Reading the Tea Leaves:Growing Sales & Profits with Tea

A Panel Discussion & Presentation by:Joe Simrany – Moderator, Tea Assoc. of the USA

William Bowron Jr- Red Diamond Inc.Eliot Jordon- Peet’s Coffee & Tea

George Vukasin Jr.- Peerless Coffee & Tea

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Objectives of this Session

• Brief update on the State of the Tea Industry

• Current consumer trends

• Future trends & forecasts

• Integrating tea into a coffee environment

• Questions from the audience

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Tea Imports into the USA in 2008

• The USA imported nearly 240 million pounds of tea in 2007

• Full year 2008 figures are just in and indicate over 257 million pounds or nearly 117 million Kg were imported in 2008

• This makes the USA the seventh largest consumer of tea after China, India, Russian Federation, Turkey, Japan, and the United Kingdom

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Tea Imports – USA Kg(000)YEAR BLACK GREEN TOTAL % CHG.

2002 84,156 9,295 93,451

2003 82,132 12,054 94,186 +1.0

2004 87,717 11,767 99,484 +5.6

2005 85,927 14,139 100,065 +1.0

2006 89,098 18,474 107,572 +7.5

2007 91,154 18,237 108,733 +1.1

2008 99,905 16,845 116,607 +7.4

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Tea Imports into the USA (Kilos)Three Year Rolling Average

2005-2007 2006-2008 % Inc/ dec

Black Tea 88,727,800 93,387,100 5.2

Green Tea 16,950,400 17,852,300 5.3

Total Tea 105,678,200 111,239,400 5.3

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Size of the Tea Market in U.S.

• 1990 $Value by Type• Trad. $0.87 Billion• RTD 0.20 “• Fd Srv 0.50 “• Special 0.27• Total $1.84 Billion

– Green $20 Million

• 2008 $Value by Type• Trad. $2.00 Billion• RTD 2.95• Fd Srv 1.02• Special 1.16• Total $7.13 Billion

– Green $1.5 Billion

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Change in Tea Consumption by Revenue & Segment

0.00

1.00

2.00

3.00

1990 2008

Traditional

RTD

Foodservice

Specialty

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Tea Sales ($) Forecast to Double over Next 5 Years

• A reputable market research firm (Packaged Facts) has forecast that the Dollar value of tea in the United States will move from over $7 Billion in 2008 to nearly $15 billion by the end of 2012!

• Green Tea is growing at a much higher rate than Black Tea; up over 200% in Kgs. Over the last ten years

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Traditional Tea Trends

• Historically this has been the largest tea segment at $2 billion

• Price points have been stagnant for years & typically sell for under $3 per package which is a significant consumer appeal in a tough economy

• Tendency has been to smaller packages (under 100 count) to overcome price issue

• Packers are beginning to use a health message to sell.

• Advertising effort is minimal but increasing

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Consumer Issues Driving Traditional Tea

• Growing number of scientific studies suggesting tea plays a role in the inhibition of many chronic human diseases

• Widespread acceptance by the scientific and medical communities that tea is a healthy beverage

• Widespread awareness by the media that tea is proven to be a healthy beverage

• Tea enjoys positive imagery regarding its contributions to health versus other beverages

• Traditional tea pricing is very appealing

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Developments to Watch

• Traditional Tea– Smaller pack sizes– Packaging & process

innovation– Health claims– Increased consumer

marketing– Blending of traditional

tea with specialty tea

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RTD Tea Trends

• RTD within a span of 10 years has gone from virtually nothing to the single largest tea segment

• It is responsible for appealing to a much wider audience than traditional tea

• Many powerful marketing alliances have been formed with soft drink & water companies

• Prospects for future growth are excellent

TEATEA

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Consumer Issues Driving RTD Tea

• RTD tea appeals to the individuality of consumers

• RTD teas continue to appeal to the demand for convenience and availability

• Other beverage options are seen as being less healthy than tea

• Concern with obesity is driving many consumers to tea

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Developments to Watch

• RTD Tea– Continued flavor

exploration from existing & new suppliers

– Functional teas linked to health

– Specialty Tea entries– Marketing directed

against bottled water

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Foodservice Trends

• Tea is more difficult to prepare than coffee & is often served incorrectly

• Equipment manufacturers are beginning to address the issue by developing faster processing methods

• Operators are starting to do a better job with tea because of the profit potential & consumer demand

• Some high end restaurants are employing Tea Sommeliers

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Consumer & Trade Issues Driving Foodservice Tea

• High profitability potential attracts entrepreneurs

• Increasing preparation options encourages greater foodservice utilization

• Trend towards natural foods favors tea in general and organic tea specifically

• Emerging Tea “Salons” are making Specialty Tea more available

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Developments to Watch

• Foodservice Tea– Improved preparation

& variety– Improved consumer

demand driven by concern for health

– Resurgence of loose tea

– Increased operator merchandising

– Greater awareness of profit potential

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Specialty Tea Trends

• Fastest growing segment in the industry

• Ten fold increase in the number of tea rooms from 200 to 2400

• Most coffee houses now offering specialty tea

• Tremendous profit potential attracting entrepreneurs and stimulating producing country interest

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Consumer & Trade Issues driving Specialty Tea Trends

• Promise of high profitability is drawing thousands of entrepreneurs to sell various forms of tea

• The number of tea rooms has grown from 200 to 2200 over the last 10 years in America

• Thousands of Coffee Houses have added Specialty Tea

• Affordability to consumers

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Developments to Watch

• Specialty Tea– Rapid expansion of tea

outlets– Emergence of 1 or 2

National operators– Increased Producing

Country involvement in marketing (Tata & Tea Boards)

– Greater availability of Estate Teas

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Prospects for Future Growth

• Traditional Tea is expected to realize annual growth in the 2-3% range although a prolonged recession could drive higher growth

• RTD Tea will continue to experience robust growth in the range of 5-10% annually

• Foodservice Tea will experience annual growth in the low to middle single digits

• Long term, Specialty Tea will become the fastest growing segment with annual increases in the 10-20% range

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Calm-A-Sutra ContestShortcut to CD Drive.lnk

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Integrating Tea into a Coffee Environment

• Panel Discussion

• Questions from the audience

• Further information please visit www.teausa.org