Global tea brand, Lipton is pumping in more investments in its supply chain in China, as it faces growing competition from other brands in the freshly brewed and sugar-free tea categories.
Its Liheng Central Warehouse, a logistic hub aimed to streamline its operations across the country is expected to be completed by 2027 at an investment of Rmb 50 million (US$6.9 million).
Apparently, tea bag formats face growing challenges from healthier, fresher tea products in China. Lipton is responding by diversifying its portfolio and will be launching a caffeine-free rooibos tea this year aimed at health-conscious consumers. It is also accelerating the rollout of cold brew and loose-leaf formats.
According to Huifang Tsang, General Manager of Lipton Greater China, 1/3 of the brand’s sales come from e-commerce and sales usually outperform on weekdays compared to weekends, signifying that its products reach out to ‘out of home’ or ‘office-based’ consumption. Probably, consumers prefer the fresher tea products from tea stores and spent more time out-of-home during weekends.
Lipton currently markets over 200 products in China, spanning tea bags, loose-leaf cans and powdered products. It serves about 2 billion cups annually and operates across tens of thousands of catering outlets.
Despite its dominant position, maintaining market share is a huge challenge due to the large number of tea/bubble tea stores as well as new entrants into the tea manufacturing market. Lipton has invested heavily in fast-food chain partnerships and is positioning itself as a key ingredient supplier to major beverage operators.
Frost & Sullivan estimated China’s tea market to grow from Rmb 334.7 billion (US$46.75 billion) in 2023 to Rmb 427.6 billion (US$59.7 billion) in 2028. Lipton hopes to capture more demand from food services where freshly made tea drinks are becoming more mainstream, as it cannot rely entirely on its tea-bag retail formats.
Nevertheless, Mintel estimated that sales of tea bags continue to grow at 6.6% to reach Rmb 19.3 billion (US$2.7 billion) in 2024 due to rising demand for convenience and health-focused products.
