examines U.S. specialty tea from a variety of angles, according to company founder Abraham Rowe, Google’s former tea expert.
There are 1,607 specialty tea businesses in the U.S. of which 255 outlets are chains with five or more locations, according to State of the US Specialty Tea Industry (2019), a newly released market research report published by Sinensis Research.
The total U.S. specialty retail market grosses between $690 million and $1.2 billion annually, according to a nationwide survey of tearoom owners and managers. The survey was conducted online with data from 400 respondents and 70 randomized follow up phone interviews.
“We have evaluated the total market size, retailers within the space, and the demographics of the primary consumers of specialty tea,” said Rowe. “We present this information as a “state of the industry” report, offering a comprehensive description of the U.S. specialty tea industry, as well as the behaviors of retailers, consumers, and wholesalers. We also examine broader trends within the tea industry and speculate on the future of the space in the US,” said Rowe.
A single store selling a variety of tea earns $220,000 to $270,000 annually with average online sales of $40,000 to $65,000, according to Rowe. Specialty vendors exclusively selling Chinese tea earn a bit more online, ranging to $70,000. These general tea outlets account for 55% of total locations. Afternoon tea venues account for 34% of the total and Chinese tea shops represent 7.3%. Japanese tea shops represent 1.2% of the total.
The U.S. tea market is dominated by general tea stores and afternoon tea shops, which together make up 89% of primarily specialty tea points of sale, said Rowe, noting that many of these shops sell both Japanese and Chinese teas. “Still there is fairly strong demand for tea shops that specialize in Chinese tea,” he said.
The largest chain store in the U.S. with significant specialty tea offerings is Spice and Tea Exchange, with 71 locations. The largest tea-exclusive vendor is DAVIDsTEA, with 46 locations in the US.
Ranges are not from audited financial reports. The author states that he is “90% confident that the accurate number is within the stated range.” Non-tea retail describes a non-tea focused business that sells specialty tea, like a café or a coffee shop with a high end tea menu. (Chart courtesy of Sinensis Research)
Revenue from venues offering afternoon tea averages $150,000 to $190,000 annually. Companies with extensive online selections earn up to $110,000 annually, according to Rowe, who obtained these figures by surveying hundreds of tea merchants and tea shop owners.
Rowe believes that the U.S. loose tea sales are between $27 million and $67 million annually and that the combined annual sales of businesses selling primarily specialty tea is between $320 million and $380 million.
“We used two approaches for estimating the size of the market to arrive at a range of between $690 million and $1.2 billion. We are 50% confident that it is $800 million to $1 billion,” he said. Asked to pick a specific number, “our highest confidence (2.5%) in a specific market size is $910 million.”
This is a number less than half the $2.58 billion reported by the Tea Association of the USA in its annual assessment for 2018-19.
(Chart courtesy of Sinensis Research)
“Sinensis Research suggests that this number is 2–4 times larger than the actual market size,” according to the report. “Our analysis suggests that these larger estimates are differentiating tea sector types based on factors that are different than how most consumers view the tea world. In particular, it seems likely that these estimates use “specialty tea” to refer to a broad segment of the market, and not the tea consumed by tea culture focused customers,” according to the report.
The Beverage Marketing Corp. estimates loose leaf sales at 0.7% of the total tea market that is predominately ready-to-drink (47.3%) and tea bags (42.9%) with 8.2% of sales from instant tea powders, crystals and mixes. Per capita consumption in the U.S. is 0.5 pounds.
The number of people drinking specialty tea is just a fraction of total U.S. tea drinkers, wrote Rowe. “Of the $708 million of tea imported in 2018, only around $12.84 million would go on to be sold as loose tea,” according to Rowe. This figure does not include imported herbal teas.
California has 169 tea houses which are concentrated in the Pacific Northwest and along the Atlantic Northeast, with New York and the mid-Atlantic states home to the largest numbers of consumers seeking afternoon tea. (Chart courtesy of Camellia Research)
“However, similar to coffee’s “third wave,” and wine culture, interest in specialty tea as a distinct product is growing. While tea has never filled the cultural role that coffee currently fills in American life, specialty tea continues to be an essential part of U.S. tea culture,” he wrote.
On average, across all segments, women are the primary customers at tea businesses, comprising 73% of customers. At afternoon tea 87% of customers are women while women account for only 54% of customers visiting a Chinese specialty tea businesses.
Here are a few bullet points from the 37-page report:
Females represent 73% of retail customers; men 27%
The most common age range of retail customers is 25 to 34 years. Customers aged 35 to 54 are only slightly more prevalent, as are customers 55 and older.
Customers under 18 are the “least likely” specialty tea buyers, those 18 to 24 are also infrequent buyers.
Afternoon tea customers skew older with most between 35 and 54 years and those 55 and older.
Across all businesses, black teas, herbal teas and flavored teas are the most popular. Unflavored green tea, flavored white tea, and flavored green tea are less popular.
Oolongs are the most popular tea at Chinese tea shops. In Japanese specialty tea shops unflavored green teas “are far and away the most popular.”
Google Gets Tea Drunk
Rowe has an interesting story to tell about how he came to tea.
It began in Mountain View, Calif., at the headquarters of Google. The campus accommodates a staff of 23,000 staff (out of a total 98,771 worldwide) who ride company-owned bikes around the massive facility, play arcade games, snack for free and enjoy tea at their desks, among a that include a free gym access, on-site physicians, free travel insurance and emergency assistance on both personal and work-related trips. When the lunch bell rings you can find them crowding gourmet cafeterias that look nothing like what you experienced in school.
Over time, tea drinkers began displaying Yixing pottery at their desks, trading fabled oolongs and lobbying for better selections. In 2013 they convinced management to establish a “world class tea program.”
As Google was setting the stage, Rowe recalls that he “went off the deep end” over tea after working in a local tea shop in his hometown of Albuquerque, NM. He drank every tea imaginable and by 2011 had learned enough about tea culture to teach a university level course on Chinese tea at Oberlin College in Ohio, one of the first courses on tea accredited at a four-year university. The course featured tea tasting.
In 2013 Rowe was more than ready when Google decided to hire an outside tea expert to manage its tea bars and cafeteria selections in Mountain View. He was recruited to manage a specialty tearoom in the main building “with an amazing menu and gong fu tastings for staff,” said Rowe. “These were really high-end teas, there were interactive screens educating workers about tea and tea, juice and coffee bars in several locations,” he said. “It was a really cool program with an emphasis on tea education,” he said. “In time the executive who was excited about the program left the company. When I left no one replaced me,” he said.
At Google, Rowe managed a complex tea supply chain. He brought a data-focused mindset to tea by keeping careful tabs on the popularity of different teas and building a small but responsive menu shaped by Googler interest.
Rowe lives and works in Washington, D.C. The report sells for $29.95.