Reading the Tea Leaves: Growing Sales

1
Reading the Tea LeavesGrowing 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- Peets 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
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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

TEA
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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 Contest
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Integrating Tea into a Coffee Environment

• Panel Discussion
• Questions from the audience
• Further information please visit www.teausa.org