Herbal Tea Market

The consumption of herbal tea is increasing across the globe owing to its pleasant flavor, mildly stimulating effects, and medicinal properties. The growth of the global herbal tea market is driven by the high demand for functional beverages and availability of several flavor variants. The increasing demand for organic products in developed economies is expected to offer lucrative opportunities to market players in the coming years. However, the high costs of herbal tea as compared to its regular counterpart and limited product awareness in underdeveloped nations are expected to hamper the growth of the herbal tea market at the global level during the forecast period.

Growing consumer awareness about health and wellness is driving the demand for functional beverages. Consumers are inclined toward beverages that assist in enhancing certain body functionalities. This growing trend of functional beverages has increased the scope of the global herbal tea market. Thus, herbal tea manufacturers are offering advanced products to address the health concerns of consumers. For instance, market players are infusing vitamins to increase the functional properties of herbal tea. According to MRFR analysis, the global functional beverages market was valued at USD 170.12 billion in 2018 and is projected to register a CAGR of 6.75% during the forecast period of 2019 to 2025.

Market players are also using a blend of multiple herbs and plants such as chamomile, lavender, peppermint, and ginger to increase product value. Chamomile promotes relaxation due to the presence of the flavonoid apigenin; it is also an anti-inflammatory. Similarly, lavender tea has a calming effect and aromatherapists use lavender to treat headaches, nervous disorders, and exhaustion. Peppermint aids in digestion due to its menthol content which breaks the phlegm and thin mucus to soothe stomachache, cramps, and heartburn. Ginger contains approximately 14 bioactive compounds with antioxidant and anti-inflammatory properties.

In accordance with the high consumption of herbal tea for its functional properties, manufacturers in the global herbal tea market are continuously launching products. For instance, in November 2016, Tata Global Beverages Limited launched Tata Tea Teaveda as part of its herbal tea portfolio. This helped the company cater to the demand for functional and herbal tea in India.

Thus, the growing demand for functional beverages would significantly contribute to the growth of the global herbal tea market during the forecast period of 2019 to 2025.

Rising health consciousness has led to a preference for organic food products among consumers. There has been an inclination among consumers toward the consumption of organic herbal tea, which is produced without any synthetic substances such as the majority of pesticides, herbicides, and fertilizers. The demand for organic products has grown tremendously across developed and emerging economies in the past few years. According to MRFR analysis, the India organic products market was valued at USD 2.99 billion in 2018, registering a CAGR of approximately 8.6% from 2008 to 2018. As per the FiBL, the Research Institute of Organic Agriculture, organic food sales in Europe were worth EUR 30.7 billion (USD 34.2 billion) in 2016, which reflected a market growth of 11.4% from 2015. This shift in consumption patterns has influenced food manufacturers to launch natural and organic food & beverages.

Thus, the preference for organic products creates an opportunity for players in the global herbal tea market. For instance, Typhoo, in September 2018, launched organic herbal infusions that have ingredients such as ginseng, ginger, cinnamon, turmeric, and chamomile to cater to the growing demand for organic products. Moreover, the demand for organic herbal tea is on the rise, providing market players the scope to expand their geographic footprint.

Herbal teas are generally priced high due to the ingredients used, production process, and distribution. Unique flavors and the use of all-natural ingredients in herbal tea such as ginger, rooibos, and hibiscus make it a highly popular and trending alternative to regular tea. Since herbal tea is an infusion of herbs, spices, and other medicinal plants, it offers various nutritional properties and does not require additives as a nutrition enhancer. Furthermore, the increasing demand for herbal tea for its medicinal benefits and health concerns have also impacted sales. This, in turn, is affecting the demand and supply balance, thereby fuelling the price of the product. Consumers are price-sensitive and conscious of daily products particularly at the lower-middle class and lower-income levels. Additionally, wealthier consumers are willing to spend more on status items while non-status items are likely to be chosen based on price.

Thus, the comparatively high prices of herbal tea over regular tea are expected to hinder the growth of the market during the forecast period.

The demand for herbal tea is at a nascent stage due to the traditional consumption of regular tea across the globe. Tea is heavily consumed across India, China, and other emerging economies in Asia-Pacific both in rural and urban areas. In India, rural parts account for about 70% of the entire geography and more than 800 million people reside in villages; thus, manufacturers face a serious challenge in product promotion in the rural sector. According to a study by MRFR, in 2018, the sales of regular tea sachets were high in rural India, especially in the Southern and Western parts of the country, due to a preference for the taste and strength of regular tea. Limited awareness about the medicinal benefits and flavor options of herbal tea poses a major challenge to the players in the global herbal tea market. The consumption of herbal tea is also exceptionally low in several underdeveloped economies owing to its high price and low consumer awareness.