Opinion: Make Room for Hot Tea

Donna Hood Crecca, Senior Director, Technomic

A dear friend of mine is a coffee fanatic. She relishes her daily cup and knows which c-stores get it right. She was downright gleeful after her first visit to a new c-store in our neighborhood, describing the beverage bar as “a shrine to caffeine—a coffee lover’s dream!”

I envy her. Our neighborhood c-store delivers her coffee fix with all the trimmings. As a hot-tea drinker, the most I can hope for is to dip a cheap tea bag into tepid water from a pump pot and hope a bit of flavor can be steeped out of it. That is often the case in the convenience channel: While coffee drinkers are lavished with a broad selection of roasts, flavors and condiments, we tea drinkers are left feeling like second-class citizens.

A Growing Trend

The c-store channel is missing a hot opportunity. Tea is the second most frequently consumed beverage worldwide (after water). This ancient favorite is in vogue right now in the United States and is considered a healthful, flavorful, functional and low-calorie beverage. But while a quarter of consumers drink tea regularly, barely three in 10 sourced their brew from a foodservice venue in the past month, according to Technomic data. One reason may be lack of availability: Tea is not nearly as ubiquitous as coffee on menus.

That is changing. Tea-centric restaurant concepts are emerging, such as Argo Tea, which has 40 cafe locations that sell brewed tea beverages as well as retail tea. Argo is educating consumers about the functional benefits of tea and enticing them with a range of flavors and intriguing stories about the authentic elements of its teas. Argo touts its commitment to sustainable practices and its local communities. (Do you hear echoes of a certain coffee shop siren’s brand pillars?)

Classic, signature and “Teapuccino” beverages are available hot or iced at Argo. The chain is making a range of teas accessible while debunking the notion that tea takes too long to make. Argo Tea cafes’ beverage prep systems, condiment stations and to-go cups deliver on quality and fit with today’s consumer’s on-the-go lifestyle. Argo recently signed a licensing agreement to add its tea offerings in  some of JAB Holdings’ Coffee & Bagels locations, which house Einstein Bros. Bagels and Caribou Coffee under one roof, for a triple play of coffee, tea and bagel/bakery-cafe food items.

Argo isn’t the only restaurant concept tapping into tea. A search of Technomic’s MenuMonitor shows the incidence of tea in nonalcohol beverages grew 2.9% on independent full- and limited-service restaurant  menus from the first quarter of 2016 to the first quarter of 2017, and it is up 8.3% among emerging restaurant chains. These segments are considered trendsetters in food and beverages.

Specialty tea beverages, such as chai or matcha lattes, are on the rise as well, according to MenuMonitor. Specialty tea ranks among the five fastest-growing hot prepared beverages on menus at quick-service and fast-casual restaurants, bakery-cafe concepts and retail foodservice venues, such as grocery stores and specialty grocers.

Round Out the Offer

While c-stores are tapping into the iced-tea craze, especially in the South, the channel appears to be slow to embrace hot tea. The five fastest-growing hot beverages on c-store menus are specialty coffees. Tea is notably absent.

Personal preference aside, c-store operators serious about growing their hot-beverage business should consider tea. Three in 10 consumers say they’re drinking more tea now than two years ago, with younger consumers driving the increase. Tea satisfies many current consumer demands, including authenticity, a better-for-you perception, functional benefits, premium positioning and customizability.

And tea drinkers skew female, a coveted demographic for many c-stores. More Northeastern consumers overall report regular tea consumption than in any other region. This aligns with the skew of c-store coffee consumption, pointing to a strong opportunity for convenience retailers in that region.

Technomic’s outlook for hot tea in foodservice is fairly bullish; we project it to outpace overall hot-beverage growth on a compound annual growth rate through 2018. While four in 10 c-store operators cite increased sales of hot tea since 2014, Technomic’s projections call for nominal sales growth for this increasingly popular beverage in convenience stores. Operators who make some room on that coffee shrine for a selection of quality teas, provide hot water and market tea effectively can round out their hot-beverage offer and expand its appeal to a broader range of consumers.

Donna Hood Crecca is associate principal of Chicago-based foodservice research and consulting firm Technomic. Reach her at [email protected].