A Call for Standards – Need to Know

What tea professionals need to start the week of Dec. 8, 2014 —

A Call for Standards

By Austin Hodge

The last decade has seen a boom in what the industry calls ‘Specialty Tea’, but if you ask for a definition you will come away confused.

What is so special about ‘Specialty Tea’?

Not much. A close examination reveals commodity tea that has been adulterated in some way, typically by blending ingredients such as pieces of fruit, exotic herbs or flower petals. Since the ingredients are dried, tea blenders spray (yes, spray) on lots of flavor. I’m using the word “commodity” to include any large-scale tea where the production goal is quantity over quality. There are great quantities of traditional tea growing in every tea producing country. These include green tea, puer tea, wulong tea, white tea well as black tea. There are also an endless variety of herbals incorrectly labeled teas.

Why set standards for ‘Specialty Tea’?

Without standards, the market faces chaos. Where would France be if it had not established standards for wine almost 500 years ago? Italy followed suit and prospered. Stop and think, would the debate over which is better — Italian or French wine — have turned out differently if the Italians had been the first to set standards?

Picking Standard for Breakfast Qimen Tea

Picking Standard for Breakfast Qimen tea is two leaves and bud

It’s important to understand that standards not only define products, they establish markets, and whoever defines a market, controls it. It is undebatable that the French have created admirable markets for their wine, as have, more recently, specialty coffee retailers.

The chaos in the ‘specialty’ tea market comes from the fact that no one, from buyer to seller, actually knows the value of the tea they are buying or selling, or how to clearly establish its value. Price is derived mostly from marketing — price is certainly not based on the quality of the tea. In a practical sense, words like “quality”, “value”, and, “excellence” have been watered-down into obscurity as much as “specialty.”

Nowadays, tea is whatever the merchant says it is, opening a lot of ground for dubious interpretation. In contrast, standards are consistent and independently verified. The specialty coffee industry has done an excellent job of establishing standards, which has lead to levels of excellence and increased profitability enjoyed by the entire coffee industry.

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Coffee and tea both began as rarities for the rich, evolved into commodities for the masses and are gradually becoming artisanal offerings – the choice of connoisseurs.

Everyone my age remembers that back in the day, coffee was either the Red Can (Folger’s) or the Blue Can (Maxwell House). There were neighborhood diners and corner cafes where a cup of coffee cost a quarter. This was coffee’s “First Wave.” Americans annually drank an average of 10 lbs. of coffee per person. Per capita consumption was measured by the gallon because the efficiencies of the commodity model made it cheap.

The turning point was 1974 when independent coffee shop owners established a standard for “Specialty Coffee.” The adoption of standards launched the “Second Wave.” Pioneers such as Alfred Peet at Peet’s Coffee & Tea, Starbucks, and Coffee Bean & Tea Leaf would not exist without these standards. Innovations in growing, sourcing, roasting, packaging, and coffee brewing followed.

The market for specialty coffee was more sophisticated, resembling its European counterparts. Coffee of this quality command a higher price; it no longer had to be cheap. Thus “quality” coffee became easily distinguishable from commodity coffee.

The term “Third Wave” was coined around 2002 when small coffee businessmen traveled to coffee farms to source direct and eventually became experts in every aspect from growing to roasting to brewing. This took the small retail coffee businesses to a new profitable level that could differentiate itself from the like of Starbucks and company. Once in control of the entire supply chain, not only did standards raise retail margins for retailers, the discovery of great coffee also opened the door for a respectable wholesale business selling to other quality businesses whose business models did not include working the complete supply chain.

The “Third Wave” aspires to an even higher level of coffee experience. It begins with direct sourcing. Only direct sourcing can insure quality and answer questions about fair trade and farming methodology with confidence. Third wave coffee also places high value on production and preparation: the goal is to get the best possible cup. Third wave coffee owes its existence to Starbucks for building the market for better coffee, and for establishing the benchmark. Retailers exceeding that level could not profit in the market that Starbucks created. Third Wave roasters realized they needed to get a whole lot better to beat Starbucks, and to do so they needed expertise and transparency along the entire supply chain.

Similarly, two years ago Starbucks changed the tea market dramatically for small independent tea businesses when they bought Teavana. From here on, every small tea business is going to be defined in relation to the nearest Teavana, like it or not.

Picking standard for LiLi Xiang tea

Picking standard for LiLi Xiang tea is three top leaves

The difference between coffee and tea is that there are no standards that give tea business the tools to beat Teavana. Starbucks redefined the market for coffee on almost every level. They will do the same for tea. Small tea businesses and major tea corporations alike are going to feel the heat. Without standards, Teavana, with its extraordinary marketing muscle, can define tea quality any way they want.

If standards for specialty tea mirrored the standards for specialty coffee the only tea that could quality as “specialty” is tea judged to be within the top 20%. Most of the tea sold as specialty tea in the West would be disqualified. Just as there is with coffee, few multimillion dollar companies are going to support standards for quality in the tea industry.

Why would they?

Tea’s “Third Wave”

In the spring of 2014, Jesse Jacobs of Samovar Tea, wearing a cream-colored canvas apron over a fashionable t-shirt, announced the coming of the tea industry’s Third Wave.

But can the tea industry really be on the verge of entering into a movement equivalent to that of the coffee industry? Even though both tea and coffee have the Starbucks Corporation in common, it is going to take the tea industry a very long time to catch up to the sophistication of the coffee industry. The discussion about standards for ‘Specialty Tea’ has not even begun.

Picking Standard for Liu An Gua Pian. The second opened leaf is picked as soon as it matures to the size of a pickers thumb

Picking standard for Liu An Gua Pian. The second opened leaf is picked as soon as it matures to the size of a picker’s thumb

Looking forward, a profitable market for small tea businesses will require standards. These need to be objective, understandable, and replicable. Standards provide growers with a definable goal for crops and harvesting. Standards enable tea makers to formulate products clearly identified by buyers, which give the producers incentive to get better. Direct sourcing will become increasingly important for the tea businessman. Consumers will actually know what they are paying for and where it originated.

Establishing standards brought extraordinary advantages to coffee growers including unimaginable financial success. A small Brazilian coffee grower this month won the Alliance for Coffee Excellence’s 100th Cup of Excellence (COE) competition to earn $50.20 per pound at auction, the highest price ever paid per pound for COE coffee. He took home $106,000 in a country where the per capita income is less than $1000 per month. What is noteworthy is that Brazil is the largest commodity coffee producer in the world. Think what standards for quality would mean for small holders in India and Africa, areas still economically strangled by the colonial commodity system. Establishing an objectively evaluated standard establishes value that can be communicated thru the supply chain to the customer. Excellence is the reward.

China is realizing the benefits of standards in its domestic market for tea right now. Their tea industry was destroyed through a 150 years of war and internal strife. As China recovered following World War II and the Mao era, tea was mediocre at best across the country. More than a decade ago China set standards for quality and freed tea makers to create and profit from their own business. Since then, China has experienced a renaissance in tea making: tea being produced for the domestic market is the best it has ever been in history; China has become the largest tea producing country in the world, gets the highest prices for its tea, and has the highest average price for tea. China has the best teas in the broadest categories; it has defined standards, and grows the largest percentage of tea using traditional, chemical free growing practices.

The coming of standards is inevitable. Small businesses that are dedicated to quality in real terms, not just in the marketing of their products, will benefit.

It took years for standards to impact coffee, but things will move quicker with tea due to the benefits of the information age. The tea industry is ready for professionals to lay the groundwork for “Third Wave” tea. Let’s leave it to Teavana to push the second wave along in building the market, like their parent company did.

What is great about getting the ball rolling towards standards for quality and, eventually — excellence — is that small businesses that are struggling to establish new business models need not worry, for the best practices for quality in the tea industry go beyond the reach of corporations, economies of scale, and deep pockets of marketing departments. Standards are the essential tool for the tea entrepreneur.

So become a pro, take some Chinese classes, and get you passport up to date, and by all means study the Specialty Coffee Industry. They have become experts in coffee on every level. You might want to remember that this year Peet’s hired a woman that is fluent in Chinese and has a masters degree in tea from Zhejiang University.

Standards, direct sourcing, transparency, expert level knowledge about tea and its culture, logistical mastery, inventory management expertise, and tea preparation skills are all requirements for ushering in tea’s third wave. Herein lays opportunity, challenge, and the promise of excellence. Let’s hope tea entrepreneurs’ passion for tea is strong enough to take them where they’ll have to go.

Austin Hodge is the founder of Seven Cups Fine Chinese Tea in Tucson, Ariz. http://www.sevencups.com

Copyright Austin Hodge.

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Q&A with John Smith, Chair Tea Association of the USA

SOUTHAMPTON, Bermuda — John Smith, vice president at Henry P. Thomson tea importers, was recently named Chair of the Tea Association of the USA during the 4th Annual North American Tea Conference.

Smith has been with New Jersey-based Thomson since May 1997. He is fluent in Spanish and Portuguese holds an MBA in Finance from Fairleigh Dickinson University and graduated with a degree in languages from Georgetown University in 1989.

The family-owned company, founded in 1912, has been active in the association since its founding. One of the firm’s principals is “to share our knowledge of tea with others and to stay at the forefront of the marketplace.”

On taking the gavel from outgoing Chair B.W. Cooper, Smith sat with Tea Biz to outline his views and vision of the association.

TEABIZ: The Tea Association of the USA was founded to protect the interests and promote growth of the U.S. tea industry. For several decades its mission was to serve as a “creative catalyst and vigorous voice of the industry in the pursuit of these goals.” The mandate includes a list of tasks that are continually evolving. As incoming chair will you share with readers two tasks that you view as the most pressing. Why?

SMITH: Earlier this year, incoming President Peter Goggi assembled a diverse group of association members running the gamut from major packers to specialty tea consultants to revise and update the mission statement.

The new statement reads as follows:

TEABIZ-TeaAssociationMission“I think the new formulation, while very close to what we had before, accurately reflects what we need to do as an organization. That said, there are two priorities that I think should guide all of our efforts going forward.”

• We need to expand our membership.

Our current members import and pack more than 90% of the tea consumed in the U.S., calculated either on a total weight or a dollar volume basis. Not a bad penetration rate! To achieve this, our efforts have traditionally been geared toward the larger, commercial entities that dominate the market place. We represent those interests very well.

“However, much of the passion for our product, the drive for new tea experiences and a deeper understanding of the product we enjoy so much can now be found within the individuals and businesses that fall outside our traditional membership. We need to foster an environment where these other voices are recognized and their issues and concerns represented.

“While differences in opinion will always exist, ours is the only organization that provides a venue in which these differences not only co-exist, but serve to bring the tea industry to a better place. As a not-for-profit, our only agenda is what you find contained in the Mission, Values and Vision above.

• We need to gather and maintain as complete a database as possible of all current and pending laws, regulations and standards that apply to our product.

“While a very tall order, it is imperative that we fully understand current regulations and their impact on our members.

John Smith

John Smith

TEABIZ: The Specialty Tea Institute offers the most comprehensive professional training program in the United States, teaching the art of tasting which is fundamental to operating a tea business. Will you share your vision of STI in the year ahead.

SMITH: STI does a great job training people on the basics of tea. We do not attempt to offer professional or business guidance and I do not see us pushing that agenda for some time to come. I would like to see STI become a bridge toward membership in the Tea Association. This requires adding value for members. I will be working to develop ideas in this area.

“That said, we are the premier organization representing tea in the United States. There are other groups and organizations that work with tea, but none serve as an impartial, non-commercial voice that defends the industry from both outside influences and well intentioned, but misguided industry members. My vision is to have an organization in place that needs no coercion to join. Whenever a tea professional asks “should I join STI?” the only realistic response should be “of course”!

TEABIZ: The Tea Association is known as a champion of tea’s health benefits. What initiatives will you undertake to enhance/maintain this role?

SMITH: The “Tea and Health” message is as powerful as it is because the industry stays out of the way of professional researchers. We disseminate scientifically sound information as it comes forward. Through the Tea Council’s sponsorship of the International Scientific Symposia on Tea & Human Health, we are able to facilitate the availability of peer-reviewed, solid research to the public. In order to continue the Symposia, we will once again start setting aside the necessary funds to cover the next event – likely scheduled between 2016 – 2018.

“This is another area where members should stop and examine the benefits provided by the U.S. Tea Association. The resources to organize a successful scientific symposium that has the full support of the appropriate scientific and governmental entities are substantial. It may not seem that a $250 annual membership in STI does much toward this, but every bit helps! If your tea shop, your consulting business, your speaking engagements benefit from the Tea and Health message, you might want to consider staying involved in its evolution and continued propagation by maintaining your STI membership and contributing toward the Association in that arena. Inertia will not keep this process going. Left untended, the bush will continue to grow, but the harvest will be greatly reduced.

TEABIZ: Members of the Association also belong to the Tea Council of the USA, whose mission is to promote tea in the U.S. In the past the Tea Council spent between $300,000 and $550,000 to promote tea, including specialty, mass-marketed, and RTD teas. Discuss programs and current level of funding for Tea Council programs designed to promote tea.

SMITH: Let me clarify that statement. Since the Bermuda accord, back in 1991, the Tea Council has spent its funds entirely on either the Scientific Symposia or on the Public Relations efforts that follow publication of the papers. Our PR efforts are fully supportive of the Tea & Health message. Clearly, this effort has paid off, as tea continues to be viewed as one of the healthiest, good for you foods that you can consume…

TEABIZ: Annually the Tea Association jointly hosts a conference with the Tea Association of Canada that provides an opportunity to foster open exchange with exporting countries. Discuss your view of the relationship between the U.S. and major tea exporters.

SMITH: The relationship between the U.S. Tea Industry and its major producing partners has always been strong. The tea industry as a whole is very collegial. There is a mutual respect between most of the participants and a noticeable lack of the cut-throat, anything-for-an-extra-cent competition frequently encountered with other commodities.

“That said, the recent increase in regulations governing U.S. Trade and the multitude of interpretations regarding those regulations have caused issues. I do not advocate a laissez-faire approach. Some rules are necessary. However, when I read phrases in legislation like “scientific and risked based principles,” I would like to see some indication these words have been taken into account. In many instances, that does not seem to be the case.

“In our excessively risk-averse modern culture, any form of disclaimer is immediately discounted. Most responses to proposed regulations exhibit a knee jerk quality that disregards principles based on a solid grasp of statistics, cost benefit or risk assessment.

“I digress. As the Association improves its database, listing specific regulations accompanied by any specific enforcement details we can provide, this area of tension should certainly decline.”

Hans P. Theyer to Oversee Fairtrade America

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Hans P. Theyer is the first executive director of Fairtrade America.

TWEET: New Fairtrade America executive reasserts smallholders role.

WASHINGTON, D.C.

Hans P. Theyer was named executive director of Fairtrade America May 13 of the newly organized affiliate of the international Fairtrade system. He is charged with articulating the organization’s social mission after a schism invited major retailers to abandon Fairtrade certification in favor of a rival program run by Fair Trade USA.

Theyer confronts the challenge of re-establishing relationships with suppliers severed in January 2012 when Fair Trade USA cut its ties to Fairtrade International, diverting millions in funding after 13 years as an affiliate. The staff at Fair Trade USA, based in California, introduced a new label and began certifying large plantations and estates. The group also introduced programs that emphasized the importance of growing fair trade sales through marketing by major retailers and member suppliers.

Theyer is not without allies. Equal Exchange, the largest fair trade coffee company in the U.S., refused to accept the policy change and campaigned publicly to convince other suppliers to remain with Fairtrade International.

“Fair Trade, a product of years of sweat, sacrifice and risk, belongs to the farmers. But Fair Trade USA has abandoned the legitimate international system, not paid its dues, and changed the rules to allow large-scale plantations and private estates into the coffee system. With this move, they threaten to reverse decades of hard-won gains while potentially putting at risk the very survival of the farmer co-operatives,” declared Equal Exchange Co-Presidents Rob Everts and Rink Dickinson who made their point in full page newspaper advertising addressed to coffee giant Green Mountain Coffee Roasters.

Their appeal “to leave Fair Trade USA and rejoin the international certifier in which small farmers have a true seat at the table and governance power” was ignored.

Tea blenders, roasters, retailers and others holding Fair Trade certifications in many instances were forced to pay both Fair Trade USA and Fairtrade International.

Theyer’s zeal for small holders is apparent. “I have seen first-hand the incredible difference fair trade can make for farmers, workers and entire communities in developing countries,” he said. He also made clear his intent to raise public awareness of Fairtrade’s core mission “in partnership with companies, retailers, producers and all fair trade advocates that share our vision of building a vibrant fair trade movement in the United States.”

The stakes are high. Globally, fair trade certified goods amounted to $6.6 billion in sales in 2011, up 27 percent since 2009. Retailers in several categories including sugar, coffee and tea now find stocking their shelves with fair trade labeled goods essential to attract a growing niche of customers. Fair Trade USA founder and Chief Executive Paul Rice argues the split was essential to maintain this momentum. “We are after results,” he told BusinessWeek
after announcing the decision. “We want to get things done.” His announced goal is to double U.S. sales of fair trade goods by 2015. To achieve this goal additional products such as fair trade cotton will be certified. More controversial is the decision to certify products made with a combination ingredients. In considering chocolate bars for example, cocoa in some Hershey Bars earned the Fair Trade USA seal even though the sugar used to make the chocolate bars was not fair trade certified. In March Hershey’s, the largest American chocolate maker, announced it would source 100 percent of its cocoa from fair trade certified suppliers including both Fairtrade and Fair Trade USA. The decision followed a seven-year campaign by the Raise the Bar, Hershey! Coalition.

Prior to joining Fairtrade America, Theyer helped create and run a consulting practice specializing in developing social impact strategies for businesses. He previously served as Executive Director of Agros International, a non-profit organization dedicated to rural poverty alleviation throughout Central America and Mexico. Hans was a leader in Microsoft’s Rural Computing effort, an initiative to empower emerging markets throughout the rural, developing world with access to information and communications technology.

Originally from Chile, Theyer holds a Masters in Business Administration (MBA) degree from London Business School. His business experience includes sales, marketing and business development positions with Microsoft and leading international banking institutions.

“Hans brings tremendous assets to Fairtrade America, including a fantastic combination of business and international development experience, strong connections and work with rural communities across Latin America and Asia, and fresh ideas and vision for growing Fairtrade in the United States,” said Bama Athreya, Board Chair, Fairtrade America. “Under Hans’ leadership we look forward to collaborating with our business and non-profit stakeholders so that more Americans will learn about fair trade, buy Fairtrade products and have the opportunity to play an active part in empowering small farmers and workers to improve their lives.”

Dan Bolton

©Mystic Media 2013

LinkedIn: Hans Theyer agreed to a five question Q&A with Tea Biz. What questions would you pose?