August 28, 2026 – The US tea market and US RTD tea market includes hot tea and iced tea. Hot tea describes tea products such as fruit tea, chai mixes, tea infusions, tea concentrates, and RTD tea that is consumed hot. Iced tea is consumed cold. It includes prepared iced tea, powdered iced tea, RTD iced tea, cold brew tea, and kombucha.
Tea and RTD Tea are Two Different Categories
Tea and ready-to-drink tea serve two different market needs. Hot tea is minimally processed and is very simple. Innova’s research shows that US tea consumers drink hot tea for calmness and ritual. The US hot tea market is quieter than the US iced tea market. US consumers are facing increased stress, an area that hot tea could claim with opportunities to help consumers relax and wind down. Iced tea in the RTD tea market is in a competitive subcategory for flavored liquid refreshments. Competitors for the US iced tea market include water or homemade iced tea. Iced tea has the larger share of the US tea and RTD tea market. It is the tea format that drives growth of the US tea market. Price and affordability often drive growth of the US iced tea market. Factors threatening continued growth include the costs of importing and packaging.
Using just one strategy for tea likely won’t fare well. The US tea market and US iced tea market differ from each other in flavor, format, price, and occasion. They differ from each other in growth, growth drivers, flavor, format, and opportunities. Gains in one area for one type of tea could suppress growth of the other. One strategy for the US tea market could help one tea, say, hot tea, while suppressing iced tea.
Position Iced Tea and the RTD Tea Market Based on Price
Competitive pricing is one way to spark the growth of iced tea, and when there’s inflation, price is hit first. According to US consumer trends surveys, US iced tea consumers rank affordability over flavor. Outside factors like packaging costs and the cost of imports can hurt values for iced tea.
Calmness is an Overlooked Opportunity for Hot Tea
The benefits of hot tea for calmness are well-established, even though they are not actively marketed. US tea consumers drink hot tea for relaxation but tend not to seek beverages to help manage their stress levels. Marketing hot tea for winding down is a missed opportunity.
Tea Faces Competition
Other beverages form the competition for the US tea market. The core occasions for drinking tea are refreshment, hydration, and calm. Tea faces competition from functional sodas, sparkling water, RTD coffee, and others. Beverages that deliver refreshment and value are rivals for iced tea. Those that offer calmness and ritual compete with hot tea. It is important in the US tea market for iced tea to compete on its strengths and hot tea to compete differently on its inherent advantages, rather than trying to compete generally.
US Tea Consumers Give Various Reasons for Drinking More
US tea consumers have several similarly ranked reasons for drinking more iced tea, for example. Affordability is the number one driver, followed by variety and growing interest in the iced tea subcategory. Value is important, but so is interest. Other factors influencing the US iced tea consumer are healthier options, household needs, and changing lifestyles. Higher percentages of US iced tea consumers say that spending less is a driving factor, compared to spending more. The influence of promotions is pretty low. Because value, interest, and variety have similar influence on the US iced tea consumer, US iced tea brands need to diversity marketing beyond just accessible prices. Approaches could include changing flavors, offering limited runs, and supporting health benefits.
Make Tea Drinking a Daily Habit
US tea consumers buy tea often, but many don’t drink it daily like coffee drinkers. Just over half of US tea drinkers drink tea every day. These drinkers offer the opportunity in the US tea market for brands to encourage more occasions to drink tea. This could be a more attractive option than getting new consumers to start drinking tea. Iced tea can accomplish this more easily because consumers can seek refreshment throughout the day. In contrast, hot tea is consumed more as a ritual, but this can compete with coffee.
Innovation Versus Purity in the US Tea Market
Innovation and purity are two opposing forces in the US tea market. On the purity side, tea is minimally processed. On the innovation side, new tea product innovation is focusing on flavor and function. Iced tea in particular leans heavily on innovation. Nearly all US iced tea launches are flavored in the RTD tea market. In contrast, hot tea is becoming more plain and less processed, a nod to the purity side. Every time a playing innovates in the US tea market, it trades away purity and also puts itself in a more competitive marketplace for flavor. Therefore, hot tea needs to protect its position for minimal processing and iced tea can compete on flavor without trying to compete on purity.
What’s Next for Tea and RTD Tea in the US?
Watch for continued movement toward less sugar as a pathway to healthiness. The number of reduced-calorie iced tea launches is on the rise. Tea and RTD tea will be consumed on more occasions and in café offerings that spread tea consumption across the day. Iced tea has a flavor advantage over hot tea and can incorporate more botanical ingredients and exotic fruit flavors for functionality. Protection of value can become difficult because of reliance on imports and the rising costs of aluminum cans.
This article is based on Innova’s Tea & RTD Tea in the US report. This report is available to purchase or with an Innova Reports subscription. Reach out to learn more