In 2024, Nongfu Spring experienced an unprecedented change: its ready-to-drink tea segment overtook bottled water as its biggest business. This illustrates how quickly the tea industry is changing. As the world’s oldest tea industry, China’s tea industry is being reshaped. Traditional loose-leaf remains the foundation. However, new Chinese-style tea drinks and ready-to-drink tea are rapidly growing, driven by young consumers who see tea differently from the older generations. For young consumers, tea is not only tied to taste but also to social expression, wellness, and cultural identity. As a result, they’re pushing brands to constantly innovate in terms of flavors, ingredients, and experiences and even encouraging brands that are not in China’s food and beverage industry to incorporate tea into their products.
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Traditional tea remains the foundation in the Chinese market
Traditional tea remains stable in China. In 2025, the traditional retail segment, which encompasses conventional loose-leaf tea and packaged teabags, reached USD 18.38 billion. It is expected to expand at a 7.2% compound annual growth rate from 2026 to 2033.
This foundation is supported by a substantial physical farming base. According to the China Tea Marketing Association, China had 53.12 million mu of tea plantations (or about 5 million soccer fields of land). It produced 3.64 million tons of dry crude tea. This means that about 10,000 tons of tea are produced per day across the year.
In the traditional tea market in China, green tea dominates with 59% of the production share in 2025. Black tea (16%), dark tea (12%), and oolong (10%) followed it. Green tea is not just popular, but it is also the most culturally significant tea in China and a versatile ingredient. It was the first type of tea people developed in China, forming the foundation of Chinese tea culture. Even in regions where tea is not produced, Chinese consumers are likely to have memories of their family drinking it at home. It is also versatile, allowing it to be incorporated into beverages, foods, and cosmetics.
New formats – ready-to-drink (RTD) and new Chinese-style tea – are growing rapidly
In addition to the traditional tea segment, the tea market is segmented by two other major ones: new Chinese-style tea and ready-to-drink (RTD) formats.
Young consumers drive growth of new Chinese-style tea drinks
The new Chinese-style segment, or freshly prepared beverages made with brewed tea or tea leaves mixed with ingredients like fruit, juice, or dairy, is expanding rapidly. In 2025, it was valued at USD 6.75 billion, and it is expected to grow at a CAGR of 14.5% from 2025 to 2033.
Young Chinese consumers are driving this growth as they see the beverages as a mix of lifestyle, cultural, and social engagement. They demand interactive cultural experiences, supported by blind boxes, limited-edition merchandise, DIY elements, and social media-friendly experiences.
Moreover, as Chinese consumers grow more health-conscious, they are seeking drinks that provide benefits beyond just low sugar toward cleaner-label tea beverages with plant-based ingredients and real fruit. According to a 2025 iiMedia report, 78.3% of consumers pay attention to “real fruit” and “low sugar” labels.
Additionally, young urbanites demand holistic wellness and cultural resonance. Consumer discourse heavily revolves around food-as-medicine and TCM aesthetics. On Xiaohongshu, users actively combat physiological “dampness.” Dampness (湿气) is a traditional concept describing excess internal moisture. Consumers utilize specific herbal tea integrations to cure this imbalance. Popular functional ingredients include lingzhi (灵芝), red barley (薏米), and black sesame. Buyers treat these specific teas as proactive, preventative metabolic tools.
The new Chinese-style tea industry is segmented
Surviving this segmented oligopoly requires distinct operational execution. In the Chinese industry, this structure is defined by three rigid tiers: the Mass-Market (led by Mixue’s extreme cost-efficiency), the Premium-Tier (HeyTea/Nayuki’s focus on high-end experience), and the high-pressure Mid-Range segment where brands like Chagee must balance premium quality with aggressive, scale-driven pricing. This segmentation means brands that fail to dominate their specific niche’s operational costs are quickly squeezed out by competitors who control their own upstream supply chains.
Within this environment, Chagee achieved a massive RMB 31.58 billion (USD 4.62 billion) GMV in 2025. However, rapid store expansion caused severe profitability pressure. Their operating margins dropped to 10.4%.
Conversely, Chinese beverage brand Mixue thrives through absolute supply-chain ownership. Mixue dictates raw material costs across 44,000 domestic stores. This cost leadership generated RMB 5.93 billion (USD 868 million) in net profit. Mixue also masters low-cost, viral memetic marketing. They printed a serialized historical fiction novel on store receipts. This “receipt fanfiction” generated over 38 million views on Weibo in 2025. Supply-chain dominance and memetic creativity define survival in this sector.
Ready-to-drink tea formats are also growing
Although smaller than traditional tea and new Chinese-style tea drinks, RTD formats are also driving growth. Domestic ready-to-drink tea consumption accounted for 34.5% of the global total in 2024, and its growth rate exceeded the global average of 8% CAGR from 2021 to 2024. In 2024, RTD accounted for 11% of the consumption share within the market of soft drinks in China.
Nongfu Spring illustrates this shift. The brand’s packaged water business didn’t do well, but its packaged tea helped offset the pressure. In 2024, its packaged water revenue fell 21.3% YoY to RMB 16 billion. However, its packaged tea – largely its Oriental Leaf – rose 32.3% to RMB 16.75 billion, making tea drinks the company’s largest business for the first time.
Tea consumers are becoming younger, driven by different needs
The tea market in China, especially the new Chinese-style, is being driven by young consumers. According to a 2026 report released by Douyin, 36% were aged 18 to 30 among the first time buyers of tea during the spring.
More specifically, young consumers can be split into types: those who drink tea for the “check-in” (打卡) experience and those for its functional value. The first segment of consumers values the aesthetic aspects of the tea stores. They visit tea stores to take photos and share them on social media. Their repeat visits tend to be low, unless there’s an experiential reason to re-visit. The other segment refers to those who pay more attention to the emotional value, social space, and health needs. They tend to be high frequency repeat consumers who care about the tea quality and treat tea houses as a “third space.” These consumers are more likely to be white-collar or creative professionals.
Tea spills into other product categories
Severe commodity oversupply pushes the industry to seek higher-margin secondary categories. The Asia Pacific region captures roughly 35% of the global tea-based skincare market. Domestic manufacturers increasingly utilize tea tree oil for its natural antimicrobial properties. They integrate these botanical extracts into premium skincare and household cleaning products. This strategy allows companies to command premium pricing from health-conscious buyers. It decouples revenue from the compressed margins of traditional bulk tea.
Key learning points in China’s tea market
- Traditional tea remains the largest segment in the Chinese market. In 2025, it was valued at USD 18.4 billion with a steady growth ahead. Green tea alone accounted for 59% of production.
- New Chinese-style tea is growing rapidly, powered by young consumers. Young consumers demand social, experiential, and health-forward ingredients. They seek real fruit, TCM-inspired functional teas addressing “dampness”, and other benefits beyond just low sugar.
- Tea extracts are spilling over other categories. Premium skincare, household cleaning supplies, and other non F&B products are incorporating tea.
Author: Sory Park
