November 25, 2025 – The hot tea market and iced tea market in the US are growing, although they are growing unevenly. US consumers perceive tea for its naturalness and health benefits.
Tea in the US Lags Behind Other Drinks
Even though tea in the US fits into a lot of trends, it has not grown in popularity the same way other drinks such as hot coffee, ready-to-drink coffee, energy drinks, and functional drinks have. The tea market in the US has room to grow because it can meet multiple consumer needs for focus, energy, relaxation, digestive health, heart health, and immune health. Other key benefits are for nutrition, mood-boosting, and refreshment. However, US tea brands also need to educate US consumers regarding the bioactive compounds in tea that can meet consumer health needs. Coffee offers a great model for tea to follow. Coffee has transitioned from being part of the morning routine to being consumed iced as a pick-me-up in the afternoon to serving as a key ingredient in evening cocktails. Tea in the US can follow this model.
The US Iced Tea Marketplace is Larger than the Hot Tea Marketplace
Looking at dollar sales, the US iced tea market is triple the size of the US hot tea market. The success of iced tea in the US as a refreshing beverage can be an inspiration for the US hot tea market. At a time when US consumer trends show that US consumers are tightening their budgets, pricing strategies for hot tea and iced tea need to be considered.
Hot Tea Meets Varied Needs
In the tea market in the US, hot tea meets a broad range of consumer needs. However, hot tea’s positioning is very fragmented, so it invites innovation in flavor variety and health benefits. US consumers trends research suggests that US hot tea brands can target Millennials and Generation Z in different ways, including suggesting tea drinking occasions that go beyond breakfast. Tea trends reveal that US consumers under 45 are the biggest cohort of iced tea drinkers and are driving growth in the US tea market through their iced tea purchases.
Tea has a natural health halo but it also is important to promote the health benefits of tea, including the priority benefits of stress-reduction, energy, and brain function, while also expanding occasions beyond breakfast. However, tea trends show that the number of health benefits of tea can be overwhelming to consumers. Tea is extremely versatile, with varieties containing caffeine or being caffeine-free and meeting a range of health needs from relaxation and stress relief to energy, heart health, and immunity. The range of benefits for the US consumer can be overwhelming so consumers may need guidance for personalizing their tea choices.
Emphasizing the Fun Factor of Iced Tea
In addition to its health features, iced tea in the US can be fun! US ice tea brands need to find the balance between better-for-you and fun but maybe less healthy, especially tied to key beverage occasions. One way to accomplish this is with innovation around fun flavors. Still, as shown in tea trends, US Gen Z and Millennial consumers are seeking healthier tea products with lower sugar and added functional ingredients and nutrients.
US Hot Tea Consumers Need More Education
Tea trends indicate that US consumers could benefit from more education regarding occasions for drinking hot tea. This will help create new habits. Some angles for tea brands in the US are caffeine for energy in the morning, L-theanine for energy and mental health during the day, and caffeine-free options for calmness in the evening.
Message Around Clean
Tea is natural and has a naturally clean reputation. This is one of its most relevant assets. That is why additives to tea in the US also need to be natural. This includes vitamins, flavors and colors, and sweeteners.
What’s Next for the US Tea Market
Innova expects that tea in the US will be promoted as being cleaner and a better energy source than energy drinks. Many energy drinks contain large amounts of added caffeine. Tea can support US consumers at the beginning and end of the day with energy in the morning and stress relief and sleep promotion in the evening. US tea brands can look into promoting the specific health benefits associated with tea’s unique bioactives such as L-theanine, caffeine, flavonols, and catechins. Flavor is an exciting area to explore, with new tastes emerging from brand collaborations, reflecting current tea trends. This is a strategy currently used by soft drink and energy drink brands. US tea brands can explore combining different herbal ingredients for targeted health benefits. These can include benefits for digestive health or for losing weight. Finally, tea in the US may need to compete against CBD- and THC-infused drinks. US tea brands can emphasize tea’s long history as a soothing beverage or consider adding CBD or THC ingredients to tea drinks.
This article is based on Innova’s Tea and RTD Tea in the US report. This report is available to purchase or with an Innova Reports subscription. Reach out to find out more.