The tea market reached almost $5.5 billion in 2003, up from $1.8 billion in 1990, according to the Tea Council of the USA. Ready-to-Drink (RTD), or bottled tea, leads that market with 75 percent of the market share. The rest of the market is divided between loose and bagged tea (16 percent), instant tea mixes (5 percent), and refrigerated tea (3 percent), according to Packaged Facts. Roughly 80 percent of the tea consumed in the United States is iced. The rest of the world favors the brew served hot. American interest in hot tea is rising, however, in the face of specialty tea trend that has been sweeping over the nation. Thanks to the trend, American tea drinkers now know the difference between green tea, herbal teas, red tea, Chai— and the latest variety to hit our shores—white tea.

Despite the growing interest in alternative teas, most tea drinks still are made with black tea. (Worldwide, 75 percent of all tea consumed is black tea. In the United States, 95 percent of tea consumption is black tea.) Within the specialty tea category, however, black tea may not be king for much longer.

“We are predicting that green tea will outpace or outsell black tea by the year 2008 or 2010,” says Brian Keating, founder and president of the Sage Group International, a market research firm focused exclusively on tea, which publishes the Tea is “Hot” Report.

Green tea is perhaps the fastest growing tea segment, for the very reason that consumer interest in tea overall is on the rise— it improves health and fights disease.

“If you want to know why tea is hot, just punch into Google the words ‘tea’ and ‘health’ and you won’t have the time to look through all the articles that will be listed,” Keating says. “We’re awash in positive, friendly articles about tea. People are even being told by their physicians to drink tea.”

“We’ve pulled green tea up out of our other menu offerings to promote it as a healthy alternative—even compared to water—to drink during our lunch hours,” says Phil Coleman, president of PJ’s Coffee, a 42-unit chain based in Louisiana. “It offers more flavor and healthy benefits, providing a little better experience for the health conscious than just having water.”

Health benefits are not limited to green tea; black tea also is packed with antioxidants although in different combinations. “The health benefits of black tea are pretty close to that of green tea,” says Bruce Bramen, vice president of marketing for Luzianne. “We just haven’t done a good job in getting the information out about black tea. The news started coming out earlier about green tea.”

Black tea is the most fermented and highly processed of tea forms. There are four steps involved in its processing:

• Withering—water is removed naturally or mechanically.

• Rolling— leaf cells are broken down, releasing enzymes and initiating fermentation.

• Fermenting—leaves absorb oxygen in a damp, warm environment.

• Drying—hot air is used to stop fermentation.

At the end of the process, the green leaves have turned brown and are coated with polyphenols and flavonoids—antioxidants believed to improve health.

Green tea is the least processed of tea forms aside from white tea, which is picked just before the leaf opens. (For that reason, white tea yields small harvests and high prices, but has the highest level of antioxidants and very little caffeine.) In processing green tea, the goal is to avoid fermentation as much as possible. The withering phase is replaced by immediate steaming or heating, nearly sterilizing the leaves and inhibiting the release of enzymes. The leaves retain their green color, a very high antioxidant potency, and a naturally low caffeine level.

“I think the press about the health benefits of tea, combined with an aging baby boomer population looking for healthy alternatives, will help the tea category grow,” says Chris Toal, vice president of marketing for Caribou Coffee.

“I would remind our customers that they don’t even have to increase their advertising to sell more tea,” says Lynda Parks, product manager for tea and juice at Sara Lee. “With the fact that the media is running with this, they just need to piggyback on that information. Consumers are ready for more tea choices.”

Like Toal and Parker, Brian Keating believes the media’s influence on tea-drinking American has a lot to do with why the beverage is so popular right now. He also sees yet another synergistic element that makes this a critical moment for tea, a moment when the beverage could explode within the restaurant industry—particularly the quick-service and fast-casual markets. “Vendors are getting ready to start offering better teas and more exotic flavors to foodservice operators,” Keating says. “You’re going to see green tea, red tea, herbals, tropicals become more accessible in foodservice. And better quality liquid concentrated foodservice teas are becoming available.”

Keating says vendors have been slow to answer foodservice needs, in terms of providing a high quality product that also is convenient to prepare. Equally problematic, Keating says, has been restaurant operators’ complaints about poor-tasting tea without giving vendors solid information about their space and time challenges. “It doesn’t matter if you have a product with good flavor and good margins, if it’s a hassle to prepare,” Keating says. “Now there are a lot of innovative tea products and delivery systems coming on the market, but foodservice operators need to continue to say to vendors, ‘How are we going to brew this, and how are were going to get employee consistency in preparation.’”

Luzianne is hoping to answer some of those questions with its new iced tea concentrate, made from brewed tea leaves. “We see a lot of potential for quick-serve restaurants,” says Bruce Bramen. “The concept of a tea concentrate has been around for years. It eliminates cleaning, waste, and filtering. But the drawback always has been the taste. It never has tasted like fresh-brewed.

“We waited to come to market with a product that stands up next to our brewed tea.”

Other vendors are producing similar products. “We used to not even review tea concentrates,” Keating says, “because they weren’t real. In the past many were made of tea flavoring, water, and preservatives. Now we’re finding much better quality foodservice teas.”

“Much better, when you’re talking about a concentrate versus brewed tea, still isn’t good,” argues Bill Wolf, senior vice president of national accounts at S&D Coffee. “At the expense of quality, many foodservice providers have moved to concentrates in the interest of convenience and speed. But many are realizing that quality drives sales, and they are returning to brewed tea.”

S&D sells its tea to McDonald’s, Burger King, Hardee’s, Bojangles’, and Wendy’s, although not as an exclusive provider. According to Wolf, many stores within those chains have experimented with iced tea concentrates and decided to return to brewed tea.

“The fact is, other than selling tap water, tea is the most profitable beverage you can sell—brewed tea, that is,” Wolf says. “Brewed tea is one of the few items where you get better volume, better quality, and better profit at a lower cost compared to tea concentrate.”

“Many restaurants think of tea as the thing that pays them back for all the things they give away,” says Luzianne’s Bramen. “In trying to sell tea, I come across operators who are looking to buy things cheaper and cheaper to make more money. If they choose a lesser quality tea, consumption drops, and they lose a dramatic amount of profit regardless of the purchase price. I tell them they should figure out how to sell more tea rather than buy it for less.”

On the high end, a serving of brewed iced tea costs a restaurant 5 cents. Typically the customer pays between $.99 and $1.25 for a serving with refills. Flavored and specialty teas are a little more expensive to serve, but usually cost customers at least $2.00, still proving to be profitable for operators.

For the coffeehouses now selling tea, the drinks are profitable, though they make up a small percentage of sales. “Tea makes up roughly 5 percent of our sales,” says PJ’s Coleman. “We’re seeing more demand for cold teas, with only 2 to 3 percent of that 5 percent being hot tea. We’re putting more emphasis on food with our lunch menu, which is dragging up tea sales. I don’t think it ever will hit 10 percent, but I’d like to see it grow to 7 to 8 percent of our total sales.”

There is argument about whether teahouses ever will catch on as coffeehouses have. Brian Keating of the Sage Group believes there is a niche for them, although he says there is a challenge in finding the right combination of service and atmosphere. Others believe coffeehouses are fulfilling customer demand with their tea offerings.

Caribou’s Chris Toal says he thinks tea consumption at coffeehouses will remain limited. “The name of our company is still Caribou Coffee Company. Some in the specialty coffee industry have opted to add ‘tea’ to their name. We haven’t pursued that. In my opinion, the coffee opportunity will always be larger than the tea opportunity.”

Caribou, like PJ’s and Starbucks, has seen most of its tea growth in frozen tea drinks and Chai, which is presented like latte. “The larger opportunity for us is going to be in Chai and these frozen drinks, because you can’t conveniently make them at home.”

Another cold tea drink seeing some growth in the United States is bubble tea. The intensely sweet-flavored infusion mixed with tapioca pearls is served with a large straw to allow the drinker to suck the pearls through the straw. The drink originated in Taiwan. “It’s a delightful novelty drink, especially for children under the age of 12,” Keating says. “We don’t see it expanding into high-sell environments, because of the prep time. The basis of the drink is tea, sugar, soy milk, and dairy milk. It’s served in brightly colored cups and really is intended for the juvenile market.”

Children are a new target for traditional teas as well. The Republic of Tea brand now offers Panda Berry Tea for Kids. It’s a blend of apple pieces, rosehips, hibiscus, licorice root, fine decaffeinated black tea, and natural strawberry, cherry, cream, and honey flavors.

Restaurant operators considering adding new tea drinks to their menus have the chance to influence the future of the U.S. tea market, because tea experts and vendors are looking to foodservice to grow the market.

“Supermarket and drug store sales of tea are going to remain sluggish. They’re at roughly 0 percent growth now,” Keating says. “Tea in general will start selling better if foodservice can be a leader.”

Sara Lee is one vendor concentrating on finding new tea offerings to excite restaurant operators and their customers. “I’ve been going through this crazy tea cupping process trying everything I can,” Lynda Parks says. She’s especially interested in flavored ice teas, including the new juicy teas, which contain juice crystals.

“There is so much opportunity with what you can do,” Parks says. “The key is going to get foodservice customers to buy into that and try the new flavors. So often, foodservice mimics what’s going on in retail. If we can be out there first with new products, it’s going to make a difference. What I’m hoping to do is get one of our customers to partner with us and see what we can develop.”

The timing is perfect, Keating says, for restaurants to take a greater interest in tea. “There’s been a major shake up on menus,” Keating says. “The Supersize menu items are going away and we’re seeing veggie burgers on fast-food menus. Operators have looked at improving their coffee service, adding juices and even installing better dispensing guns for soft drinks. Yet you have this crowned jewel on menus—with the highest profit margin and the healthiest possible message that hasn’t been looked at. And there’s better tea and better delivery systems out there. The time to take a look is now.”