Tea Market Analysis

Tea Market (Global, 2024)

Introduction

The tea market is in the throes of a revolution, driven by changing consumer preferences, health awareness, and new product launches. Tea is now being consumed in every country and every culture. As it has done for centuries, it is also attracting a younger, more diverse audience, with more adventurous tastes and a greater interest in health and well-being. The emergence of specialty teas, organic teas, and ready-to-drink teas is reshaping the market and forcing established players and new entrants to rethink their strategies. In addition, consumers are becoming more demanding in terms of ethical and sustainable sourcing, which is influencing their buying decisions and their loyalty to brands. This report provides a comprehensive overview of the current trends, challenges, and opportunities in the tea market.

PESTLE Analysis

Political

The tea market in the year 2024 is influenced by many political factors, such as tariffs and policies on trade. In India, for example, the government has imposed a new export tax of 10 per cent on tea, to help stabilize domestic prices and supply. This has a knock-on effect on international prices. Similarly, the UK has set up a new regulatory framework for food imports, after the Brexit vote. All tea imports have to meet strict quality standards, which affects the sourcing strategies of tea companies operating in the region.

Economic

The average price of black tea in the world market will be around $2.50 per kilogram in 2024, up from $2.20 in 2023. This rise is attributed to rising production costs and supply disruptions. The World Bank has reported that inflation in the key tea-growing countries of Sri Lanka and Kenya has reached 12% and 9% respectively, a figure that affects both the cost of production and the retail price.

Social

In the tea market, a change is underway, a growing preference for products that are healthy and free of chemicals. By 2024, it is estimated that herbal and specialty teas will have captured 35% of the tea market, an increase of 10% over the previous year. This trend is largely due to the growing awareness of the health benefits of tea among millennials and generation Z, who increasingly put health before price.

Technological

The tea market has been greatly influenced by the development of science and technology, especially in the field of production and distribution. In 2024, the precision agriculture in India has been widely used, and about one-fourth of the tea plantations use drones to monitor the growth of tea trees and increase the yield. In addition, the tea e-business has also developed rapidly, accounting for about one-fifth of the total tea business. The convenience of the Internet and the habits of consumers have changed, and tea e-business has become a new trend.

Legal

The tea market is changing, with new regulations on labelling and health claims. The European Union is tightening the rules for labelling all teas with the caffeine and any other possible allergens. This will affect the way teas are labelled and the way tea companies will market their products. The companies doing business in the European Union must be in compliance with the new regulations, because of the potential fines of up to one hundred thousand euros for companies that do not comply.

Environmental

The tea market is being influenced by the environment, especially in terms of sustainable production. By 2024, the proportion of organic teas was said to have reached 40%. It is said that the number of organic teas has been steadily increasing since then. The industry is also facing the challenge of climate change. It is estimated that about 30% of tea-growing regions may be harmed by climate change, and more resilient agricultural practices are being adopted.

Porter's Five Forces

Threat of New Entrants

In 2024 the tea market faces a moderate threat from new entrants. The market is growing, but the distribution network and brand loyalty of the established companies are difficult to penetrate. The relatively low capital needed to enter the tea market and the growing consumer interest in special and organic teas may encourage new entrants.

Bargaining Power of Suppliers

Suppliers in the tea market generally have low bargaining power because of the abundance of producers and the global nature of tea sourcing. Suppliers’ influence on prices is limited. Suppliers also have low bargaining power because many tea brands can easily change suppliers at little cost.

Bargaining Power of Buyers

The bargaining power of the buyer in the tea market is high because he has access to a wide variety of brands and products. In addition, the growing concern for health has led to the demand for a wide variety of teas. This competition between brands gives the buyer the opportunity to negotiate better prices and to demand higher quality.

Threat of Substitutes

The threat of substitutes to the tea market is moderate. Tea is a popular beverage, but consumers have a number of alternatives, such as coffee, herbal teas, and other beverages. However, tea’s unique health benefits and cultural significance may reduce this threat, as many consumers remain loyal to tea as their preferred beverage.

Competitive Rivalry

Competition in the tea market is intense, with established brands and new entrants vying for market share. The market is characterized by aggressive marketing strategies, product differentiation, and innovation in flavors and packaging. The companies compete for market share through constant product improvements and price wars.

SWOT Analysis

Strengths

• Strong global demand for tea, particularly in health-conscious markets.
• Diverse product offerings including herbal, green, black, and specialty teas.
• Established supply chains and brand loyalty among consumers.

Weaknesses

• High competition leading to price wars and reduced profit margins.
• Vulnerability to climate change affecting tea production.
• Limited awareness of premium and specialty teas in emerging markets.

Opportunities

• Growing trend towards organic and sustainably sourced products.
• Expansion into untapped markets, particularly in Asia and Africa.
• Innovative product development, including ready-to-drink and functional teas.

Threats

• Increasing regulatory pressures regarding health claims and product labeling.
• Economic downturns affecting consumer spending on premium products.
• Rising costs of raw materials and transportation impacting pricing.

Summary

The market for tea in 2024 will be characterized by a strong demand for tea, and a variety of products, which will be a major advantage. However, there will be competition and the effects of climate change. Opportunities will be organic teas and the opening of new markets. Threats will be the growing number of regulations and rising costs. The most effective way for companies to compete will be to use their strengths and opportunities.