Leading Brands in Global Ready to Drink Tea and Coffee Market Exploring Mergers and Acquisitions to Gain Lion’s Share

In response to the changing lifestyle, the preferences of consumers have also dramatically changed. The rising willingness of people to spend on ready-to-eat options has proven a major boon for the food and beverages industry. The demand for ready to drink (RTD) tea and coffee has thus considerably increased in the last few years. The market is also expected to gain considerable momentum as ready to drink tea emerges as a new staple in beverages.

Q: How is urbanization responsible for driving growth in RTD tea and coffee market?

A: As per a report published by the Tea Association of the U.S., tea is the second-most highly consumed beverage in the world. The industry has significantly benefited from the proliferation of non-traditional retail outlets such as mass merchandise, warehouse club, drug stores, convenience stores, and gas marts. In the ready to drink tea market, the iced tea segment has exhibited growth at an impressive rate in the last few years. The market has also substantially benefitted from the introduction of functional beverages and the increasing urbanization.

Emerging economies in Asia Pacific and Central and South America have proven especially lucrative for the global ready to drink tea and coffee market. Furthermore, consumers nowadays are more informed about the antioxidant properties of tea and the health benefits, such as such as instant energy boost and low calories, it offers. This has subsequently led to a paradigm shift in consumer preference from carbonated drinks to healthier beverages such as tea and coffee. The demand from the market for RTD tea and coffee is therefore being fuelled considerably.

Besides this, the café culture has become quite popular among the urban youth, which has been significantly aiding the expansion of the global RTD tea and coffee market. The success of coffee chains has prompted tea vendors to diversify their production and marketing strategies. Numerous cafes are thus launched offering tea- and coffee-based drinks with health benefits. This has helped in augmenting demand from the global market for RTD tea and coffee.

Q: How are major players operating in the market gearing to battle for higher revenues?

A: Coca-Cola Co. and PepsiCo. Inc are clearly the best known players in the global ready to drink tea and coffee market. These companies collectively hold a substantial share in market, much of which is obtained through their partnership with Unilever, which also owns Lipton. As per a recent CNBC report, PepsiCo gained a lead over Coca-Cola Co. in 2014 with its offering called Pure Leaf, which witnessed an exponential 49% surge in sales in that year. Apart from entering into partnerships, these companies are capitalizing on the rising health consciousness of consumers to gain competitiveness in the market.

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Leveraging mergers as a winning strategy, one of the leading vendors in the RTD tea and beverages market, Starbucks Corporation, has joined forces with Anheuser-Busch in June 2016. These two companies will produce and distribute RTD Teavana tea to take on competing brands. Teavana tea is expected to be launched first in the U.S. in the first half of 2017. Earlier, Teavana was acquired by Starbucks in 2012 in a bid to expand its reach in the tea market.

Mergers and acquisitions have therefore emerged as potent solutions for vendors to gain the lion’s share in the global RTD tea and coffee market.