Drivers Of US Tea Drinking – Coffee Shops

D r i v e r s O f U S T e a D r i n k i n g C o f f e e S h o p s

The data about tea sales in coffee shops tends to get confusing. Recent NCA reports might have you believe tea is declining.

However, a more thorough investigation indicates the opposite:


1. Demographics-wise, the country is shifting towards more tea. Charles Cain was one of the drivers of tea at Starbucks. He saw the numbers from the demographics perspective and from Starbucks sales data.

Charlie says: “Demographic trends suggest the industry has a long runway of expansion as younger consumers are more inclined to favor tea over coffee than their parents.”


2. Even while Starbucks sales were/are slumping, tea was one of the positive areas of growth

Stephens analyst Will Slabaugh: “While we continue to be pleased with the sustained growth from espresso, tea, and improvements in throughput during peak hours…”



These larger trends suggest that it isn’t tea itself that is slumping, but may be about the way tea is offered. Additionally, Starbucks didn’t shutter Teavana because of tea, but because of operations. Basically, Teavana stores, the majority of which were in shopping malls, were geared toward selling tea merchandise, not actually serving tea. When Starbucks acquired Teavana, the shift in focus from tea accessories to cups of tea served proved insurmountable.

David’s Tea, another tea retailer heavily positioned in US shopping malls, appears to be experiencing similar woes: Slump in sales of tea accessories; poor performing locations in (declining?) shopping malls.

Source: BNN Bloomberg

As covered before, coffee chains are wholeheartedly embracing tea. Starbucks, Dunkin, and others are incorporating premium teas into their menus.


Note the nice, big Dunkin’ tap labeled: “GREEN TEA”

Just as Starbucks improved performance in with its tea and espresso, Dunkin’ and others are doing the same. It isn’t just about having tea. It’s about having the right tea in the right format. Dunkin’ is riding the wave. Dunkin’ is extending its premium tea, frozen beverage, and espresso product lines.

Source: QSR Magazine


So how did NCA statistics come to the conclusion that previous day tea consumption was declining?

1. Premium teas are driving results. NCA survey numbers were based on people drinking “regular” tea. That’s the word used in the survey to describe tea- “regular.” What is “regular” tea in the minds of respondents? Is it black tea? Is it tea in a traditional teabag? Dumping responses into a bucket deemed “regular” likely confuses the issue more than it sheds light.

2. Premium teas come in various formats. The use of loose teas, pyramid teas and other formats may have gotten under-represented or inaccurately captured if there wasn’t a proper category to describe consumption of these teas and tea formats.

3. Premium teas are toward the front of the bell curve. That’s not to say obscure, or limited to the leading edge of the front, but it is to suggest that the majority of retailers haven’t caught up with consumers’ expectations. If Starbucks and Dunkin are seeing growth with premium teas, and coffee shops with traditional teabags are not seeing the same growth, there is good reason to probe deeper to see what premium teas and tea formats are driving this exceptional performance.