May 05, 2012 at 07:01 AM EDT
Keeping Warm: Tea Production in the US Industry Market Research Report Now Available from IBISWorld
Emerging from the long shadow of the Coffee Production industry, the Tea Production industry is beginning to come into its own. Despite rising unemployment and waning consumer confidence - both of which affect the industry - IBISWorld estimates industry revenue will increase at an annualized rate of 3.1% to total $987.0 million in the five years to 2012. Revenue is expected to grow at a slower rate of 1.8% in 2012. Helping to drive the industry's growth is an increased emphasis on healthy living and changing consumer dietary patterns. "Backed by the scientific community, tea manufacturers are marketing the various health benefits of tea consumption, especially tea's effect on lowering cholesterol," says IBISWorld industry analyst Agata Kaczanowska. In particular, herbal teas are experiencing substantial success on the market as consumers increasingly use them for at-home medicinal remedies. Additionally, as Americans have become more health-conscious, they have looked for alternatives to sugar-rich carbonated beverages.
Tea is also becoming more popular thanks to the increasing variety of flavors, strengths and sweeteners. "The high differentiation of teas has enabled the industry's major players to earn high profit margins and perform well despite recessive economic conditions," Kaczanowska says. The high brand and customer loyalty major players command has also contributed to high profit margins and sales growth. In particular, multinational conglomerate Unilever has the distinction of longevity with its Lipton brand. Though following in a distant second, Hain Celestial Group Inc. also commands a decent share of the Tea Production industry with its Celestial Seasonings teas. On the other hand, as members of a growth industry, niche players have had some significant opportunities to serve increasingly fragmented consumer needs, such as the specialty and gourmet segment. Niche players such as Rishi Tea, which specializes in wellness and exotic teas, have been steadily increasing their share of the market. The product lines of the major brands typically comprise mid- to low-value, high-volume branded products. Given the high brand value of these products, these players enjoy a high degree of loyalty and familiarity from their consumers. Smaller players tend to focus on niche markets, supplying specialty products that are of high value and margins but have shorter production runs and, hence, lower volumes.
The Tea Production industry's future is bright. America's aging population, which embraces tea's antiaging and health attributes, will be a strong source of future demand and will drive sales of specialty products, especially for green and herbal teas. In addition, the emphasis on innovation and new product introductions will further stimulate demand over the next five years. Though the major brands will remain dominant, IBISWorld forecasts the industry to become less concentrated as small specialized tea producers continue to sprout up nationwide. For more information, visit IBISWorld's Tea Production in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes businesses that blend and package tea, excluding iced and ready-to-drink tea.
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