---
title: "The Categorization Evolution of Sugar-Free Tea: What Can We Learn from the Japanese Market?"
description: "The sugar-free tea market is booming, with dozens of new products launched in the past six months alone. As competition intensifies, brands are moving beyond basic health claims to differentiate on specific tea varieties, processes, and flavors. By analyzing Japan's decades-long evolution, this article explores four key dimensions of category fission—experience enhancement, scenario expansion, cultural recognition, and functional exploitation—to provide strategic insights for Chinese brands seeking to innovate and capture new growth opportunities."
author: "Foodaily"
publisher: "New Distribution"
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published: "2024-01-13"
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# The Categorization Evolution of Sugar-Free Tea: What Can We Learn from the Japanese Market?

> The sugar-free tea market is booming, with dozens of new products launched in the past six months alone. As competition intensifies, brands are moving beyond basic health claims to differentiate on specific tea varieties, processes, and flavors. By analyzing Japan's decades-long evolution, this article explores four key dimensions of category fission—experience enhancement, scenario expansion, cultural recognition, and functional exploitation—to provide strategic insights for Chinese brands seeking to innovate and capture new growth opportunities.

How hot is the sugar-free tea market? According to the author's incomplete statistics, dozens of new sugar-free tea products have been launched in just the past six months. Genki Forest introduced a large-capacity "Golden Osmanthus Pu'er" tea, Master Kong launched a sugar-free jasmine green tea, and Otter Tuntun rolled out a hand-brewed "Osmanthus Oolong" sugar-free tea. Beyond traditional tea beverage brands, players from other beverage categories have also entered the sugar-free tea market: Dongpeng Special Drink has entered with its Oolong Shangcha new product, Yili launched Yike Huoquan freshly brewed tea, and Tsingtao Beer introduced Youhuojia barley tea. Image source: Genki Forest, Master Kong, Otter Tuntun flagship stores.

Behind the rush of brands is the huge opportunity of rapid growth in sugar-free tea. According to Euromonitor and Yeeou Think Tank data, China's sugar-free tea beverage growth rate far exceeds other tea beverage tracks. While sugary tea beverages grow slowly, the sugar-free tea market maintained a 7.9% growth rate in 2022 and is expected to achieve a compound annual growth rate of 10.2% from 2022 to 2027. In the coming years, China's tea beverage market will enter a period of rapid growth for sugar-free tea. However, compared to other Asia-Pacific countries with long tea-drinking histories, especially Japan and South Korea, the domestic sugar-free tea market is far from saturated. In 2022, domestic sugar-free tea beverages accounted for 7.7% of the ready-to-drink tea beverage market, expected to rise to 18.2% by 2025, while Japan had already reached 85.2% in 2022.

As players flock to the sugar-free tea track, competition is shifting from generic health claims and tea flavor restoration to more specific tea varieties, processes, and tastes. As consumer demands evolve and upgrade, category fission is inevitable, deriving more personalized and high-end forms from basic formats. This is a universal law in the food industry and even the consumer goods industry, and the sugar-free tea industry is no exception. With the domestic competitive landscape not yet stable, companies aiming to stand out need to jump out of the confines of specific product concepts and seek opportunities to mine and create new categories from consumer demands at different levels. Accurately discerning the direction of category fission can give companies a first-mover advantage and enable more precise product development strategies.

Japan's decades of industrial development practice repeatedly confirm that category fission is the best opportunity to spawn leading brands and hit products. Therefore, the author hopes to provide new ideas for domestic companies' future development by studying the category fission patterns of sugar-free tea. Reviewing the category's development history, what does the sugar-free tea market look like? What insights can domestic brands' development and innovation gain from tracing Japan's differentiation path during its rapid growth period?

**Scanning the Domestic Sugar-Free Tea Beverage Market: The Landscape Is Not Yet Stable, and Efforts Are Still Needed**

#### **1. After 20 Years of Growth, Three Forces Jointly Drive the Accelerated Development of Sugar-Free Tea**

In 2004, Japan's Suntory Oolong Tea entered the Chinese market, opening the prelude to the development of the domestic sugar-free tea category. Subsequently, Uni-President and Coca-Cola successively launched "Tea King" and "Original Leaf" teas, but due to the limitations of consumers' health and sugar-free awareness not yet fully awakened, both products exited the market. After Nongfu Spring launched "Oriental Leaf" in 2011, the public gradually developed consumption habits, and sugar-free tea gradually broke out of the niche and entered the public eye.

Image source: Foodaily Daily Food compilation; data sources: Yeeou Think Tank, Analysys.

In 2017, Genki Forest launched "Ran Tea," using a sugar substitute solution of erythritol and other sweeteners to solve the dilemma between healthy tea drinks and sweet taste experience. Subsequently, Coca-Cola launched "Chun Tea House," Vitasoy launched "Sugar-Free Tea," and Letea launched "High Mountain Tea"... With the comprehensive recovery of national health awareness, the sugar-free tea category has experienced rapid growth. The "2023 China Sugar-Free Tea Beverage Industry White Paper" shows that sugar-free tea has become a key driver of the overall beverage market growth.

Image source: "2023 China Sugar-Free Tea Beverage Industry White Paper" Yeeou Think Tank.

Currently, the domestic sugar-free tea market generally presents a competitive landscape of three forces: traditional brands, new brands, and cross-border brands. Traditional brands such as Oriental Leaf and Suntory still occupy the main market share, new brands like Genki Forest and Letea are entering strongly, and there are many cross-border players, but few have successfully broken through.

Image source: The above brands' Tmall flagship stores and official websites.

#### **2. Quality and Taste Become the Mainstream Competitive Directions**

In studying sugar-free tea products, the author found that the current mainstream selling points of sugar-free tea products mainly revolve around two aspects: tea quality and tea taste. In terms of quality, many products emphasize concepts such as **sweet aftertaste, pure aroma, high-quality original tea extraction, refreshing taste, and no additives**, highlighting differences in tea varieties and flavors. For example, Genki Forest's large-capacity Golden Osmanthus Pu'er tea uses golden osmanthus and ripe Pu'er tea leaves, brewed with 100% original leaves, offering a refreshing taste suitable as a daily tea substitute. Otter Tuntun's hand-brewed osmanthus oolong tea uses Guilin golden osmanthus and Fujian Baiya Qilan as raw materials, presenting a warm, mellow, and sweet flavor. In terms of taste, some tea drinks use sugar substitutes to provide sweetness. In addition to common oolong tea, green tea, jasmine tea, etc., more flavors such as Longjing tea, mulberry tea, Pu'er tea, and red bean barley tea are emerging.

Image source: Genki Forest, Letea, Tea & Water Talk.

Genki Forest launched red bean barley water and red date wolfberry water, Letea launched high-mountain Pu'er tea, and Tea & Water Talk launched jasmine tea, among others.

**Highly Similar Market Background: What Reference Significance Does Japan's Sugar-Free Tea Fission Trajectory Have?**

Comparing China in 2020 with Japan in the 1990s, there are extremely high similarities in population structure, economic characteristics, and consumption performance. According to data from the UN Population Division and Huajin Securities Research Institute, the overall population structure of China and Japan is highly similar. The new generation (15-35 years old) as the main consumer group has similar proportions in both countries, and the distribution of the population over 60 is also very close. In terms of consumption behavior, before the economic bubble burst, Japan advocated hedonism and personalized consumption, with rapid development of the luxury goods market; but after the bubble burst, consumption became more rational, with light luxury and high cost-performance consumption becoming mainstream. Similarly, before 2021, domestic consumption upgrading was a major trend, with international luxury brands accelerating channel sinking in China; but in the post-pandemic era, the overall upgrading trend that lasted for several years began to differentiate, with high cost-performance, bulk sales, and discounts becoming consumption keywords.

Information source: Pacific Securities Research Institute compilation.

The high overlap in social and economic development between the two countries is also reflected in the evolution of Japan's sugar-free tea category.

Image source: Foodaily Daily Food compilation.

Domestic sugar-free tea entered a rapid development period after 2017, while Japan also entered a rapid development period in the early 1990s. The author believes that national consumption concepts, sales channels, and technological innovation have become the three major drivers of the rapid rise of sugar-free tea. First, fast-paced, rational consumption prompts people to value the convenience and health attributes of products, and sugar-free tea's characteristics are highly compatible with this. Second, the development of sugar-free tea also benefits from the rapid growth of convenience stores and vending machines. Taking vending machines as an example, their number increased from 440,000 in 1990 to 600,000 in 2000. As retail channels penetrate people's life scenarios, the convenience of obtaining sugar-free tea has greatly improved. In addition to external environmental changes, brands' technological and packaging breakthroughs in optimizing tea drinking experience and expanding drinking scenarios have also greatly driven the development and innovation of the sugar-free tea category. During the decade of rapid growth from 1990 to 2000, the CAGR of the Japanese tea beverage market was about 10%, with sugar-free tea accounting for 30%, while soft drinks only accounted for 2.7% during the same period. During this period, Ito En became the leader in the green tea category by pioneering canned oolong tea and PET bottled green tea. Ito En and Suntory won the top position in the oolong tea category through differentiated marketing of "authentic Chinese tea leaves." Subsequently, Coca-Cola's Ayataka and Kirin also increased their layout in the sugar-free tea track, seizing a place in the market by creating different subcategories. Social and economic development, coupled with beverage giants and new players' grasp of consumer demand, has allowed Japan's sugar-free tea market to develop steadily since 2000, creating long-lasting classic products. The product forms, flavors, drinking demands, and experiences of sugar-free tea have also undergone several generations of changes, forming trajectories of upgrading and fission.

**Culture, Scenarios, Functionality... Deconstructing the Four Dimensions of Japan's Sugar-Free Tea Category Fission**

After analyzing the development history of Japan's sugar-free tea market, the author believes: **Experience advancement, scenario expansion, cultural recognition, and functional exploitation are important dimensions of Japan's sugar-free tea category. Currently, domestic competition in sugar-free tea mainly focuses on taste and quality. The development of Japan's sugar-free tea category fission provides reference experience for domestic sugar-free tea brands to explore new growth opportunities.** Image source: Foodaily Daily Food production.

#### **1. Experience Advancement: Using Technology and Packaging to Optimize the Details of Tea Drinking Experience**

Improving the sensory quality of tea drinks is closely related to current specific tea drinking habits, making consumers' tea drinking experience easier to perceive. Clear tea soup, fresh-brewed flavor and taste, and flexible and portable product forms are all innovation levels that can be optimized. With breakthroughs in technology and packaging, tea experience can be upgraded. Ito En is a typical case of using technological innovation to drive the fission of the green tea category. To make tea into a long-term storable ready-to-drink beverage, it is necessary to overcome the problems of tea soup oxidation, discoloration, and flavor change. In 1985, Ito En adopted the "T-N Blow" process, which removes oxygen from the container by injecting nitrogen before filling and capping, successfully creating the industry's first canned ready-to-drink tea product. In 1990, Ito En also used the patented Natural Clear production method, filtering tea leaves with natural micro-filters to retain tea aroma and clear tea soup.

Image source: Ito En official website.

It is worth mentioning that to ensure the tea taste is close to that of teapot brewing, Ito En's tea production line imitates the tea soup extraction machine of a teapot, and the process conditions adjust parameters such as extraction time and temperature according to the day's environmental characteristics. In packaging design, Ito En also pays great attention to details. They specially designed a "freshness-preserving bottle" that reduces the impact of light. At the shoulder of the bottle, 70 cuts are designed to scatter light, preventing the shoulder that cannot be covered by the label from being affected by sunlight.

Image source: "Turtle Pond Haiku Selected for Japanese Tea Bottle"

In addition to conventional canned and bottled tea, Ito En's Oi Ocha product matrix also includes various differentiated packaging forms such as tea bags, tea sticks, tea powder, and tea bag multi-packs, providing a very diverse range of drinking options.

Image source: Ito En Oi Ocha.

Besides Ito En, Kirin and Ayataka have also created new sugar-free tea categories by leveraging different tea drinking experience details. Starting from the pain point of improving the bitter and astringent taste of green tea, Kirin used gyokuro and crown tea leaves rich in theanine, and added raw tea leaf extract to create the raw tea category. From the experience of restoring freshly brewed tea, Ayataka launched "tea that is cloudy like brewed in a teapot."

#### **2. Scenario Expansion: Penetrating People's Lives from Multiple Time Dimensions**

#### **(1) Extending the Time Line: Expanding Drinkable Scenarios from Four Seasons**

Every cold winter, the concept of hot drinks becomes popular. Early tea drinks were made by brewing tea leaves with hot water, but domestic hot drinks are mostly limited to freshly made beverages, with few pre-packaged beverages actively occupying the consumer mind of warm or hot drinks. However, in Japanese convenience stores, shelves for warm drinks are very common. Ito En launched a PET bottle that can be heated in a microwave in 2000, using a 5-layer special structure to prevent oxygen from entering the bottle during microwave heating.

Image source: Ito En Oi Ocha.

Observing the habit of preferring cold drinks in summer, Ito En launched a freezable green tea product in 2018, using technology to ensure that the product maintains a refreshing taste and appropriate astringency after melting, and the bottle does not deform.

Image source: desertcart.vu.

#### **(2) Focusing on Daily Details: Capturing Specific Lifestyles**

In the post-pandemic era, home scenarios have developed rapidly. With their warm aroma that easily evokes family and the hustle and bustle of life, Japanese roasted tea and genmaicha have become more popular. Observing this characteristic, Ito En launched fresh roasted aroma versions of roasted tea and genmaicha in 2021. The roasted tea is roasted to the core, emitting a sweet and fragrant happiness aroma unique to roasted tea; genmaicha removes rice bran and then adjusts the heat in stages for roasting, further enhancing the rice aroma.

Image source: Ito En Oi Ocha.

Cold climates cause a significant decrease in people's sensory sensitivity. Ito En launched a winter-limited rich roasted tea in 2021, using the first tea leaves of the year and roasting them for a long time to enhance aroma and richness. At the same time, the product uses dark red packaging, also presenting a warm and happy atmosphere.

Image source: Ito En Oi Ocha.

#### **3. Cultural Recognition: Seizing Cultural Symbols to Create a Unique and Memorable Persona**

As the TOP1 in Japan's oolong tea category, the key success factor of Suntory Oolong Tea is that Suntory has shaped a cultural symbol with strong category recognition. Previously, Japan's perception of oolong tea was that it was a foreign tea from China. Suntory Oolong positioned itself as "authentic oolong tea from China" and printed the words [Using Fujian Province Tea Leaves] on the packaging, strongly associating with Japanese consumers' recognition of Chinese oolong tea leaves.

Image source: Suntory.

Suntory also adapted to the changing times, presenting different Chinese elements in line with Chinese trends. Incorporating Chinese cultural elements such as [Beijing Crosstalk], [Havoc in Heaven], [Chinese Dance], and [Chinese Kung Fu] into advertisements further strengthened the perception that Suntory is an authentic oolong tea brand.

Image source: Suntory.

Suntory's Iyemon green tea also successfully broke through in the green tea market firmly occupied by Ito En by leveraging a highly recognizable cultural symbol. Japanese consumers believe that local green tea is the most authentic. In 2004, Suntory partnered with Fukuzyuen, a Kyoto-based tea shop with over 200 years of history that only sells "tea," with the business philosophy of selling consumers "the beautiful Kyoto." The brand name was taken from Fukuzyuen's founder, Iyemon; the water used for brewing comes from Kyoto's Yamazaki, permeating Japanese tea ceremony and tea culture.

Image source: Suntory Iyemon.

#### **4. Functional Exploitation: Linking to Current Health Pain Points and Deeply Mining the Functional Value of Tea Components**

By highlighting different value points in different eras, even the same product can show different charms. Ito En launched Oi Ocha Koicha strong green tea in 2004. Although this product was developed based on taste, at that time, Japanese consumers associated this darker strong tea with a strong bitter and astringent taste, so they refused to try it. In 2019, Ito En updated the product label of this strong green tea, making functional claims, particularly emphasizing that the catechins contained in the product have the function of reducing body fat. After updating the product's value point, sales of Oi Ocha Koicha strong green tea surged, becoming a product with high repurchase rates among all age groups.

Image source: Ito En Oi Ocha.

After the 1990s, Japan successively enacted various regulations for functional health foods, providing brands with greater autonomy and flexibility in developing functional foods. In recent years, as the functional value of tea components such as catechins and theanine has been gradually discovered, products closely related to current health pain points such as fat reduction have emerged. In recent years, Ito En has successively launched products such as Oi Ocha Catechin Green Tea PET Bottle and Oi Ocha MATCHA SHOT. Among them, Oi Ocha MATCHA SHOT not only has a rich matcha flavor and taste but also makes functional claims for its theanine and catechin content.

Image source: Ito En Oi Ocha.

**Summary**

In China and Japan, tea beverages have always been a category rich in history and cultural heritage. The diversity of raw materials, the diversity of tea-making processes, and the plasticity of drinking scenarios all give tea beverage innovation great imagination space. The general view is that today's China is highly similar to its neighbor 30 years ago. As an FMCG category that fully reflects the improvement of people's livelihoods and the evolution of dietary concepts, the domestic sugar-free tea industry is also in the early stages of an explosion, and what follows will be leapfrog development.

Can the domestic sugar-free tea market, driven by the health trend, seize the favorable opportunity of rapidly increasing consumer awareness and acceptance to show a more mellow and longer-lasting charm? The author will continue to pay attention.

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