Exploring the rise of premium and functional tea

10 Sep 2019

Tea enjoys a strong health halo among consumers all over the world, and the market for premium tea-based beverages is on the rise. Where are the opportunities for further growth?

The well-documented health benefits of tea, especially its antioxidant properties, have led many western consumers to include more tea in their daily routine – and this trend has converged with growing consumer interest in less sugary beverages. Sales of both iced tea and hot tea are on the rise, with new premium concepts including cold-brewed tea, single-estate artisanal tea, and sparkling tea.

Exploring the rise of premium and functional tea
Both hot tea and iced tea have gained in popularity

Perception of tea as a healthy beverage in general is a driving force for the market, but functional ingredients also are gaining in popularity. Market research organisation Mintel has highlighted several functional categories for tea, including for relaxation, energy and gut health. While probiotic teas accounted for less than 1% of tea launched in the year to July 2018, it is a rapidly growing sector, and there may be room for further growth, considering the more general popularity of foods and drinks for gut health. According to Mintel, global launches of probiotic products rose 11% to July 2018, compared to 1% the previous year.

New botanicals and even vegetable ingredients are an important area for premium teas, with CBD oil emerging as one of the trendiest ingredients. Whether it has staying power will largely depend on the regulatory environment, which currently is a major challenge for the ingredient across food and beverage categories in Europe, while legalisation in the United States has led to a huge jump in NPD. Meanwhile, other functional ingredients gaining in popularity include ayurvedic and adaptogenic blends using moringa, ashwagandha, maca and fungi.

Other ingredients, like yerba mate, ginger and elderflower are also on the rise, with a focus on flavour and the naturalness of these ingredients, rather than the promise of any particular health effect.

Suppliers of natural ingredients and extracts have responded to increased demand. For example, Sensient Technologies, has a range of natural and organic extracts from herbs, spices, fruits, flowers, hops and vegetables, among others. It promotes a natural, mild extraction technique that allows manufacturers a clean label positioning. The company says one of its most popular extracts is a combination of compounds from ginger root, extracted using carbon dioxide at low temperatures.

Meanwhile, Naturex supplies a range of flavouring extracts from more than 250 botanical ingredients and recently extended its range of floral-derived flavouring extracts to include extracts from rose, hibiscus and Brazil cress. The company has said floral flavours tend to appeal to consumers seeking out natural health benefits.