According to CRI, the herbal tea industry is monopolistic in China. JDB and Wong Lo Kat accounted for about 80% of the market shares in China herbal tea in 2015, while a fraction of the rest was occupied by other enterprises. The number of herbal tea manufacturers is hundreds nationwide, but major brands familiar to Chinese consumers are JDB and Wong Lo Kat. Therefore, the barriers to entry in this industry are relatively high for new entrants. The competition between JDB and Wong Lo Kat is intense with a series of legal disputes.
Consumers from Guangdong Province as well as its nearby areas are the most powerful in the herbal tea market in China. Major functions of herbal tea are advertised as cooling and removing summer-heat, and they are accepted by consumers. The nationwide demand for herbal tea is relatively large of those frequent visitors to fried food, barbecue and hot pot. Many Chinese restaurants sell herbal tea in a large quantity, especially in hotpot and barbecue shops. Besides, herbal tea is preferred by certain groups who like outdoor sports and often stay up late.
The sales areas of Chinese herbal tea cover plentiful countries such as China, the U.S.A., Canada, France, the U.K., Italy, Germany, Australia and New Zealand at present. The unit product sales value of JDB red can herbal tea reached CNY 16 billion in 2011, which surpassed Coca-Cola to be the best seller of soft drinks in China. Herbal tea covers Chinese restaurants, large scale supermarkets and convenience stores at present.
Major risks and challenges faced by the herbal tea industry are the substitutes of other beverages. For example, fruit & vegetable juice and beverage, vegetable protein, milk beverage and herbal tea are in a relationship of competition while there are no absolute substitutes because of dynamic target consumers. Generally, the herbal tea industry will grow rapidly in China in the next few years. CRI estimates that the CAGR of the market size of China herbal tea will remain about 10% from 2016 to 2020.