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Key findings from Allegra's Project Tea UK 2018 report

Tea out-of-home consumption remained healthy in 2017, with total tea sales of £283m within the £6.4bn specialised coffee shop sector, comprising independent and branded coffee shops – up from £256m in 2016

Project Tea Out-of-Home UK 2018, Allegra World Coffee Portal’s market-leading report on UK tea operators forecasts tea sales of £313m for 2018, a 10.3% year-on-year increase.

Allegra expects continued growth over the next five years, with total sector value expected to reach £439m by 2022, representing 9.2% CAGR growth for the period.

Specialty teas take share from traditional black

Allegra observes significant growth in fruit, herbal and green tea compared to traditional black tea, with 58% of operators adding more specialty teas to their menus in the last three years. Health-focused products, such as matcha, kombucha and a burgeoning functional tea segment represent significant opportunities for operators.

45% of industry leaders agree that healthier and specialty tea offerings represent the two most significant product opportunities for tea out-of-home.

Allegra observes that successful operators are broadening their tea out-of-home offer to include alternative brewing methods and more diverse product offerings.

Tea operators must turn the tables on value perception

Reversing negative consumer perceptions on the value of tea-out-of-home is another significant challenge. Just 29% of consumers believe tea out-of-home represents good value for money.

However, 41% would be more inclined to drink tea-out-home if quality was improved, indicating that operators should seize the opportunity to offer more premium products. In particular, loose leaf products show potential to both increase profit margins and satisfy quality expectations.


Consumers remain lukewarm on tea out-of-home

At-home consumption is still by far the UK’s preference, with the majority of consumers surveyed by Allegra indicating they will not increase out-of-home consumption in the next 12 months.

This attitude represents a significant challenge for tea operators. However, more than 90% of operators who refreshed their tea offering in the last 3 years experienced increased sales, indicating that menu diversification is a key route to sales growth.

The nation’s favourite cuppa

Aside from smaller branded independent tea rooms, the UK still lacks any nationally scaled tea chains. High street coffee chains continue to be the most common locations for regular tea out-of-home consumption – ahead of department stores, independent cafés and work environments.

Costa Coffee was the most common branded chain for consumers to drink tea out-of-home, with 10% making their last purchase there. 38% of consumers identified Twinings as their favourite tea brand, ahead of Yorkshire Tea (36%) and PG Tips (35%).

Allegra research showed a heavy bias for Twinings among under-30s while Yorkshire Tea was the preference of far more over-60s.

Despite the increased popularity of herbal and specialty varieties, which are more commonly consumed without milk, tea with milk remains the UK’s most popular tea out-of-home offer. 61% regularly consume tea with milk, while 30% regularly drink black tea and 17% choose green tea.

Market trends: What the tea leaves say

Undeterred by the challenges of delivering tea out-of-home, 67% of industry leaders expect sales performance for next 12 months to be positive, with the remaining 33% neutral. Complementing recent health and trends, tea also continues to perform well as an alternative social beverage to alcohol – especially among varieties promoting specific health benefits.

Allegra forecasts that the future of the tea out-of-home marketplace will continue to be defined by increasing consumer demand for product innovation and variation. However, most industry leaders are doubtful the beverage will replace coffee as the core out-of-home proposition.

Allegra’s consumer data supports this view, with 82% of those surveyed expecting to maintain their previous year’s tea out-of-home consumption rate in the coming 12 months.
Commenting on the new report, Research Manager at Allegra World Coffee Portal, Bradley Journeaux, said:

“Specialty teas that tap into current premiumisation and wellness trends are providing a significant boost to out-of-home tea sales, with matcha, kombucha and other functional teas at the forefront.

“Among the major players, we’re starting to see greater variety in terms of range and delivery, with more emphasis on presentation of delivery, and a resolved determination to provide the best quality experience.

“Those operators moving beyond the basic tea offer and providing a better value proposition are gaining traction with consumers.”
Project Tea Out-of-Home UK 2018 is Allegra World Coffee Portal's definitive study on the challenging tea out of home market. The report helps industry stakeholders and investors understand the importance of tea for a varied coffee shop menu and establish effective business strategies.

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