expected to contribute to a large part of the growth from 2016 to 2021, with a net increase at around US$4 billion, according to Euromonitor International’s Health and Wellness data. Ancient wisdom, such as traditional Chinese medicine (TCM) offers a window of opportunity for manufacturers given botanicals fit perfectly well with the word “natural.” Sustainable sourcing is relevant and important for brand owners to have a sustained tea business. Considering tea generates vast amounts of revenue for some developing countries, drinking tea is serving two purposes: personal health and sustainability for the community.

Naturally Healthy Tea Shows Promise

Naturally healthy tea is predicted to generate a net increase of around $3.5 billion from 2016 to 2021, driven by China, India, Canada, the U.K. and Germany. China alone will contribute absolute growth of $1.6 billion over the period thanks to the fact that tea is a native and integral part of people’s lives. Consumption of tea beverages is rising even in coffee-drinking nations. Euromonitor International’s Hot Drinks data demonstrated hot tea growth (2 percent) largely outpaced coffee (-0.3 percent) in retail value sales terms in Germany from 2015 to 2016. This contrasts with the global decline of carbonates by around 0.2 percent and struggles with diet brands. The Coca-Cola Co.’s Coca-Cola Zero grew by 3 percent compared to naturally healthy RTD tea Ayataka’s 10 percent globally from 2015 to 2016, according to Euromonitor International’s Health and Wellness system.

Tea as a beverage has been around for thousands of years; however, RTD tea as a modern and convenient version was slowly accepted by the West during the past decade. It is noted that naturally healthy RTD tea is more commercialized than the hot variant, and a large amount of unpackaged tea continues to be available in China and India. Major naturally healthy RTD tea brands’ sales far outweigh those of naturally healthy hot tea. For example, the world’s No. 1 naturally healthy tea brand, Lipton (Unilever), achieved around $740 million in sales compared to Jiaduobao’s (JDB Group) $5 billion in 2016. However, Lipton naturally healthy hot tea sales are 64 percent higher than its naturally healthy RTD variant. This is largely because hot Lipton is widely available globally, but Lipton RTD tea is a minor brand in major RTD tea markets such as China, Japan and Indonesia, according to Euromonitor International’s Soft Drinks system. In China, domestic players have the local knowledge and developed RTD herbal tea ranges and firmly retained their strong leadership in the TCM beverage space.

Moreover, green tea-based beverages are in hot pursuit. Naturally healthy green RTD tea is set to fetch a net increase of around $800 million from 2016 to 2021 thanks to its recognized health benefits and the improved taste and flavor of green tea. Consumers are adopting a holistic approach to health, wellness and wellbeing. For example, the rising awareness and expansion of Japanese style of diet and the long-life expectancy in Japan has somehow encouraged consumption of green tea. Chinese tea suppliers have also reported a surge in demand for green tea from overseas. Zhejiang Tea Group Co. Ltd., the largest tea enterprise in China, is the world’s leading green tea exporter. Many of the globally recognized consumer brands are sourced from Zhejiang province.

Practically, some natural ingredients, such as fruits and honey, are added to green tea to enhance the flavor. According to Euromonitor International’s Soft Drinks system, The Coca-Cola Co.’s RTD Honest Tea has a wide range of flavors, including green tea, and is marketed as an organic brand, increasing sales by 40 percent compared to RTD Lipton’s 3 percent from 2015 to 2016 in the United States.

Commercialization of Ancient Wisdom: Natural, Healthy, Heritage

Globalization has created more opportunities for cross-cultural exchange and influences between traditions and food and beverages. Traditional Chinese, Indian and Hispanic herbs, beliefs, wellbeing concepts and treatments have progressively spread throughout the West. This situation has translated into a gradual acceptance of and willingness to sample the food and beverages associated with these cultures.

Traditional preparation of TCM is time consuming, thus the modern method and commercialization of TCM is to enable a product to have the same or similar efficacy, but also be convenient and easily consumed on the go. Chinese brands Jiaduobao and Wong Lo Kat are among the successful examples. Chinese companies bank on their knowledge and expertise of local tastes and traditions in terms of certain grains, plant roots and seeds in combination with the TCM concept, to produce modern versions of drinkable plant-based beverages. Chinese herbs, such as goji, are increasingly recognized in the West as a naturally healthy ingredient and will be further commercialized.

While Chinese tourists are flooding the West for luxury goods and selfie-taking, multinationals are also exploring the possibility to produce more local foods and beverages for Asian consumers. PepsiCo has a R&D center in Shanghai with an advanced culinary center and test kitchens to develop food and beverages that satisfy Asian taste preferences.

Sustainable Sourcing of Tea

There is little point discussing food and beverages without touching on sustainable sourcing of the primary ingredients. Euromonitor International’s Ethical Labels system showed major tea companies, such as Unilever, Twinings, Tata Global Beverage Ltd and Starbucks, are associated with NGO’s ethical labels and/or run their own in-house sustainable programs. For example, Unilever’s Lipton is long linked to Rainforest Alliance and Twinings is one of the founders and partners of the Ethical Tea Partnership. The Coca-Cola Co.’s Honest Tea is linked to Fairtrade Certified, and many of its ingredients are sourced from China, but the finished drinks aim for markets beyond China. In some regions, tea is the only agriculture crop produced, and it is relevant to the sustainability of the local community. Thus far, major tea consumers such as China, Japan, Indonesia, India, Turkey and Russia have little awareness of these internationally known certifications. Ethical consumption is growing, but far reaching to the standard in the West.

In many developing countries, awareness of sustainability remains weak. For example, the inclusion of sustainability in the standard school curriculum and the whole educational system is under debate in China, while in the U.K., school children are learning this topic. It will take plenty of resources from the government, commercial companies, NGOs (non-governmental organizations) and consumers to do the ground work to introduce the concept, and raise awareness for both consumers and manufacturers. China’s Zhejiang Tea Group Co. Ltd., for example, has no published CSR (corporate social responsibility) report although it has engaged in producing tea in a sustainable way. Clever marketing, the promotion of sustainable consumption and a possible premium for sustainable products must be conveyed effectively.

Hope Lee, senior analyst of health and wellness, joined Euromonitor International (euromonitor.com) in 1998. In 2000 to 2015, she focused on managing global soft drinks and hot drinks (tea and coffee) research, providing strategic analysis of the global market. In her current role, she writes global analysis on sustainable sourcing of tea, coffee and cocoa, health and wellness product innovation, corporate strategies and market forecast. Her reports are frequently referenced and highly rated by multinational clients.