Reading the Tea Leaves: Growing Sales & Profits with Tea

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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
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
2
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
3
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
4
Tea Imports into the USA (Kilos)
Three Year Rolling Average
2005-2007
2006-2008
88,727,800
93,387,100
% Inc/
dec
5.2
Green Tea 16,950,400
17,852,300
5.3
Total Tea
111,239,400
5.3
Black Tea
105,678,200
5
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 $1.5 Billion
6
Change in Tea Consumption by
Revenue & Segment
3.00
2.00
Traditional
RTD
Foodservice
Specialty
1.00
0.00
1990
2008
7
Tea Sales ($) 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
8
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
9
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
10
Developments to Watch
• Traditional Tea
– Smaller pack sizes
– Packaging & process
innovation
– Health claims
– Increased consumer
marketing
– Blending of traditional
tea with specialty tea
11
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
TEA
12
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
13
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
14
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
15
employing Tea
Sommeliers
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
16
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
17
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
18
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
19
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
20
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
21
Shortcut to CD Drive.lnk
Calm-A-Sutra Contest
22
Integrating Tea into a Coffee
Environment
• Panel Discussion
• Questions from the audience
• Further information please visit
www.teausa.org
23
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