Reinventing Tea Retail: Tea Discovery Online Is a Top Priority in 2022

Consumers cherish tea. Steadfast brand loyalty rescued niche sellers even as the pivot to online and direct-to-customer transactions nailed the coffin on mall-based tea chains.

Here is what thriving retailers have in common:

1. They are omnichannel with high levels of engagement.

2. They are experiential in both the virtual and physical worlds.

3. They market themselves as beverage specialists, not as wall-of-tea vendors, often promoting health and wellness drinks and botanical blends.

Three years of the COVID-19 pandemic has reset tea consumption at brick and mortar restaurants and cafés, initially reinforcing traditional expectations of comfort and warmth but evolving to disrupt sit-down dining out-of-home permanently. Sales of tea in food service now account for less than 20 percent of global tea industry sales. For the first time in decades (beginning in 2019), demand globally is outstripping supply, early indication prices will increase.

“Tea in the United States was uniquely vulnerable to Coronavirus (COVID-19) since an unusually high proportion of it is consumed at foodservice,” writes Euromonitor beverage analyst Matthew Barry. Statista estimates that 52 percent of spending and five percent of volume consumption in the tea segment will be out-of-home by 2025. In 2019, that proportion was 48 percent. In the United States, the decline is most evident as iced tea at lunch occasions plummeted along with tea served as celebratory occasions in tearooms, tourist locations and hotels.

RELATED: Did you get your copy of the World Tea white paper, “2022 Tea Industry Trends, Issues & Innovation”? The white paper – which was published just before the recent World Tea Conference + Expo – features the article you’re reading now, as well as others like it. To download the free paper, CLICK HERE.

Tea largely missed out on the rapid growth of restaurant-quality food delivery, curbside service and take-out. Beverage service in downtown offices, sales at transit terminals and inner-city stands remain below pre-pandemic levels. Retail vendors offering afternoon tea at tourist locations, iced tea at sports venues, and food trucks selling teas and juice lost sales to homebound tea drinkers purchasing online or near-to-home suburban locations. COVID-19 also reversed the sales growth of tea as a breakfast alternative. Independently operated tearooms with few seats and limited financial resources closed, changed owners or pivoted online. Tea is consumed more frequently at home, and with food inflation rising and costs driving up menu prices, it is clear that in 2022 tea retail will not return to the familiar patterns of yesteryear.

The upheaval in food service is manageable. Fears keeping diners away from cafés are diminishing. Out-of-home tea sales in COVID-ravaged India already exceed pre-pandemic totals. Restaurant consolidation is underway, with investors anticipating a return to pre-pandemic spending by 2023. Tea rooms, tea cafes and tea bars should focus on efficiencies here and now. The immediate priority is to recuperate and resume growth at a sustainable pace. Retailers that survive will see greater demand, better prices and fewer competitors.

Packaged Goods Retail

According to IRI, a Chicago-based market research firm, sales of packaged tea declined six percent in 2021 to $1.4 billion. The price per unit increased ($0.07 to $3.53) in step with inflation. Unit sales of tea bags and loose leaf tea declined 7.8 percent. In contrast, sales of canned and bottled teas grew 4.4 percent to $4.3 billion, but here, too, unit sales declined 2.8 percent. The most resilient category is refrigerated teas (except kombucha), where sales increased 7.5 percent, with unit sales rising by 5.5 percent. Sales of kombucha were flat, and unit sales were down 1.7 percent. (These figures total sales at grocery, convenience, drug, mass-market department stores, club and dollar retailers for the 52 weeks ending Dec. 26, 2021.)

HTeaO, an iced tea drive-thru in Amarillo (West Texas), combines drink-at-home convenience and value that drive sales of refrigerated teas. The franchise chain, founded in 2009, has expanded rapidly despite the pandemic. “We’ve got thirty-two stores open, thirty-seven in some phase of construction, and another one hundred and fifty in development,” founder Justin Howe, president and CEO for HTeaO, told Texas Monthly.

HTeaO resembles a convenience stop with 26 fresh brewed sweet and unsweetened iced tea flavors mixed, garnished or blended with cut fruit. It’s a fun place to hang out with “happy hours” that draw crowds of patrons rewarded with loyalty points and complimentary tea. The focus is refreshment with pebble ice machines, Tik Tok-inspired recipes, and gallon jugs to go. Twelve-ounce cups are nowhere to be found in these shops. Start with 24 ounces, top off a 44-ounce cup with pineapple or cherries or choose the contractor’s favorite 51-ounce (1.5-liter) Peach-ginger or Sweet blueberry green iced tea. Buy a $3.50 tankard or pay $19.99 for four gallons to take away. Shelves are stocked with healthy snack options and a full line of YETI merchandise. Construction workers arrive throughout the day to fill their on-site coolers with tea and fill five-gallon containers of double-pass reverse osmosis water. Kids mix and match at the self-serve fountain.

Momentum Builds Online

Online sales show great promise, but garden-owned and direct-to-consumer brands are crowding a minimal marketplace for premium tea. Worse, automated comparison shopping suggests online prices will converge, driving down margins as advertising costs increase. Devising profitable business strategies, redesigning the retail experience, and remodeling storefronts will take time.

Online sales resurrected bankrupt DAVIDsTEA, North America’s largest specialty tea chain. The company had fortuitously relaunched its website before March lockdowns forced the permanent closure of 166 locations, including 42 US stores. In 2021 the company, trimmed to 18 locations, emerged from its financial peril as an online powerhouse and grocery brand with store-in-store pharmacy partner Rexall Drugs.

The company earned $26 million as the pandemic raged in 3rdQTR20, with e-commerce and wholesale sales accounting for 84.3 percent of sales. The surge had ended by 2021, but online sales remained impressive. The company is now on track to earn $100 to $125 million in sales at 40 percent gross profit margins.Coresight Research notes that the growth of single-channel online retailers, including marketplaces, now trails their omnichannel counterparts.

“The e-commerce boom should have been a heyday for digital-first retailers, yet one of the most striking features of this trend has been the general failure of online-only (or online-predominant) retailers to seize the opportunity to outperform in the only channel in which they compete,” writes Coresight CEO Deborah Weinswig. She explains that stores serve as an online billboard for a retailer’s websites while online-only competitors are forced to pour money into advertising.

There were never enough local tea shops where U.S. tea drinkers could taste a selection of good teas. There are many fewer now, making tea discovery online a top priority in 2022.

David Segal, who founded his namesake brand, recently launched a new direct-to-consumer venture in tea. Unlike DAVIDsTEA, there will be no physical stores, no manufacturing plant, and sourcing by third-party suppliers. Segal and Shopify president Harley Finkelstein teamed up to create Firebelly Tea in early November.

The brand will market the highest quality tea, shun flavorings and additives, and utilize advanced packaging with a distinctive design. “It represents a different feel, a different product,” says Segal. “It’s not DAVIDsTea.”

“We can go really far just focusing on online sales,” Segal told reporters, explaining that it will use Shopify’s technology to power its online store.

Reinvention is underway with upscale boba tea rooms, nitro cold brew tea in bars, iced tea drive-thru, premium milk tea, cheese, and fruit tea outlets, subscriber-only tea clubs, and livestream marketing. The exciting mix of retail innovations in response to market-moving developments that will shape the future and fortunes of tea foodservice and foodservice suppliers will blossom in 2022.

RELATED: Did you get your copy of the World Tea white paper, “2022 Tea Industry Trends, Issues & Innovation”? The white paper – which was published just before the recent World Tea Conference + Expo – features the article you’re reading now, as well as others like it. To download the free paper, CLICK HERE.

Dan Bolton is a creator, journalist, podcaster and the founding publisher of Tea Journey, a consumer magazine for tea enthusiasts. Recent positions include producer and host of the Tea Biz Podcast, editor and publisher of Tea Magazine, and editor-in-chief of Specialty Coffee Retailer. He worked as managing editor of STiR coffee and tea magazine for five years and remains a contributing editor. Visit and

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