In the refrigerated cases of convenience stores, tea beverage products are dazzling in their variety. Photo by Liang Yan, staff reporter
Recently, Nongfu Spring released its results for the first half of 2022, with revenue from its tea beverage business growing by as much as 51.6%. All-media reporters from China Cooperation Times · Tea Weekly noted that Nongfu Spring’s tea beverages include the sweetened “Cha π” tea, the sugar-free whole-leaf “Oriental Leaf” tea drinks, and the carbonated “Sparkling Tea” launched this year. Zhou Zhenhua, executive director and chief financial officer of Nongfu Spring, explained that the growth of the company’s tea beverage business had two drivers. On the one hand, “Cha π” and “Oriental Leaf” are being accepted by more and more consumers. On the other, against the backdrop of the COVID-19 pandemic, the company tilted resources toward its key categories \u2014 packaged drinking water and tea beverages. This shift in operating strategy further fueled the rapid growth of tea beverages. Within Nongfu Spring’s tea beverage business, the standout performer is the sugar-free whole-leaf tea drink “Oriental Leaf.” According to data from the renowned research firm ACNielsen, over the past 12 months “Oriental Leaf” grew at a level far exceeding the overall growth rate of the tea beverage market \u2014 close to 70%, more than 85 times the industry rate. Driven by “Oriental Leaf,” the sugar-free whole-leaf tea segment became the only ready-to-drink tea category to post positive growth in the first half of the year, with “Oriental Leaf” contributing nearly 70% of the increment.
Ten Years on the Bench
A Big Opportunity Arrives at Last
When “Oriental Leaf” launched in 2011, there was no sugar-free whole-leaf tea drink in China, and Nongfu Spring became the tea beverage industry’s “first to eat the crab.” Back then, sweetened tea drinks from Master Kong, Uni-President, and Wong Lo Kat were booming. The sugar-free whole-leaf “Oriental Leaf,” with its unique “zero-calorie” concept, distinctive packaging, and singular perspective on spreading traditional culture, drew attention as soon as it debuted \u2014 yet it won praise without winning sales.
After dancing solo in the tea beverage world for nearly a decade before finally seeing the dawn, “Oriental Leaf” has achieved explosive growth over the past three years. Starting in 2019, “Oriental Leaf” entered the fast lane with a growth rate as high as 28.9%. In 2021, “Oriental Leaf” doubled its growth.
In recent years, beverage-industry giants have all entered the sugar-free whole-leaf tea track. Genki Forest launched “Ran Tea” with “0 sugar, 0 calories, 0 fat”; CHALI, which focuses on whole-leaf tea bags, also launched a bottled sugar-free whole-leaf tea drink, “Ya Shi Dan Cong,” emphasizing its “0 sugar, 0 fat” selling points. Rangcha Group, founded in 2020, has been deeply cultivating the sugar-free whole-leaf tea field, launching four product series \u2014 high-mountain green tea, high-mountain oolong tea, jasmine tea, and Pu-erh chrysanthemum tea. Major beverage companies are all optimistic about the sugar-free whole-leaf tea market.
Han Chi, a researcher at the Institute of Nutrition and Health of the Chinese Center for Disease Control and Prevention, said in an interview that the 2022 edition of the Dietary Guidelines for Chinese Residents explicitly calls for controlling added-sugar intake, avoiding or minimizing sugar-sweetened beverages, and recommends drinking more tea water or plain water. She said tea is China’s national drink and most people have the habit of drinking tea, but brewing tea is inconvenient on many occasions, and in the heat of summer many find hot tea hard to accept \u2014 which creates a huge business opportunity for bottled whole-leaf tea drinks.
Nongfu Spring undertook more than a decade of innovation and pioneering based on its forecast of future trends in the tea beverage market. In recent years, consumers’ awakening health consciousness has validated Nongfu Spring’s prediction. Han Chi said that as the state popularizes health knowledge and consumers’ health awareness keeps strengthening, “healthy and natural” is what consumers demand of their diet, and sugar-free whole-leaf tea drinks meet that demand. She believes that for a considerable period to come, whole-leaf tea beverages will become mainstream products in China’s beverage industry.
Not long ago, the 2022 China Sugar-Free Tea Beverage Industry Insight Report released by Zero Point Data showed that the sugar-free whole-leaf tea industry has entered its growth stage and a new phase of rapid, steady development. As the category market matures further, the scale of mainland China’s sugar-free whole-leaf tea market is expected to quickly surpass ten billion yuan by 2025.
The main reason sugar-free whole-leaf tea drinks have met this development opportunity is that more and more people are now more wary of sugar than of fat. China’s first generation of consumers who grew up with the tea-drinking habit \u2014 the post-80s and post-90s \u2014 are also gradually adopting wellness habits; drinking sugar-free sparkling water and sugar-free whole-leaf tea has almost become a new fashion. Another survey shows that 82% of consumers are willing to spend more on healthy beverages, higher than the global average of 68%.
Bringing Health to Consumers
Easing the Overcapacity of Tea
In 2021, the country’s tea gardens covered 48.9609 million mu, with tea output reaching 3.0632 million tonnes. Over the past decade, as China’s tea garden area has expanded rapidly, tea output has grown by an average of 10%, while export volume has increased only very slowly. Although per-capita tea consumption has been rising year by year, its growth rate cannot keep pace with the growth of tea output. According to statistics from the China Tea Marketing Association, about 500,000 tonnes of tea go unsold in China each year. Under a production pattern dominated by premium and famous teas, the utilization rate of tea resources is low, the abandonment of summer and autumn tea harvesting is common, and the economic benefits of tea are markedly affected. The rapid development of the tea beverage industry will effectively raise the utilization rate of tea leaves. Data from the China Beverage Industry Association show that in 2019 China’s tea beverage market was worth 78.7 billion yuan. Tea beverages fall into two broad categories \u2014 sugar-free and sweetened \u2014 of which sugar-free tea beverages held a 7% market share. In 2021, China’s sugar-free whole-leaf tea market, dominated by bottled whole-leaf tea drinks, expanded rapidly to account for 18.3% of the tea beverage market. As more companies enter the sugar-free whole-leaf tea market, it is expected that over the next five years the segment will grow even faster and outpace the development of tea beverages overall.
Tu Youying, a professor at the College of Agriculture and Biotechnology at Zhejiang University, has been engaged in tea deep-processing research for many years. She told the reporter that China’s tea beverage industry started in the 1990s and developed rapidly after 2000. The main formula ingredients of sweetened tea beverages are syrup, tea concentrate, tea-flavor essence, and the like, but the proportion of tea concentrate is relatively low, and the tea raw materials selected are mostly low-end summer and autumn teas. Sugar-free whole-leaf tea drinks, by contrast, have higher requirements for tea quality \u2014 many use premium spring teas \u2014 with a higher proportion of tea concentrate, greater consumption of fresh tea leaves, and higher demands on tea-making techniques. When this year’s spring tea came to market, Nongfu Spring launched “Oriental Leaf” Longjing new tea: only five days elapsed from plucking the leaves to bottling and release, and its taste came very close to freshly brewed Longjing, earning high recognition from consumers.<\/p>\n
Tea beverages have become a “regular guest” at young people’s gatherings. Photo provided by Rangcha Group
For the same net content, sugar-free whole-leaf tea drinks use more raw material than ordinary tea drinks. Shu Yi, founder of Rangcha Group, did the math for the reporter: assuming that every 10,000 cases of tea beverage (12 bottles per case, 500 ml per bottle) require 500 kg of whole-leaf tea, in 2022 Rangcha’s high-mountain series planned to produce 4 million cases of tea beverages, requiring more than 200 tonnes of tea raw material \u2014 far above what ordinary tea drinks require.
Sugar-free whole-leaf tea drinks can both bring health to consumers and ease the overcapacity of Chinese tea. Jiang Tong, general manager of the tea business division of Hejun Group, believes that bottled whole-leaf tea has caught the development wave and is the breakthrough for relieving China’s tea overcapacity. After more than 20 years of development, the tea beverage industry has formed a hundred-billion-yuan-scale industry led by giants such as Master Kong, Uni-President, and Wahaha, playing an important role in driving the development of China’s tea industry. However, the tea content of sweetened tea beverages is low, so their consumption of tea leaves is fairly limited. Sugar-free whole-leaf tea drinks demand more in both the quality and quantity of tea; consumers’ emphasis on taste is pushing the whole industry upmarket, and brands are paying ever more attention to the quality of raw materials. As sugar-free whole-leaf tea enters a golden period of development, more beverage companies will enter this track, and the supply chain will become the core of competition among brands. As the source of the supply chain, tea companies must strictly control tea quality, provide beverage companies with ecological, trustworthy raw materials, and together help the sugar-free whole-leaf tea market flourish.
The reporter learned from the Tea Deep-Processing Professional Committee of the China Tea Marketing Association that at present China’s tea-concentrate producers are mainly distributed in major tea-producing provinces such as Zhejiang, Fujian, Hunan, and Jiangxi, with nearly 20 producers of scale turning out about 20,000 tonnes of tea concentrate a year. More than ten backbone enterprises, including Damin Food (Zhangzhou) Co., Ltd., Zhejiang Minghuang Natural Food Development Co., Ltd., and Fujian Xianyangyang Biotechnology Co., occupy an 80% market share, mainly supplying raw materials for tea beverage production to Wahaha, Master Kong, Uni-President, and others, and can absorb an average of 100,000 tonnes of mid-to-low-end tea raw material each year. As the sugar-free whole-leaf tea market enters the fast lane, more high-quality tea raw materials will be fully utilized in the tea beverage field, which will help ease China’s tea overcapacity.
Produced by: China Cooperation Times · Tea Weekly All-Media<\/p>\n
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\nAuthor: Lam Sam (LamSam), the Old Tea Head
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