Chinese tea market driven by the increasing popularity of instant tea

Press release   •   Apr 02, 2013 10:55 BST

Chinese people have the habit of tea drinking. Tea drinking and tea planting in various countries in the world has spread from China directly or indirectly. In 729 AD, tea drinking spread to Japan, while in 1610, Dutch traders bought tea from China, which was the transferred to various European countries. Subsequently, tea has become a worldwide drink.

China is currently the leading producer of tea in the world having witnessed explosive growth in the last five years, growing by approximately 400%. According to estimates China's tea market is estimated to be worth over US$3 billion.

While all tea types have contributed to the growth, the key driver is rise of instant tea segment which is gaining significant popularity because of its convenience.

Instant tea registered a robust growth among all the tea categories, representing an increase of 16% in off-trade volume terms. The changes in modern lifestyle drove the rapid development of instant tea. Younger generations in particular prefer to purchase instant tea owning to convenience and time saving features. Instant tea is also portable and suitable for people when travelling.

Green tea remained the largest tea type in off-trade value terms, enjoying the largest consumer base and the most complete product mix. Meanwhile, Oolong tea and black tea all increased their popularity among domestic consumers due to their longer storage time (caused by deeper fermentation) and features that offer wider health benefits.

China's tea market is highly fragmented with only a few large players and many medium sized and small players. It is important to note that prominent players in the market are local, except Unilever China.

Guangdong Strong continued to lead the category in 2012 and held a 6% share off-trade value sales based on improving brand awareness of U-loveit milk tea and channel advantage in second-tier and third-tier cities. The brand was closely followed by Xiangpiaopiao, which was the second largest player both in instant tea and tea.

Rather than developing new products, manufacturers paid more attention on upgrading tea packaging. Thus, gift box tea gained popularity especially for premium tea. Consumers are placing increasingly higher expectations and requirements on the quality and market positioning of gift tea products, which is pushing tea players to reposition their product offerings by presenting more higher-end, higher-quality, and premium tea products.

The Chinese tea market is expected to see stable but decelerated growth through 2017, with a constant value compound annual growth rate (CAGR) of 7%. This will mainly be led by a slowdown in the growth of instant tea.

Although instant tea is still predicted to be the most dynamic category, growth will be moderate compared to that achieved in constant terms over the past five years.

For more information on the Chinese tea market, see the latest research: Chinese Tea Market

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