Changing Consumer Needs and Opportunities for Tea in Asia Pacific

August 2023

Amidst the cost of living crisis and an inflationary environment, tea in Asia Pacific remains a resilient category, owing to its inelastic demand. Nevertheless, stiff competition from other beverages remains, and this report seeks to analyse the various innovation strategies adopted by tea players to thrive in the long term. This includes responding to consumers’ health concerns, such as stress relief, mental wellbeing and boosting the immune system.

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This report comes in PPT.

Key findings

Commodity prices and labour costs remain a challenge for tea players

While the cost of living crisis has posed challenges to the prices of fast-moving consumer goods, the price of tea has not experience many of the shocks, with price rises typically below the overall rate of inflation. Nevertheless, the surge in commodity prices and labour costs, owing in part to ageing populations, has resulted in an increase in production costs.

Tea players opt for premiumisation to drive value sales

While tea has traditionally been a volume-driven category compared to coffee, rising disposable incomes across Asia Pacific are set to provide opportunities for premiumisation in tea. Furthermore, with the effects of inflation softening, global tea players have the opportunity to seek value growth in Asian markets, while local brands can expand their footprint.

Wellbeing and its evolving meaning for consumers in Asia Pacific provides opportunities for tea players

As consumers prioritise wellbeing, such as lower stress levels, better sleep, a good immune system and physical wellbeing, this provides tea players in Asia with an opportunity to respond to consumers’ health concerns by tapping into health functionalities in their products, such as stress relief, aiding sleep and boosting the immune system.

RTD milk tea remains popular despite concerns over sugar content and obesity

Milk tea is widely popular in Asia Pacific, especially among young consumers, and its presence has spilled over into retail, where ready-to-drink milk tea is widely available. Despite growing concerns over sugar content and obesity, consumers continue to indulge in milk tea, due to its taste, and it is typically consumed after a meal.

Key findings
Tea records the second largest growth in Asia Pacific between 2017 and 2022
Black tea remains dominant in Asia Pacific, but innovations observed in other types of tea
Tea has tended to trail the overall inflation rate
Commodity prices and labour costs remain challenges for tea players
Case study: The crisis in Darjeeling threatens one of the world’s premier teas
Rising disposable incomes offer opportunities for premiumisation in tea
Tea brands use retail e-commerce to promote their premium products
Wellbeing and its evolving meaning for Asia Pacific consumers provides opportunities for tea
Inflation further pushes demand towards calming and sleep-promoting functionalities in tea
Stress relief teas are part of a wider “anxiety economy”
Relaxation and sleep aids are top health claims in tea in Asia Pacific
Health functionalities such as mood, detox and beauty are also addressed by fruit/herbal tea
Immunity-boosting tea continues to remain relevant post-pandemic
Cold brew tea set to gain prominence as tea players expand offering for young consumers
Targeting young consumers is key to sustaining growth in tea
RTD tea remains popular in Asia Pacific, due to consumers’ taste preferences
Tea prices at retail have risen but by less than the average grocery basket
Cold brew and sparkling RTD tea set to gain momentum in Asia Pacific
Saicho’s sparkling tea appeals to mindful drinking while catering to indulgence
Healthy ingredients in RTD tea still hold strong appeal to health-conscious consumers
Fruit flavours in RTD tea continue to shape product variants in Asia Pacific
RTD milk tea dominated by Japanese and Chinese brands in Asia Pacific
Minimal price change observed across top RTD milk tea brands in e-commerce
How to win in tea and ready-to drink tea in Asia Pacific
Key findings

Hot Drinks

This is the aggregation of Coffee, Tea, and Other Hot Drinks.

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