Tea has been an integral part of Chinese culture for centuries, and with the emergence of the Ready-to-Drink (RTD) tea segment, it has become a popular beverage among busy Chinese consumers, particularly the younger generation. According to Statista, the revenue in the RTD tea segment in China amounts to a whopping £21.92 billion in 2023, with an expected annual growth rate of 5.94% (CAGR 2023-2027). This translates to per-person revenues of £18.84 generated in 2023.
RTD tea's growth in China is majorly driven by health awareness. Sugar-free, carbonated, and alcohol variants are competing with traditional soft drinks, attracting speciality tea shops despite intense competition. Here are the three discernible trends that have emerged in the Chinese RTD tea market.
Health concerns lead to positive performance for reduced sugar RTD tea
In 2022, more customers have realised the health risks associated with excessive sugar intake from RTD tea, and thus demonstrated heightened concern regarding the sugar content in RTD tea, prioritising this aspect over its refreshment value. As a result, reduced sugar still RTD tea is poised to experience considerable growth, even though regular still RTD tea is expected to experience a decline in off-trade volume. In response to this evolving consumer preference for sugar reduction, RTD tea manufacturers have been introducing sugar-free and reduced-sugar alternatives.
Several Chinese beverage brands began offering sugar-less tea beverages in the early 2010s, a time when this concept and flavour were not widely embraced. Over the years, with continuous improvements from brands and changing customer attitudes, sugar-free tea has become one of the most popular beverages in the market today. For instance, Oriental Leaf introduced its first sugar-less RTD tea in 2011, but only gained popularity in recent years, capturing approximately 1% market share in the whole RTD tea industry in 2022. The brand's core flavours include oolong tea, black tea, green tea, and jasmine tea. Chi Forest, a Chinese brand that focuses on sugar-free and fruity sparkling water, also entered the tea market in 2016, adding erythritol sweetener to make the taste more palatable compared to pure tea while maintaining its healthy selling point. In early 2022, the leading player, Master Kong, launched its reduced-sugar jasmine tea, which has diversified the brand's product range and is poised to fuel rapid off-trade volume growth in 2022.
Innovative flavours emerged in Chinese RTD Tea
In the RTD tea market, customers are seeking more unique and captivating beverages. Thus traditional Chinese material flavoured RTD tea and tea-based alcoholic beverages are capturing the attention of consumers.
To cater to the growing demand for healthy beverage options, some manufacturers have incorporated traditional Chinese materials that are purported to possess various health-promoting properties. Coca-Cola China is actively entering RTD tea and promoting its herbal tea Health Workshop in mainland China in 2022, emphasising its health benefits, with natural sweeteners from Momordica fruit and no additives serving as selling points. Xian Tea (which belongs to Chi Forest), is positioned as a light and healthy plant-based tea drink, using natural plants as raw materials, to provide consumers with a new nourishing solution for their fast-paced urban life. The Xian Tea initial series has three flavours: corn silk, Hangzhou chrysanthemum, and mulberry leaf. Corn silk tea targets "reducing temporary water retention," Hangzhou chrysanthemum flower tea targets "improving vision and clearing excess heat," while mulberry leaf tea targets "controlling blood sugar." Xian Tea received excellent customer feedback, as it ranked at the top in the Tmall repurchase list, best review list and best-selling list
Besides, as a growing number of consumers seek to moderate their alcohol intake, there is also a cross-category innovation by merging RTD tea and low-alcohol drinks. RTD tea with low alcohol content has thus become more popular, expanding the range of occasions for casual drinking. For example, Budweiser has launched the new RTD tea sparkling cider FOR CHILL, containing a mere 3.5% alcohol by volume, which blends jasmine green tea and lemon tea with a low alcohol content, resulting in a pleasing taste. These products could draw attention to tea as a flavour while potentially posing a challenge to RTD tea.
Specialist tea shops anticipated entering RTD tea
Due to projected growth in off-trade volume sales of RTD tea, there is a growing expectation that specialised tea shops and street vendors will venture into the RTD tea market. NAIXUE Tea, for example, acquired an RTD tea product line in 2021. Mass production of bottled RTD tea can result in cost savings and eliminate the need for making products individually by hand, thereby requiring fewer staff to create freshly brewed tea on-site. NAIXUE’s shift from a fresh tea specialist to an RTD tea manufacturer could inspire other companies to adopt a similar business model centred on RTD tea production. Consequently, it is anticipated that more tea shops will enter the RTD tea market in the coming forecast period.
The growing popularity of RTD tea in China is a testament to the country's love for tea and its willingness to embrace innovation in the beverage industry. As the RTD tea market continues to evolve, there will be more opportunities for companies to introduce new and exciting products to meet the changing tastes of Chinese consumers. To seize this opportunity, feel free to contact us for any support and solutions we can provide!
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