Why Functional Tea Is Gaining Momentum In The U.K Market

LONDON, United Kingdom  According to a recent report by Technavio, the rising awareness of the health benefits associated with tea are having a positive impact on the U.K’s tea market.

Responding to demands from health-conscious consumers, tea producing companies are actively experimenting with new flavours, as well as functional ingredients like matcha, in order to boost visibility and move with the market, which is predicted to grow steadily at a CAGR of more than 4% over the next four years.

In light of this, Vijay Sarathi, Lead Analyst, Food & Beverages at Technavio Research argues that the market is witnessing a considerable shift towards the consumption of flavoured and functional teas. To date, this trend has largely been driven by innovative upstarts, but the rapid growth factor is now shocking big brands into action.

As new brands have entered the market, identifying the early signs of growing popularity in functional and fortified teas, many have seized the opportunity to adopt premium pricing – which according to Euromonitor’s latest data, is on average four times higher than the price of regular tea.

T plus, a new entrant into the U.K’s healthy drinks market, is one such brand hoping to leverage the growing interest in functional teas, by blending the best of green, herbal and fruit tea with vitamins and functional drinks to create what it’s calling ‘a smarter tea’.

Targeting a new generation of healthy, active consumers, and not just those already engaged with tea, founder, James Dawson believes his brand has what it takes to capture the attention of today’s consumers, because it meets the demands of those wanting more from what they eat or drink.

According to Dawson, every cup of t plus gives the consumer 50% RDA in 9 essential vitamins along with functional herbs and cleansing green tea, priced at £3.69 per box. However, in addition to its health benefits, Dawson says “t plus has also been created to appeal to the non-tea drinker through its natural fruit fusion drinks.” This gives the brand more scope to cross over into the mainstream market.

Because of the movement away from high sugar and high caffeine, particularly in the beverage space in the U.K, there has been an inevitable decline in the sales of black tea, while Dawson says, green and herbal/fruit teas have grown at 20% and 8% year on year respectively.

Driven by a new generation of younger and more informed consumers looking for low sugar and functional drinks to supplement their lifestyles, manufacturers of the traditional ‘builders’ brew have been suffering.

One of the world’s leading manufacturers and distributors of tea, Tetley, have had to revise their portfolio to include ‘better-for-you-options’, in order to attract new customers and boost lagging sales.

Having recently launched a new product range called Super Everyday tea with added vitamins, the company’s latest addition follows the success of its Super Green tea, which has recorded sales of £1.7million to date.

Why Functional Tea Is Gaining Momentum In The U.K Market
Image: Tetley

“This range is really what’s been driving sales and helping to drive the brand,” Andrew Pearl, Director of Customer and Shopper Marketing at Tetley told The Grocer soon after its launch.

Supermarkets and retailers are also responding to the U.K tea industry’s current transformation, helping to boost the momentum of functional teas by stocking a number of smaller brands and ready to drink beverages.

Little Miracles, which is currently available in Tesco and Boots across the U.K, priced at around £2.25 per bottle, is made from a blend of organic tea, fruit juice and ginseng, developed with health and wellbeing in mind.

Targeting a new demographic who are seeking out a natural energy kick, the brand’s Marketing Manager, Jemma Crow, argues that demand for their product is driven by the fact that they are adding value to a beverage people are already familiar with.

However, she does admit that in a market dominated by big brands, standing out can be a challenge.

One British startup tackling this challenge head on is We Are Tea. Using a combination of innovation and design to win over new audiences, We Are Tea is positioning itself as super-premium challenger brand, sourced from artisan producers across the world, but packaged, explained and colour-coded in an accessible, ‘unfussy’ way.

Vocal about their ethical practices, We Are Tea believe it sets them apart from larger competitors, and nutritionist Amanda Hamilton, who recently collaborated with the brand to launch a range of functional teas agrees:

“Like many other sections of the health products market, a fresh brand with an authentic voice is an important differentiator in the trade.”

“Today’s tea consumers are less about the big brands with TV ads and more about connection,” she adds.

Putting a new and unique spin on tea is key for these startups trying to excite and engage consumers, explains Business Executive Sarah Lloyd , Business Development Manager at Amanzi Tea, a modern day tea house based in London.

Creating Amanzi in order to bridge the gap between low quality, cheap teas and very expensive premium teas, while blowing some fresh air into the market, Lloyd says she is excited about the direction the functional tea market is headed.

Why Functional Tea Is Gaining Momentum In The U.K Market
Image: Amanzi Tea

Citing Matcha tea, which has taken the market by storm in recent years, as an example of the potential impact new functional teas could have on mainstream consumption, Lloyd told Welltodo:

“Moving forward, we believe that the opportunities in the world of tea are endless and as such the market will continue to evolve, with new flavour profiles, health benefits, drinks, and ways to consume tea.”

Launched in 2013, backed by a £100,000 investment,Vivid Drinks were the first to bring Matcha drinks to the market in the U.K.

Currently, the leading ready-to-drink matcha brand in the region, the business built a customer base of more than 250,000 in its first year, securing distribution at more than 300 retailers including Waitrose, Boots and Holland & Barrett.

Founder, James Shillcock, believes the product has performed so well in the mainstream market because, aside from its clever use of ingredients, it’s health credentials stack up and stand up to scrutiny.

“Matcha is a powerful anti-inflammatory and is proven to naturally energise (thanks to caffeine and L-theanine),” explained Shillcock.

“However, many other functional drinks have questionable claims and consumers are bombarded with so many fads they are confused,” he added.

While Matcha has benefited from the fact that it is backed up with centuries of trust and trial from consumers in Japan and Asia, to ensure its future success in the functional tea market, for Matcha and its competitors, continued innovation and true points of difference will be key, says Dawson.

The market is set to develop further in terms of functionality, convenience and health benefits, he argues. But, as more big tea manufacturers attempt to change direction towards functional tea, in order to reverse their fortunes, smaller brands will have to position themselves at the forefront of innovation if they are to have any chance of attracting and maintaining a wider customer base.