The 73 million Millennials and 61 million members of Gen Z have alreadyreshaped American markets in multiple ways. The tea industry is no exception,and manufacturers and retailers who want to capture bigger shares of thesedemographics need to be very savvy about the preferences of these youngerconsumers.
Millennials are those who were born between 1981 and 1996; Generation Z or “Gen Z” are those born between 1997 and 2012.
British research firm GlobalData told World Tea News thatthe value of the U.S. tea market in 2019 stood at $2.8 billion USD and isexpected to record “robust growth,” at a Compound Annual GrowthRate of 4.8 percent, which will see the category’svalue reach $3.4 billion USD by 2023. “This is driven by newinnovations such as cold-brews and ‘hard-teas’, aswell as healthier varieties, with the inclusion of functional ingredients suchas turmeric increasingly visible on supermarket shelves,”GlobalData reported.
Much of that growth will come from younger consumers. Accordingto the Tea Association of the U.S.A., 87 percent of American Millennials drinktea. Gen Z’s consumption habits are just now being studied, as the youngestmembers are less than 10 years old, and the oldest only in their early 20s.Yet, as research published by BevNET.com revealed, both groupsfavor higher-quality products, often containing botanicals, and are frequentpurchasers of ready-to-drink tea products. The same research also showed thatthese two groups “want clean-label and sustainably and ethically sourced tea,”and are likely to seek out “global tea styles,”such as Kenyan purple teas.
Gen Z consumers reported a definitive preference for green tea,at 38 percent, compared to black tea at 19 percent (GlobalData 2019 Q4 consumersurvey – US). When asked in thesame survey what flavors/infusions they preferred in tea, Gen Z opted for “herbal” and “sweet”equally at 67 percent, while Millennials preferred “fruity” and “herbal” at72 percent and 64 percent respectively. Plain or unflavored options garneredthe lowest responses for both generations. “This ties in closelywith the growing demand for healthier alternatives, further exemplified bypositive social media coverage, ultimately reflecting less demand for classicor traditional flavors among younger generations,”stated GlobalData consumer analyst Carmen Bryan.
Millennials and Gen Z are also driving the demand in boba, milkteas and other non-classic categories. In the trend-setting San Francisco BayArea, retailer Milk Tea Lab, with stores in San Francisco, Alameda, PleasantHill, Concord and San Jose, offers customers their choice of black, oolong orjasmine tea, combined with choices that include grass jelly, handmade boba, andegg or tofu pudding. The San Jose location has begun offering a “hotpot” prepared for groups ofthree in the same type of cauldron used for shabu shabu.
Andrew Chau and Bin Chen started Boba Guys (profiled in World TeaNews in 2016) as a San Francisco pop-up in 2011. Their rapidly expanding bobaempire now includes multiple stores in the Bay Area, Los Angeles, and New York.One of the factors behind their success is the ability to adapt to theirMillennial and Gen Z customers, including innovations such as nitro tea, whichthey introduced in 2016. Their partnership with local Black Sands Breweryenabled them to innovate a process that “creates a cascading beverage thatbrings out a tea flavor that is silkier and sweeter without added dairy orsugar.”
But the demand for traditional teas, often combined with moreextensive background knowledge, can be a market driver as well. Ali Roth, ownerof Berkeley, CA’s Blue Willow Teaspot and wholesale Blue Willow Teas,specializes in Japanese loose teas, and also offers classes in the Japanese teaceremony in her retail outlet. She reports that approximately 30 percent of herregular customers are Millennials or Gen Z members.
“These age groups are much more interested in the story behindthe teas than the specific teas themselves,”said Roth. “Teas’specific origins, the people making them, unusual processing methods are allintriguing factors that, especially younger enthusiasts, want to know.
“Tea trends are also picked up a lot more in this age range somatcha and puerh are very popular right now, as well as some oolongs,”said Roth.
She is also seeing increased demand from younger consumers forlessons in the tea ceremony. “A lot of that is peopleinterested in the history and mindfulness practice, seeing how they can learnfrom the tea ceremony and adapt some of the practices to fit a more moderncontext,” she said.
Although Roth caters to all age groups, she noted that she is “beefingup” her Instagram presence,because it’s such an important avenue for getting messages out to theyounger group of her patrons.
However, as GlobalData’s Bryan emphasized, “The RTD tea segmentremains a threat to the hot-tea market, offering a quicker, easier route to atasty tea drink. Convenience is a deciding factor for many consumers, and ifgiven the choice, they will often opt for an RTD tea/beverage rather thanwaiting the few minutes it takes to brew a cup.”
Bryancited the Twinings release of a new cold-brew flavored tea last year, designedto be infused in a cold bottle of water, and Tea Of A Kind’s “tea set,” which comes withone ready-to-go bottle and three eco refill caps, as examples of the convenientalternatives being demanded by Millennials and Gen Z.
Bryansuggested that the hot-tea market can capitalize on the ideas pioneered by thecoffee industry that have proved so attractive to these demographics, includingpod machines, and emulating the “vibe” of a moderncoffeehouse, which “provide a thirdspace where consumers can sit down, relax and socialize, a huge driver ofout-of-home coffee consumption, while also catering to the on-the-go mentalityof modern consumers.”
Thehot-tea segment of the tea industry, she suggested, “needs a re-brandfor the 21st century, with a greater focus on the experience of drinking, aswell as more complex, substantial flavors to keep consumers coming back formore.”
Allsegments of the industry will profit from close scrutiny of Millennial and GenZ preferences — along with theinnovation and flexibility needed to keep up with those preferences.