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Strained: Lukewarm Sales Put Pressure on Tea Manufacturers

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by Tommy Wu
Feb 17 2020

Unilever Australia has announced a strategic review of its weakening tea division this month, prompting speculation that the T2 tea chain could be put up for sale. According to IBISWorld analysis, consumers are increasingly opting for premium and wellness products, to the detriment of black tea.

Declining black tea consumption

According to IBISWorld research, black tea is falling out of favour with consumers and has been in long-term decline, with other tea varieties and beverages rising in popularity. Newer herbal tea varieties and health beverages like kombucha and turmeric lattes have become increasingly popular as the focus on wellness among consumers has risen.

‘Rising health consciousness has led to consumers becoming increasingly aware of and concerned about their health, leading to a greater preference for health and wellness products. Furthermore, the age profile of tea drinkers has played a big part in the decline of black tea consumption,’ said Mr Wu.

According to a survey conducted by Roy Morgan, tea consumption begins to drop off among the post-baby boomer generation and plummets among Generation Z consumers, with less than a third of this demographic having at least one cup of tea in a given week. The core market for black tea consumption is ageing and drinking less, which has contributed to its long-term decline, while younger consumers have opted for more niche and upmarket tea varieties and health and wellness beverages.

Tea and Coffee Manufacturing industry

The Tea and Coffee Manufacturing industry has grown slightly over the past five years, but much of this growth has stemmed from the rising popularity of café-style coffee capsules. According to IBISWorld, consumers have increasingly sought more premium beverages for in-home drinking.

‘Consumers are increasingly likely to choose premium beverages. In the tea segment, revenue growth has come from loose-leaf teas and premium teas, particularly herbal and functional teas with perceived health benefits that can help with relieving stress and pain, rather than more traditional tea blends and tea bags,’ said Mr Wu.

Increasing awareness surrounding sustainable and ethical sourcing of tea has also led to a growing preference for organic and fair-trade tea from accredited farms, which has supported demand for more premium tea varieties. This trend has helped boost profitability across the industry, particularly among operators offering a range of flavours and varieties.

T2 review

In line with consumer trends, T2’s teas have long been marketed as a premium lifestyle product rather than simply just a beverage. T2 was acquired in 2013 by consumer goods giant, Unilever, with plans to take the brand global. Given where the industry is headed and T2’s focus on flavoured premium teas, Unilever are unlikely to sell T2 before divesting other brands with a stronger focus on more traditional black teas and tea bags.

‘Growth in the Tea and Coffee Manufacturing industry over the next five years is likely to be sustained by rising consumer preference for high-quality tea and coffee products,’ said Mr Wu.

IBISWorld reports used to develop this release:

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647