Matcha set to drive growth in healthy hot beverages

By Frank Weber

The beverage industry has changed dramatically since we rang in the new millennium. New innovations have captured greater market share as consumer preferences continue to evolve. Products on target with these trends will see a healthy growth through the coming years.

Juicing it up

Mainstream juice in general has seen a decline in support over the last couple of years due to its high sugar content. Health advocates point out the greater benefits of consuming whole fruits and these changes are resulting in a shift of consumer attention. Cold-pressed juices and smoothies are positioned to be the winner in this battle for market share despite their much higher price tag. Buzz ingredients such as turmeric, ginger, kale and guava are perceived to deliver more functional benefits and beverages marketed for specific purposes are expected to show a healthy growth through the rest of this year and beyond.

Bubble down

Carbonated sodas have been declining in market share and companies like Pepsi are shifting their focus to other segments such as so-called power drinks and tea-based beverages. This shift reflects a trend which is largely driven by the adverse health benefits of a diet high in sugar. This development comes as no surprise and bottled water sales are expected to surpass carbonated soda sales in North America in the next two years.

Tea is the darling

We have seen a continuing shift to tea. The growth in this segment is clearly led by premium loose leaf tea and ready-to-drink (RTD) iced teas. In both restaurants and on grocery store shelves, premium loose leaf continues to be on the rise and is positioned extremely favourably as a health beverage.

Companies like Toronto-based Tea Squared Inc. are marketing small batch artisanal brewed iced teas under their Buddha Leaf label. Organic, very low in sugar and brewed from premium loose leaf teas, these types of RTD beverages are leading the way and continue to chip away at big soda sales for years to come.

Freshly brewed iced teas are also on the rise and operators that are keen to deliver a more artisanal experience are quickly getting on board with this quality low-cost, high-margin beverage option. In-house brewing gives the restaurateur control over the sugar content and the iced teas can then be spiked by mixologists or adorned with additional slices of fresh fruit for a premium experience.

On the hot side, we are seeing many more choices of blended, green, black and herbal teas. Millennials continue to drive the thirst for fresh and exciting flavour profiles with a growing majority counting premiums teas as a top pick. This year we will see many more tea startups as the market becomes increasingly more demanding of quality, functionality and flavours.

This development is encouraging for retailers. As consumers are looking to trade up from commercial tea bags to loose leaf, retailers are left with better margins and can offer a more exclusive experience to their customer.

Matcha is hot

This super-charged, antioxidant rich, ground green tea has been growing in double digits and there is no sign of slowing down. Matcha is a shade grown green tea which is slowly stone ground to preserve its high nutrient content. Therefore, it has been credited with many health benefits and contains 137 times the antioxidants of a regular cup of green tea. This makes Matcha an ideal functional beverage, containing no sugar, calories or sodium.

Matcha can be added to a bottle of cold water on the run, or enjoyed hot or blended in smoothies and lattes. Brands like Ma-Cha Matcha have introduced smart, individually portioned “sticks” for the consumer on the run as well as a variety of chai latte mixes. These easy-to-use blends contain Matcha and are low in sugar. Chai latte mixes were introduced by the coffee shop industry and have grown in consumer interest. They have been clawing away at coffee sales for a while now and we will continue to see moderate growth in the chai latte sector.

There are many flavours of Matcha to be had and innovation and functionality are leading the success here as well. Flavours like vanilla, green tea, chai spice and chocolate remain strong favourites. Chocolate-based drinks in this category promise a higher success rate when offering the preferred dark chocolate due to the perceived health benefits associated with it.

Key growth drivers

Overall, functionality will be the key growth sector for 2017 and beyond. Consumers are increasingly asking the question, “What can this do for me?” and marketers will further target their approach toward specific purposes to attract the consumer. Consumers are more savvy and health conscious than ever before and are willing to spend more on premium products if the perceived value expectation is met. “Trading up” is the new buzzword and it can be seen anywhere from coffee shops to fine dining and the grocery segment.

Quality, transparency and health benefits will become more important throughout all segments of the beverage market. Organics will remain an important and growing category but will run alongside functionality and quality.

Loose leaf tea and premium pyramids have become the new standard in restaurants and operators delaying to get on board may face losing sales in the category.

About the author:

Frank Weber is a pioneer in the Canadian tea industry. He owns and operates Tea Squared, Buddha Leaf Tea and Ma-Cha Matcha. For more information, contact Frank at [email protected].