Sugar-free teas sparkle in soft drinks market

Gong Ao, 28, a fitness instructor in Beijing, believes in setting a personal example for his clients with his well-maintained physique. To keep in shape, he relies on a sugar-free tea beverage called Oriental Leaf from the stable of Nongfu Spring, a well-known brand in China's beverage market.

Gong also provides dietary advice at a gym in the capital city. Sugar-free teas figure prominently among his recommendations for staying well-hydrated like him.

"It's part of my job to be in good shape," said Gong. "But drinking water all day could be dull. Unsweetened tea beverage is my preferred choice."

Most of Gong's fitness clients are male office workers and college students who, he said, have embraced healthier beverages.

Zhu Danpeng, a food and drink analyst in Guangzhou, Guangdong province, said Oriental Leaf has grown rapidly in recent years. "More than three out of 10 consumers of Oriental Leaf are males," Zhu said.

Cyanhill Capital noted that in China, around 268 million male consumers are aged above 35, who value price and practicality.

Launched in 2011, Nongfu's sugar-free tea initially found the going tough but has since evolved into a favored beverage option, especially among health-conscious consumers.

Healthier beverages were made popular in China initially by Genki Forest's sugar substitute formula. Later, "sugar-free" drinks captured consumers' attention.

Nongfu Spring's financial report for the first half of 2023 revealed a significant surge in the popularity of its teas. The tea beverage category generated 5.29 million yuan ($720,000) in revenue, up 60 percent year-on-year, constituting 26 percent of the total revenue.

Encouraged by such market success, Nongfu Spring has been investing in product innovation. For instance, the limited-edition "Longjing Spring Tea" was rolled out in March 2023, featuring premium Longjing tea. In May last year, the introduction of "Black Oolong Tea" expanded the "Oriental Leaf" product range to offer diverse choices to consumers.

The development of the Chinese tea beverage segment has created a robust market for sugar-free tea beverages.

According to Euromonitor International, the tea beverage market in China is expected to grow from 113.1 billion yuan in 2022 to 130.6 billion yuan in 2025.

As for sugar-free tea drinks, the market increased from 5.9 billion yuan in 2018 to 7.3 billion yuan in 2021. Projections suggest further growth from 7.9 billion yuan in 2022 to 11 billion yuan in 2025, surpassing the overall tea beverage category's growth rate.

According to Frost & Sullivan's forecast, the size of China's soft drink market will reach 1.3 trillion yuan by the end of this year, with carbonated drinks and tea drinks accounting for 8 percent and 7 percent of the total, respectively, but staying equal in terms of volume.

According to data from Mashangying, in the first half of 2023, tea beverages (that is, non-on-premise tea drinks) accounted for 12 percent of all nonalcoholic beverages, with a growth rate of 26 percent in terms of market share. Both market size and growth rate increased in the third quarter.

All this has persuaded beverage producers to join the trend and ride the development of the sugar-free tea segment.

Xi Guohua, head of beverage sales at Suntory China, a beverage producer, said oolong tea, constituting 80 percent of the company's sales, saw a 200 percent growth in the first half of 2023."We've been on a high-speed growth trajectory in the past three years," he said.

Among the multinationals, Coca-Cola is focusing its attention on the tea category, enhancing its unsweetened tea product Authentic Tea House with cold-brewing technology.

Hong Kong-based Jebsen Group entered the wellness beverage market in China last year with the introduction of Remedy Kombucha, a sugar-free tea-based beverage.

The 2022 China Sugar Free Tea Industry Insight Report by Dataway, an industry data provider, showed the sugar-free tea segment has entered a growth period and a new phase of rapid and stable development. It is expected that by 2025, the sugar-free tea market in China will exceed 10 billion yuan.

The sugar-free plant-based tea drink market is expected to grow by 34 percent next year, making it the category with the highest growth expectation among sugar-free tea drinks.

By 2028, the market share of sugar-free plant-based tea beverages will reach 22 percent. Such beverages will be accounting for over 40 percent of the sugar-free tea beverage market share.