China’s One Belt, One Road – Need to Know

China is making its biggest splash in tea in modern times this summer at Expo Milano 2015 the world’s largest food and beverage tradeshow.

LOGO-ChinesePavilionMilano2015“Never before has Italy hosted so many tea experts from China all together with so many companies representing the excellence of Chinese tea,” writes Marco Bertona, chairman of the Tea Association of Italy. The China Pavilion in Milan is shaped like fields of wheat rippling in the wind to reflect the theme, “Land of Hope, Food for Life.” It has been visited by almost 250,000 tourists since it opened in May.

Chinese Tea Culture Week” which ended Sunday brought to light a political mandate to make China the world’s greatest tea exporter.

In 2013 Xi Jinping, China’s new president, proposed The Belt and Road Initiative, a modernization of the Silk Road Economic Belt and the 21st Century Maritime Silk Road. The goal is reviving ancient trade routes between Asia and Europe. The proposed trade and infrastructure network passes through more than 60 countries and regions, with a population of 4.4 billion. Nations along the route produce more than 80% of the world’s supply of tea.

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China Pavilion at Expo Milano 2015

Unlike past initiatives which emphasized quantity over quality, this time China is determined to dominate the global market for premium tea.

In 2014 more than 80% of China’s tea exports were low grade green tea destined for Africa, Europe and Russia. Right now there is a surplus of commodity tea and a scarcity of premium tea making this a good time to export fine tea. During the past decade the green tea that China exported sold for between $1 and $2 per kilo. In December 2014 the world average price for tea sold at auction was $2.56/kg down from $2.72/kg the previous year. The average dropped an additional 30-cents to $2.42/kg by the end March 2015, according to statistics compiled by the Central Bank of Sri Lanka.

China Daily reports that the average price of Chinese tea increased to $4 per kilo during the past few years. Last year Chinese tea exports $4.19 per kilo. This is a big improvement but is still not enough to be profitable, according to Chinese traders.

TEABIZ_ChinaTea_OneRoadOneBeltChina’s tea market was valued at $56 billion (RMB 350 billion) in 2014. Exports comprise only $1.27 billion of market value, but were up 2.1% compared to 2013. Export volume declined 7.5% during that same period, an indication that China is shipping greater quantities of higher-value tea.

Sri Lanka, the world’s second largest tea exporter, gets the highest average price for commodity teas auctioned anywhere in the world. But the Colombo Tea Auction average is still less than $5 per kilo. Asia Syaka, a global commodities brokerage notes “Sri Lankan orthodox black tea continues to command premium pricing in the international market with prices averaging $4.97 per kilo.”

Specialty teas, in contrast, sell for $150 a kilo with some bringing $350 to $400 per kilo.

Untapped Capacity

In 2013 China was the world’s second-biggest tea exporter at 322,600 metric tons behind Kenya’s 494,400 tons. That year Sri Lanka exported 319,600 metric tons. In 2014 Sri Lanka stepped up exports, setting a record at 327,800 metric tons and China fell to third.

China is without doubt capable of meeting global demand for premium tea. It is the only large tea producing country capable of mass producing all six kinds of tea. China already produces 40% of the world’s tea and is developing thousands of additional acres per year. Tea is grown there on 6.7 million acres (2.7 million hectares) and it is exported to 120 countries. China’s tea is marketed by more than 200,000 companies representing the work of 30 million growers.

China retains its customary lead in the production of green tea, exporting 79% of the global total and accounting for 80% of value. In most instances exported Chinese tea is blended with herbs and fruits. In the US sales of green iced tea have increased significantly as national restaurant chains promote green tea’s health benefits. At least 10% of the nation’s restaurants now serve green tea alongside traditional black.

Despite its massive production capability “China is not strong enough in exports of tea leaves, tea extracts and deep-processing elements which are fundamentals of the tea industry,” according to Wu Zhibin, vice chairman of the Chinese Tea Culture International Exchange Association told Taiwan-based Want China Times. Deep-processing is the Chinese term for what in the west is known as value-added tea.

“The domestic market values low-production, handmade teas but the global tea market prefers mass-produced teas that are standardized in quality and taste,” according to Wu Jing, editor-in-chief of tea portal chayu.com. He told China Daily that “export teas are grown specifically for that purpose and not consumed domestically.”

Tea Culture Week at the Chinese Pavilion is an opportunity “to support top brands of Chinese tea industry in their path towards growth and worldwide development,” said Zhibin. He praised the top Chinese exports brands which were recognized at as special award ceremony in Milan.

“With rising production costs in China and competition that is likely to intensify, Chinese tea producers have to find new strategies to boost Chinese brands and their sales on the global stage,” says Ji Xiaoming, president of Jingwei Fu Tea Co and chairman of the Shaanxi Tea Association.

“Only if the Chinese tea industry is strong, the Chinese tea culture can be innovative and can be promoted all around the world,” Wu told Xinhua News Service.

Unprecedented opportunity

China Daily reports that “One Belt, One Road” is a rare opportunity to turn Chinese tea consumption into a global phenomenon.

“That is the dream of the country’s tea companies – which are still largely unknown to the world. They are ready to grab a piece of the action in an anticipated market boom,” according to the newspaper.

“The Belt and Road Initiative is not just a rejuvenation of the ancient silk road, but also a comeback of the ancient tea road,” said Jiao Jialiang, chairman of LongRun Group, a Chinese conglomerate specializing in food and health products.

Jiao, who is also a member of the 12th Chinese People’s Political Consultative Conference, told the newspaper that “China’s tea industry will embrace an unprecedented window of opportunity as the Initiative presses ahead.”

Growers and producers spent generations refining the Chinese way of manufacturing tea with its many unique regional variations,” according to the newspaper: “Tea is not simply beverage, but a unique opportunity to share China’s culture.”

“It’s believed the practice of tea culture can take the spirit and wisdom of humans to a higher level, and its study covers a wide field with rich content,” the paper reported.

Tea culture will lead the way boosting the Belt and Road Initiative, said Jiao, “as tea culture spreads around the world, the whole industry will take off,” he said.

Although export figures may continue to trough in the short term, says Wang Jianrong, director of the China National Tea Museum: “The future of Chinese tea exports will be bright if we continue to penetrate overseas markets with tea culture, something that is not reflected in trade figures.”

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An informal assessment of China’s export market for tea.

STRENGTHS

China has the land, tea varieties, tea quality, government incentives and motivation to excel in tea exports. The growth of tea retail outlets (T2, Teavana, DavidsTea, TenRen) is a very promising development. 1400 years ago China was the top tea exporter and even after India replaced it as a quantity supplier China always offered more varieties and higher quality orthodox, remaining dominate for centuries. India is the only producing country with similar capacity and it cannot effectively compete. Kenya will remain the dominate commodity supplier of black tea, but remains an insignificant supplier of green. Anything the Chinese can do with green they can industrialized and scale for black, but doing so is not profitable with Sri Lanka, India and Kenya in the picture. China is expert at orthodox green and while it will step up its black tea production for Asian consumption, European and US export, it will make its greatest gains in premium green/white, pu-erh and oolongs. China’s RTD tea market is valued at about $29 billion. China’s Ting Hsin International Group not only dominates China’s RTD market but the international RTD market as well with a 10% global market share, according to a financial report by LD Investments, published by Seeking Alpha. Look for breakouts in RTD and value-added tea products from concentrates and extracts to supplements and cosmetics. These are more likely to be developed in collaboration with Japan (ITO EN) and Taiwan (TenRen, Tingyi and Master Kong) using inexpensive Chinese tea from the mainland. Right now China is primarily developing extracts and “deep-processed” tea for its own domestic market.

WEAKNESS

Globally the demand for black tea is much greater than green. Right now there is a glut of commodity black teas and a shortage of “quality” CTC that is clean, certified and reasonably priced. China loses money producing cheap green and loses volume if they focus only on premium. Conversion to a dominate black tea supplier offers little financial incentives. Ultimately demand for fine green teas will grow due to its health benefits and the adoption of green by foodservice (in US Wendy’s green iced tea at 6,000 stores). Tea exports represents such a tiny fraction of foreign trade that the Chinese government stands to gain very little (other than prestige) from the increase in tea exports. Tea exports earned $1.27 billion which represents about .056% of China’s $2.25 trillion exports. Electronics and other agricultural products generate a lot more money than tea. Unlike the more profitable exports which receive significant government support, much of the investment on outbound marketing will be made by the 200,000 existing tea companies, none of whom are well known brands. Even the largest holds minuscule market share compared to multi nationals like Unilever, Tata Global Beverages or Nestle.

OPPORTUNITY

Chinese tea culture is fascinating, varied and universally appreciated. China exports tea to 120 countries. The country will more fully develop its impressivle portfolio of prized teas (premium green, oolongs and pu-erh) and that will generate significant income for regional producers willing to undertake mass production. Ultimately these firms will spend the money it takes to promote their offerings in Europe and North America. China’s domestic market currently values low-production, hand-made teas. The global tea market prefers mass-produced teas that are standardized in quality and taste. In time China will show the benefit of its hand-made teas by making them more available in the global market while at the same time collaborate with Western ventures such as Starbucks/Teavana and Unilever/T2 to produce more commercially successful mass-market teas.  In sharing its finest teas China gradually transitions from a commodity producer earning $4 per kilo to a quality producer capable of marketing teas at 10-times that rate and with the capacity to supply the entire world’s demand for premium teas.

THREAT

A slowing economy makes it more difficult for Chinese firms to invest the marketing dollars it takes to win share in export markets, but its own domestic demand for cleaner tea will help offset these costs. Learning to market value-added tea domestically is a precursor to global expansion and tolerance for the millions it takes to promote a Lipton or Tetley brand (ie. its latest global ad campaign cost Lipton $40 million, no Chinese company has ever invested that kind of money to promote a tea brand). Another threat is global instability that impacts trade (China territorial expansion, tension with Japan, aggressive behavior by surrogate North Korea) are factors. However, the single greatest threat in my view (and a primary motivation for exports) is the fact that young people in China consider traditional tea “old fashioned” and are not practicing the tea traditions of their parents. Consumer surveys reveal that nearly 70 percent of those born in the 80’s do not like to drink tea. This rises to 95% for those born in the 90’s. Tea is not cool, shops are largely antiquated and there is no marketing beyond basic grocery display. Relatively little good tea is purchased in grocery. Ultimately tea must appeal to a new generation of consumers. As one critic noted: “if all the tea stores look like archaeology dig sites and antique stores, then it won’t attract a lot of customers.” Revenue from a lively domestic market is essential to expansion of exports.

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Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs good decision-making in business. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.


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It’s Tea Festival Season – Need to Know

It’s Tea Festival Season – Need to Know

Festival season is underway with great events scheduled in Sydney, Dublin and Vancouver…

Western Tea Festivals launched in the past couple of years are drawing crowds of 5,000 to 7,000. Events in major cities across the globe introduce consumers to tea customs and styles. Educational programs are popular with experts sharing methods of preparation while discussing processing techniques and origin.

Retailers typically organize these events in cooperation with local governments and tea marketing associations. Financial support from tea wholesalers, brewing and service ware manufacturers make it possible to keep admission prices low.

Here is a quick recap of shows in the weeks ahead:

Sydney Tea Festival – Aug. 16, 2015

LOGO-SydneyTeaFestivalThis event, co-founded by retailers Renee Creer and Corinne Smith, follows the 2014 debut.  Organizers expect 7,000 to attend a tea market with 50 stalls, tea education program and to take home $4 souvenir tea tasting cups (for samples).

New workshop sessions include tea and dessert pairing with Black Star Pastry and how to create your own chai with the Sticky Chai boys. There’s also the brew lounge where you can kick back and listen to music while sipping a cuppa.

The Australian tea drinkers’ palate is improving as they are trading up basic black tea for more premium and loose leaf teas, notes Corinne Smith, co-founder and owner of The Rabbit Hole Organic Tea Bar. Creer, who owns Perfect South Green Tea, said the festival “celebrates what specialty tea in Australia is all about – quality, diversity and creativity. Whether you’re a long term tea fanatic or just starting to dabble with tea, we’ve covered all the bases for you.”

Australians spent $384 million on 7.7 billion cups of tea last year. “Tea is trending in Australia at the moment and the success of last year’s festival is a testament to that,” said Smith.

Sydney Tea Festival
Festival: Carriageworks
245 Wilson St., Eveleigh
Workshops: Yamma Dhiyaan Training Center
255 Wilson St., Eveleigh

Hours: Sunday 9 am – 4 pm

Learn more: www.sydneyteafestival.com.au and for those too distant to make the trip follow the festivities at www.facebook/sydteafestival (Facebook) www.instagram.com/sydteafestival (Instagram) www.twitter.com/sydteafestival (Twitter), and www.youtube.com/sydteafestival (YouTube)

Sydney Tea Festival

Sydney Tea Festival 2014

Dublin Coffee & Tea Festival – Sept. 11-13, 2015

LOGO-Dublin Coffee & Tea FestivalIrish Foodservice Suppliers Alliance (IFSA) and the Speciality Coffee Association of Europe (SCAE- Irish branch) are again hosting the three-day Dublin Coffee & Tea Festival.

The event in the RDS Industries Hall attracts the industry’s leading Irish tea brands, such as Mrs. Doyles Tea Company, Niks Tea and Solaris along with stands from Lily’s Tea Shop, Bewley’s Coffee and Tea Company and Koyu Matcha Green Tea.  The inaugural event drew 5,700 visitors with 93% indicating they would return in 2015.

Dublin is the site of the World Barista Championships in 2016, an event that will bring competitors from 65 countries. With the Irish palate now as sophisticated as our European counterparts, and a vibrant café culture growing all the time, this year’s show features a great mix of exhibitors, education, entertainment and competitions.

Dublin Coffee & Tea Festival - 2014

Dublin Coffee & Tea Festival 2014

These include the SCAE Brew School where visitors will be shown how to use different brewing methods; the National Home Barista Championships; and The Food Village for Artisan food and beverage suppliers whose products compliments the coffee and tea drinking experience. And, following on once again from the success of last year’s show, there will be a series of fringe events with all features open to commercial sponsorship opportunities.


Dublin Coffee & Tea Festival

Industries Hall of the RDS Dublin 4

Hours: Friday, Noon – 7 pm
Saturday, 10 am – 6 pm | Sunday 10 am – 5 pm
Admission: €10.40 (children free)
Three-day pass: €15.40

Learn more: www.dublincoffeefestival.com and for those too distant to make the trip follow the festivities at https://www.facebook.com/dublincoffeeandteafestival  (Facebook) https://twitter.com/DublinCoffeeTea  (Twitter)

Vancouver Tea Festival – Nov. 21, 2015

LOGO-VancouverTeaFestivalThe Vancouver Tea Society (VTS) is a non-profit that previously hosted a 2013 festival on Vancouver Island.  This year the event moves to the Croatian Cultural Centre, East Vancouver.

The 2013 event drew 3,500 attendees.

“Vancouver has assuredly become a city of ‘foodies’ – a city with discerning, diverse, and increasingly sophisticated tastes in food and drink. Until relatively recently, however, tea was something of an afterthought on the Vancouver scene – overshadowed, among other things, by the city’s reputation as a haven for coffee lovers. But no longer,” write organizers. “We at the Vancouver Tea Society believe the time has come to showcase specialty tea in all its splendour to Vancouver, and to British Columbia as a whole.”

VTS hosts bi-monthly tea events including focused tastings and educational sessions. Net proceeds are donated to local charities. “We resolutely believe tea can be a force for tremendous good, and giving back to the city in which we live and work elides perfectly with the social, communitarian ethos that imbues tea culture,” according to VTS, which is managed by a board of five directors active within the local tea industry.

Exhibitors include Thay Tea, Tea Sparrow, O5 Tea, Young Mountain Tea, My Matcha Life, Amoda Tea, Trudy Ann’s Chai, ICHIYO’s Matcha Tea Bar and JusTea. Tables are $450. Email del@vancouverteafestival.ca for LOGO-VancouverTeaSocietydetails.

Vancouver Tea Festival
3250 Commercial Dr., East Vancouver
Hours: Saturday 10 am – 6 pm

Learn more at: http://www.vancouverteafestival.ca and for those too distant to make the trip follow the festivities at https://twitter.com/VanTeaFestival (Twitter) https://instagram.com/vanteasociety/ (Instagram) and https://www.facebook.com/VanTeaSociety (Facebook)

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Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs good decision-making in business. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.


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US Tea Growers Competition – Need to Know

Competition announced for US grown tea… American Tea Room hires Tony Gebely to run its online operations…

National Competition for US Tea Growers

Tea farmers in the United States are eligible to enter the first competition designed to showcase US grown teas. A cash price of $1000 will go the top grower in each of four tea categories, juried by an international panel of judges.

Eva Lee, a Hawaii tea farmer and TOTUS awards director, with the Volcano Art Center hosting judging Nov. 4 in Hawaii, thanks to a grant from the Hawaii County Office of Research & Development, cash awards provided by the Hawaii Tea Society, and several contributing agricultural organizations involved in developing the cultivation of tea. The competition will be followed by an exhibition and presentation Nov. 7 at the Volcano Art Center in Hawaii.4.VAC Color Logo where people,art,nature meet LARGE

“I recently returned from Washington DC after talking with representatives on Capitol Hill on the significant development of US grown tea in agriculture and its unique place in family farming,” said Lee, a former head of the Hawaii Tea Society. “The more informed our representatives are on domestic tea production the better assistance they can provide at the county, state and federal level. The TOTUS Awards will raise public awareness and create opportunities for many in tea production nationwide,” she said.

The deadline to enter opens Aug. 1, 2015. Entry forms with payment are due Oct. 16. The last day tea entries will be accepted at the Volcano Art Center is Oct. 26. Teas must be 100% grown in the US with no foreign tea blends, scents or herbals added. Categories include white tea, green tea, oolong tea and black tea. The competition is open to both commercial and non-commercial growers. Commercial growers pay $100 per entry. Non-commercial growers pay $40 per entry. Non-commercial growers are those that produce and sell less than 5 pounds of Camellia sinensis per year. Hobbyists and researchers are also invited to submit 36-gram entries. There is a maximum of three entries per tea type.

LOGO-Hawaii Tea Society“Now that spring harvests have ended and with summer and autumn yields ahead, competitors should take this time to review, experiment and refine tea entries to demonstrate excellence of your skills,” said Lee.

Sponsorships, beginning at $100, are welcome to help underwrite competition expenses, she added.

To learn more visit: www.TOTUS1awards.com

Tony Gebely Joins American Tea Room

Award-winning tea blogger Tony Gebely was named American Tea Room’s director of technology and distribution channels. He starts Aug. 1.  Gebely, a two-time World Tea Award winner for his blog World of Tea (www.WorldofTea.org), has 10 years of experience in digital marketing strategy and business intelligence. He has worked 12 years in the specialty beverage industry and is the founder of Chicago Tea Garden.  He will be responsible for all of American Tea Room’s online presence, including management of the website and social media channels, as well as tea education and hospitality outreach.

Tony Gebely

Tony Gebely

American Tea Room will soon open its second location, a 5,600 sq. ft. space in Los Angeles’ Arts District. The shop features a new open tasting arena and oasis garden tea lounge.

The shop, at 909 S. Santa Fe Avenue, will also house corporate offices for the online business which has grown more than 30% year-over-year since launching in 2006. Once the new spot opens, the company plans to remodel its Beverly Hills location into a contemporary, open concept that will accommodate more customers with indoor and outdoor seating, a more comprehensive food menu, and an expanded retail space. This renovation is expected to be completed by late winter 2016. CEO David Barenholtz plans a third location at Fashion Island in Newport Beach. Construction will begin at that location next week he said.

Learn more at: www.AmericanTeaRoom.com

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Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs good decision-making in business. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.


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Student Designed Infuser Tops $360,000 on Kickstarter – Need to Know

By Nanette Jackson

TEABIZ-AudioIcon2_transparent Click here to listen to the inventors tell their story (15 min).

Three college students in Bellingham, Wash., set out to design an innovative magnetic brewing vessel to flip your world upside-down and throw tea bags into the past.

Now they are raising money to launch this project – lots of money.

TEABIZ_NTK_150615_Imbue-FlipA 30-day Kickstarter campaign that ended last week received $362,679 from 6,248 backers. The team’s initial $20,000 goal was met May 4, the day it launched.

The infuser design was a fund-raising project at Western Washington University created to support the Industrial Design Program.

The Imbue vessel has a magnetized loose-leaf tea holder on the inside of the lid. When you flip the container upside-down, it brews the tea. Once steeped to that perfect shade, you can flip it right side up and remove the magnetic holder to enjoy your drink.

All of the vessels were manufactured on campus utilizing student labor. The inventors used a cylindrical cutting tool to robotically cut out all the lids and then did finish sanding and assembly.

Juniors in the Industrial Design Program Dan Taylor, Leah Cohen-Sapida, and Ashkon Nina are responsible for this new invention.

In December, once they finished developing a prototype, they made 150 vessels and introduced their product to the public.

“Then they sold out, and you couldn’t buy them anymore. We got so much good feedback, and people who wanted more. So we decided we were going to take it further,” Nina said.

TEABIZ_NTK_Imbue Infuser_schematic_closeupThe students then decided to launch a Kickstarter campaign, recording video and publishing schematics. The Kickstarter was meant to bring this product into full production. They’re now working with an overseas manufacturer to produce the infuser in larger quantities and to reach a broader audience, according to Taylor.

The campaign raised 18 times their goal. Donors purchased as many as 10 at a time and it remains unknown exactly how many units have been sold because there were so many different donor packages and so many backers.

The Industrial Design Student Association (IDSA) raises money for the students in the Industrial Design program at WWU. The students plan on giving back a lot of their profits to the association once it is determined how much will be needed for full-scale production costs. They are also working on final modifications and new models.

TEABIZ_NTK_150615_Imbue-MagnetThe team collaborated with a handful of students from the onset, inventing a sustainably produced, practical invention. They said they wanted “something that stood out”

“We looked at a bunch of other tea solutions out there and none of them allowed you to easily get the tea out once it’s done brewing. So you brew it and it just keeps brewing while you’re drinking. That’s the unique thing about this product [is that you can easily remove the tea],” Taylor said.

According to Cohen-Sapida, they researched studies on how long you’re supposed to actually brew tea and they found that it was supposed to be around three minutes. But they recognized there are different steep times for various styles of tea. Everyone likes their tea differently, she said.

“This gives you the opportunity to stop, if you don’t want to keep brewing, you don’t have to,” Cohen-Sapida said.

Currently, the vessels sell for $30 on their website, http://imbuetea.com, and are may be pre-ordered online. According to the Imbue Tea website, shipments should begin around October 2015.

Nanette Jackson is a student at Western Washington University.

TEABIZ_NTK_Imbue Infuser_howitworks

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Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs good decision-making in business. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.


Tea Biz posts are available to use in your company newsletter or website. Purchase reprint and distribution rights for single articles or commission original content.  Click here for details.

A Good Omen for Specialty Tea – Need to Know

DavidsTea_LOGOA Good Omen for Specialty Tea

Strip away all the legal filings and investment analysis and what you see in the DAVIDsTEA Initial Public Offering (IPO) today is a positive and persuasive vision of the future of specialty tea retail.

DAVIDsTEA is the latest example of a home-grown venture where the founders, inspired by a love of specialty tea, grew their small shops into a bankable business. Like T2 in Australia, Teaopia in Canada and Teavana in Atlanta, Ga., DAVIDsTEA demonstrated an enviable trajectory from the onset by concentrating on developing innovative herbal blends, loose leaf in packets and selling premium tea online.

In its regulatory filings the company points to 22 consecutive quarters of same store sales growth while constructing 30 new stores a year. DAVIDsTEA is seeking at least $77 million to pay down debt and construct a total of 530 stores. The company reported a $6 million profit on $142 million in sales last year with an annual growth rate of 36%.

Excitement is building for the offering which has been chosen “pick of the week” by several analysts including lead underwriters Goldman Sachs and JPMorgan Chase. DAVIDsTEA upped the initial offering price from $18 to $19 per share Thursday and will likely see a market value vote of confidence of up to $500 million by the end of the week.

Jurgen Link is a pioneer in specialty tea. In 1996 he founded SpecialTeas, Inc. a tea import, wholesale and e-commerce company. In 2005 SpecialTeas merged with leading tea retailer Teavana Corp. (then with 28 stores) to form Teavana Holdings. As president of SpecialTeas and senior vice president of logistics and distribution and Board Member of Teavana Corp., Link lead sourcing, logistics, store distribution and e-commerce fulfillment. He was a member of the executive team during the Teavana IPO and subsequent acquisition by Starbucks.

“In 1996 it was impossible to find special tea in this country,” he recalls. “I grew up in Germany and Germany, like the U.S., is a coffee drinking country but we could always find a tea room with good quality tea in every city of say, 25,000,” he said. That is still not possible in the U.S., said Link.

“That shows me how much more potential we have. What we have available now is merely scratching the surface,” said Link. “Howard Schultz [Starbucks CEO] is right, there is a ‘huge opportunity,’” he added. Retail is changing “but it has not changed enough,” he said. “There needs to be a whole lot more distribution and many, many more outlets, more points of sale and a lot more education,” said Link.

Does DAVIDsTEA hold the key?

“DAVIDsTEA is successfully building a chain of tea stores offering bulk teas, but the jury is still out on the right tea bar or tea room concept,” he explains. “The whole bar/tearoom channel is still in flux because no one has yet discovered a concept that is truly scalable — nobody, anywhere. That does not mean it is not possible,” he said.

“I am very interested to see what Starbucks will do because once the concept is discovered there will be another big surge in growth,” he said. “I think Starbucks has the resources to do it. He [Schultz] needs to invent something that has not been invented,” said Link.

Timing is good for a brisk opening day. DAVIDsTEA reported $35.4 million in sales for the quarter ending May 2, an increase of 28% due in part to an average ticket increase of 7.2%. Comparable store sales grew 6.3% in the quarter. Margins are improving. Rival Teavana, which is twice the size of DAVIDsTEA and benefits from sales at 11,000 Starbucks locations, reported 15% growth in tea sales during the same period.

Click here to see the company’s full financials.

DAVIDsTEA now operates 161 stores. Among those open at least one year, revenue averages $1 million per store. Given the small retail footprint (albeit expensive) and small staff (typically three to five) specialty tea demonstrates a significant return on investment.

Store Count Canada US  Total
2008 1 1
2011 68 2 70
2012 91 14 105
2013 108 16 124
2014 130 24 154
2015* 136 25
*As of May 2015

More important, in the world of beverage retail, scale plays a huge role in profitability. Get the menu right, secure good locations and you can expand, and expand, and expand.

DAVIDsTEA’s biggest opportunity is in the U.S. in cities along the northern border like Chicago as well as the coasts. It operates five stores in Illinois, five stores in New York and one in New Jersey; five in Massachusetts and one in Connecticut with six in California. Its greatest concentration is in the Canadian provinces of Ontario (44), Quebec (25) and British Columbia (25). The company intends to build 30 stores in Canada this year and 15 in the U.S. with a long-term goal of 40 to 50 annually to reach 530 in the next five years. Rival Teavana currently operates 330 stores with plans to build 1,000, according to Starbucks, which acquired the venture in 2012.

Tea retail will not experience the meteoric pace of coffee shop expansion in the 1990s, when Starbucks was opening an average of two stores per day, but growth has been steady, averaging two new chain stores a week in a highly fragmented market. Tea retailing tea is less lucrative than coffee in terms of scale but with better margins. Increasing the DAVIDsTEA price to $19 a share reflects the momentum building behind this offering but keep in mind that shares of Starbucks sell for around $50.

DAVIDsTEA sells 150 different type of tea, introducing 30 annually. Popularity is fleeting for most but innovation stimulates sales. The company earns 68% of its revenue from the sale of loose leaf teas and herbals, mainly packets priced around $8-$12 with 22% of total sales from teaware and utensils. Food and beverage sales account for 10% of revenue. Only 7.9% is from online transactions (2014) which have improved significantly from the 2.7% reported in 2010 but remain below the 10% norm for brick and mortar operations with online offerings. DAVIDsTea predicts this number will rise to 15% of sales with additional investment in the company’s website and online marketing.

In July 2011 Teavana generated $123 million from its initial listing on the NY Stock Exchange. It had 284 stores at the time and was averaging $862,000 in sales per location. The company operated 161 stores in 35 states on the day the IPO was funded and was experiencing nearly identical sales growth that reported by DAVIDsTEA for the quarter preceding the IPO, according to a Goldman Sachs analyst posted to Seeking Alpha.

Will success lead to acquisition? Teavana had better margins than Starbucks at the time it was purchased. DAVIDsTEA reports comparable store growth to that of Starbucks  at seven years of age, according to a cover story published in Specialty Coffee Retailer.

Starbucks has doubled tea sales since introducing Teavana as a replacement for Tazo in its coffee stores. The greatest sales gains are in shaken iced tea and tea lattes. Meanwhile sales of Tazo, now a CPG brand, top $1 billion.

In my view the company will use the IPO money to press its advantage in the U.S. while solidifying its hold in Canada making the Great White North a less desirable expansion target for Teavana (which is eying Asian expansion and growth in the Middle East).

Once the management at DAVIDsTEA demonstrates to the public that the firm has legs to run, expect an inquiry from Unilever which opened its first U.S. tea store in New York last year and its fourth T2 specialty tea shop in London. The Melbourne-based T2 operates 50 stores in Australia. DAVIDsTEA is a good fit for the ambitions of Unilever’s president for refreshment Kevin Havelock. Unilever, owner of Lipton and the world’s largest tea retailer, is a $75 billion company with a growing appetite for specialty tea.

Sylvain Toutant, who has been president and CEO of DAVIDsTEA since 2014 (leaving Keurig Green Mountain as COO of the Canada subsidiary last May), answers to a board of aggressive executives with a history of building companies to sell.

Expansion through franchise partners is another option. Several of Teavana’s overseas stores and those in Mexico are franchised.

Operating a business largely consisting of franchised stores is much different and less profitable than corporate-owned ventures. In a report published by Entrepreneur magazine Franchise Business Review found that “51.5% of food franchises earn profits of less than $50,000 a year; roughly 7% top $250,000, with the average profit for all restaurants coming in at $82,033.”

Tea’s high margins, an exclusive collection of teaware and utensils and services like monthly delivery subscriptions generate sales at a mall location equal to or even greater than franchise chocolatier Godiva – one of the most profitable franchises with 217 locations in the U.S. and 275 overseas.

Godiva generated $765 million at 10,000 locations in 2013 with U.S. retail stores averaging more than $1 million per year. “Each of these stores makes 37% more sales and posts 248% more profits,” since 2008, according to Godiva’s owners. Production capacity of the U.S. factories has increased 73% since the company was acquired for $850 million by Yildiz Holdings, as reported by the Hürriyet Daily News.

The IPO is hot proving bulk tea vendors are an exciting opportunity but if DAVIDsTEA wishes to remain independent and eventually dominate the segment it must also discover the elusive tea bar concept that will scale.

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Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs good decision-making in business. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.


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Media Frothing Over Matcha – Need to Know

Starbucks weathered an unprecedented technical failure Friday… Matcha Madness coast-to-coast.

POS Failure

Thousands of company-operated Starbucks locations in the U.S. and Canada experienced a catastrophic POS (point of sale) crash Friday that tested the coffee giant’s spirit of generosity. A momentary outage can be frustrating but with no word on when the system would be restored store managers recognized the opportunity to offer customers free drinks and food. When it became clear repairs would take hours, managers closed the stores. There is no estimate on how much this cost the company in lost sales, but Starbucks serves 54 million people a day. The outage was caused “by an internal failure during a daily system refresh and was not the result of an external breach,” according to the company which worked overnight to repair the system. By Saturday the more than 8,000 Starbucks locations that experienced the failure as well as Teavana and Evolution Fresh locations tied into the POS were open.

Matcha Madness

Soon after the nation’s collegiate basketball frenzy passed newspapers and magazines coast to coast proclaimed “matcha madness” affording tea retailers a great opportunity to generate additional greenbacks from the emerald powder.

The stir dates to late last year when the New York Times  featured the 1000-year-old Japanese tea in an article on Ippodo Tea, an authentic Koyoto establishment that selected New York City as the site of its first store outside Japan. A stream of recipes and blog posts followed. This month TIME Magazine, the Associated Press and, here in Canada, the National Post all devoted major coverage to Westernized adaptations.

TEABIZ150427_MachaCover_D3“Matcha shots were the ‘it beverage’ at New York Fashion Week according to Fast Company which reported “at last month’s New York Fashion Week, models were spotted sipping bright green matcha instead of Red Bull. Matcha is on the menu at eateries across the city: David Chang sprinkles matcha powder on dishes in his tasting menu at Momofuku Ko; Voila Chocolat serves it on top of hot chocolate, while Maman offers a matcha-infused almond latte; you can have it prepared according to the rituals of a Japanese tea ceremony at Cha-an or Ippodo. Williamsburg, naturally, is now host to the nation’s first dedicated matcha cafe, MatchaBar.”

When 300-year-old Ippodo Tea Co. of Kyoto opened in Manhattan in April 2013 it staffed the store with sommeliers trained in the Urasenke tradition of sharing. They eagerly explained and sampled matcha to the curious. Before long the small store front was crowded with afternoon office workers and weekend diners at the Michelin-starred Kajitsu restaurant. Tea drinkers must take their beverage to go as seats are reserved for dinner guests.

The tea bar offers shaken matcha ($3.25) and a matcha slushy ($4.25) along with difficult-to-find Iribancha (a smoky tea originating in Kyoto). The subdued lighting, bamboo counter and merchandise on display reflect the Japanese view that matcha is a ceremonial drink shared quietly to facilitate meditation.

Across the Pacific, Japan hasn’t been immune to the forces of cultural adaptation. “Matcha cake, matcha chocolate, matcha macaroons. Matcha sweets are everywhere,” Kenichi Kano, Ippodo’s international director told the Associated Press. In Japan Ippodo reported annual sales growth of 25%.

MatchaBar is a western interpretation with a mission “to uplift and motivate our community with the power of matcha,” according to founders Graham and Max Fortgang. The Brooklyn shop opened last fall. The website www.matchabarnyc.com promotes the health benefits of matcha’s antioxidants, L-Theanine, catechins and EGCg. A 30-gram tin of classic matcha used in blends sells for $22 and the premium matcha taken “straight” costs $30. MatchaBar offers classes for $85 which includes a starter tin and bamboo whisk (chasen), ceramic holder and bamboo spoon. Shoppers can opt for the convenience of an Aerolatte Electronic Whisk.

Brian Keating, principal at Sage Group in Seattle, published The Matcha Report (www.teareport.com) as a business resource for importers, formulators, chefs and manufacturers who see a big opportunity.

“Over the last 20 years younger generations of Japanese bypassed matcha, replacing it with ready-to-drink carbonated soda, iced teas, coffee, and energy drinks,” explains Keating.

“During this consumption shift within Japan, an eager North American and European specialty tea industry started to import more matcha and the word spread. Creative tea cafes began making concentrated matcha steamed with milk to create ‘matcha lattes,’” said Keating. Starbucks soon caught the wave placing it on menus nationwide where it became a daily habit. Hundreds of firms now offer matcha shakes, smoothies and matcha edibles.

Click this link to see a Teavana sommelier demonstrate the traditional method of preparation.

Keating cautions retailers that “as with any rising star consumer product, cheaper imitators started appearing over the last few years.” Most originate in China as powdered tea that lacks the brilliant green color and sweetness of Japanese matcha.

Beware of “wholesale pricing far below the authentic Japanese matcha,” he said.

Authentic matcha is produced from tea plants shaded for about 10 days before harvest. Leaves develop greater concentration of phytochemicals that deliver better flavor and texture. The finest are hand plucked steamed to halt decay and then dried and aged in cold storage, which deepens the flavor. Stems and veins are removed during drying and the tea is then pulverized in slow moving stone-grinders. The fine powder that emerges is measured in microns. This insures the full benefit of the leaf is ingested.

Matcha has a distinctive, grassy flavor that reminds me of chewing on blades of alfalfa. It is rich in umami a sensation that westerners find appealing in moderation. The tea’s tannins can leave a bitter aftertaste which is why most served in North America is sweetened and blended with milk.

Keating, who has followed the growth of matcha since 2005, believes it will continue to experience fast growth. He documents his reasons in the 64-page The Matcha Report.

“Matcha has yet to reach millions of consumers worldwide. When this untapped multitude begins to respond, a burgeoning specialty tea industry will benefit from the enhanced demand. Prices for authentic Japanese Matcha will inevitably rise — significantly — over the coming years, potentially placing a strain on supplies of the finest, ceremonial, and organic grades of the tea,” he said.

Learn more: www.teareport.com

Correction: Ippodo is located in the Manhattan Borough of New York City, not Williamsburg.

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Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs good decision-making in business. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.


Tea Biz posts are available to use in your company newsletter or website. Purchase reprint and distribution rights for single articles or commission original content.  Click here for details.

Capsule Tea Makes Big Gains — Need to Know

Capsule Tea Makes Big Gains — Need to Know

What tea professionals need to start the week of Sept. 22, 2014 —

North American Tea Conference trends and impressions… Tony Gebely leaves Chicago to fly with an extraordinary Phoenix in San Francisco… IRI Worldwide data indicates capsule tea is making big gains.

Troubling Tea Trends

The North American Tea Conference annually brings together industry executives, growers, government officials from producing countries, marketers and suppliers, making it a good occasion to discern trends and concerns among those who view the US and Canadian market with interest.

Traditionally the ones watching the market most closely are Indian, African and Chinese tea industry representatives, all of whom report increased sales to North American wholesalers and, in some instances, increasing sales from retailers buying direct from growers large and small.

I filled a notebook attending three days of sessions that range from food service trends to discussions on global supply and tea and health to advice on attracting millennials to tea.

That’s too much to cover in one post. I’ll elaborate on several trends in the days ahead but here are three topics to get the conversation started.

Production

Dr. Norman Kelly, the newly named chairman of the International Tea Committee in London, was attending for the first time. He replaces Sir Michael Bunston who served many years leading the ITC, which operates as the industry’s statistician. Tea at one level is a game of numbers.

Kelly shared two important observations. One can point with enthusiasm to the charts detailing tea production increases of the past 30 years. Supply is clearly anticipating increased demand and while some new acreage is under tea, most of the gains are through improved agricultural practices. There is much work ahead extending these practices to the smallholders who produce most of the world’s tea, but the largest tea gardens are models of efficiency, making greater use of mechanized harvesting equipment (35% of the total harvest); introducing new cultivars to resist drought and pests and innovative techniques such as Integrated Pest Management (IPM) adapted to the diverse regions in which tea is grown.

China is particular has put its foot on the accelerator at 1,924 million metric tons, most of which is consumed domestically. India reached 1,200 million kilos and Kenya reported 432 million kilos of processed tea last year. Combined production by these three tops all others tracked by ITC.

What is quite extraordinary is that racing as hard as they are at turning out more tea, both China and India are just keeping up with internal demand “leaving less and less for export,” said Kelly.

TEABIZ-NormanKelly_Presentation (7) ExportChart

Source: International Tea Committee

Production remains ahead of demand but “supply might tighten and it is not beyond the possibility of exceeding supply,” he said. Note in the chart above that only 38% of the tea produced is available for export, down from 47% available in 2004. Per capita tea consumption is rising in both China and India and Kenya is making greater efforts to interest domestic tea drinkers.

Pricing

Pricing is closely tied to production and Richard Darlington, managing director of AVT in London, pointed out that the abundance of land and desire to produce additional quantities will keep China in the lead globally despite the fact that “practically all the new tea is consumed internally.”

TEABIZ_NTK_140922_RichardDarlington

Richard Darlington

It seems remarkable, but it’s true – 90% of the new tea produced is consumed by the countries in which it is grown, according to Darlington. Classic economics suggests an abundance of tea will lead to soft prices and while that is true in some markets, much of the world’s tea is selling at a premium.

There is “a paucity of good tea – hence prices are high” while “there is too much medium and low tea around – hence prices coming down,” Darlington explains.

He predicted consumption increases will continue to come from established tea producing countries.

On the topic of production inputs, costs are rising and government support “is vital to the sustainability of tea in many producing countries,” said Darlington.

The situation in Sri Lanka is noteworthy as it illustrates the extreme.

Colombo auction prices are very high and have risen entirely due to a supply squeeze, said Darlington. “The crop has not kept ahead of very strong demand for orthodox tea at a time when India is cutting back on orthodox tea production,” he said.

“The cost of production in Sri Lanka has risen from $1.35 per kilo in 2005 to $3.10 per kilo on 2013,” he said. Government privatization grants are depleted and “investment in new tea areas is prohibitively high. Producers are reluctant to take the risk,” he said. A recent study for the Sri Lanka Tea Board predicted producers will need to get “$14 per kilo to sustain their businesses!!”

Source: International Tea Committee

Source: International Tea Committee

Darlington’s country-by-country assessment was insightful and not altogether bleak. There is oversupply in Africa and falling yields in Turkey, competition from alternate crops in Indonesia and a drought in Vietnam that will influence local markets.

Averaging all tea sold at all the global auctions shows prices falling slightly from last year’s all-tea, all-auction average of $2.60 per kilo. Kelly’s ITC data indicates a $2.46 per kilo average for 2014 year-to-date.

In general supply exceeds demand and trends negatively impacting pricing will probably continue for some time, said Darlington.

Pesticides

Pesticide use, the challenges of reconciling conflicting and inconsistent global regulations and a growing unease with public disclosure of pesticide residues by groups like Greenpeace was the topic of the week. After-hours and during  presentations open to the press, pesticides generated few impassioned debates. I placed it third in my reporting because production and pricing have a much greater day-to-day influence on the industry.

A talk by public relations expert Louise Pollock, who has advised the Tea Association of the USA for 20 years,  included a slide or two on crisis management as she discussed marketing the health attributes of tea; the Eurofins presentation hinted at worry that a beverage touted for its health benefits could be tainted by pesticide residues is justified, but media attention and public concern is a long way from crisis levels.

The Tea Association of the USA was concerned enough to host a 1-1/2 day presentation on the topic following the conference.

No reporters were permitted to attend these sessions out of concern that delegates would not speak freely if their comments were made public. As a result I can only write about the events that I witnessed, but I listened to a lot of after-hours conversation and I have covered this topic for more than a dozen years.

Consider this the first in several installments intended to identify challenges and weigh solutions — not frighten the public into foregoing tea.

Tea is an agricultural crop and there is not a crop consumed in which the corresponding industry has not been faced with the task of explaining why various chemicals are necessary to cultivate and process these foods. Perhaps more importantly, the public increasingly demands to know which of these chemicals are necessary and why. The new generation of label readers is a far more formidable audience to appease. Straight talk, transparency and thoughtful explanations of its proven medical benefits will protect the reputation tea justly deserves.

There are no reported instances of people being harmed by tea, Peter Goggi reminded delegates. The discussion of pesticide residues is largely centered on bureaucratic procedure, conflicting regulations and the differing rules of various certifying bodies.

It has never been clear to me why apples were singled out when pears, grapes and other fruit tested high in Alar residue, but 25 years ago the disclosure of Alar (Daminozide) in apple juice practically destroyed the apple business. Alar had been approved for use since 1963 but growing evidence of its carcinogenic links led the EPA to propose a ban and the manufacturer withdrew the pesticide from the market.

Public outcry cost apple growers an estimated $100 million according to a lawsuit following a CBS News broadcast on the program 60 Minutes. There is no question Alar was a financial boon to the apple industry. Application improved fruit-set maturity, fruit firmness and coloring, reduced pre-harvest drop and improved market quality of fruit at harvest and during storage, but the threat to human health was too great. Eventually it was proven to be a carcinogen in humans but at a very high ingestion level. It would require drinking 5,000 gallons of apple juice per day to equal the dose that produced tumors in mice. The lifetime cancer risk was set at 5 per million for humans. Generally EPA considers lifetime cancer risks actionable at 1 per million.

Apples once again topped the list of the most pesticide-contaminated produce this year, the fourth in a row. The Environmental Working Group (EWG), a Washington DC based non-profit, annually publishes the “Dirty Dozen” list of produce and a corresponding list of “Clean 15” fruits and vegetables. The residues are from different chemicals, but the fact remains that chemical applications remain important in protecting this crop.

Tea makes neither list because it is not one of the 48 most popular produce products tested annually by the U.S. Department of Agriculture and the U.S. Food and Drug Administration. USDA conducts an analysis of 32,000 samples.

This is not to suggest government regulators should ignore the obvious lapses in enforcement. In the Greenpeace report on Indian tea, 78% of the samples showed DDT residue, a pesticide long ago banned for use on food.

The tea industry tests far more samples and routinely discards leaf that exceeds Maximum Residue Levels (MRLs) established by importing countries. China learned the hard way when European Union buyers found they could not land thousands of containers of tea, at great financial loss. EU inspectors adhere to tough maximums. Unfortunately these differ widely by country making it possible for growers in places like Vietnam to find a market for tea that could not pass inspection in Japan, the US or EU. Uniform MRLs is an important global initiative.

One of the key presentations during the conference was by Christine McIntosh of Eurofins Scientific, a company that analyzes food products for safety and compliance with a range of import regulations.

There are now 450 pesticides, a number so large that it is not financially practical to test for all. Given that many are exotic, a short list might suffice, but neither the US or Canada established MRLs for many of the common pesticides used in tea. This is because regulatory bodies in both countries give priority to pesticides used within their boundaries. Since little tea is grown by either nation, establishing MRLs for these pesticides is not a priority (or likely to suddenly become a priority). Until they are researched and listed, the US assigns a 1 part per billion “default” threshold.

As a result, McIntosh listed 26 pesticides commonly found in tea for which no MRLs exist. In each instance the European Union has tested these products and determined a maximum residue level. In many cases this threshold of safety is well above the 1ppb default used by the US.

McIntosh offered some constructive suggestions beginning with a database of global pesticide suppliers. This will help identify firms engaged in producing suspect chemicals. Reputable firms should have no concerns as they are regulated in the countries in which they operate.

Evaluate risk within the country of origin/use that takes into consideration combinations of pesticides used by farmers and impact on nearby crops.

  • Consider regulations (many countries either do not have or do not enforce regulations)
  • Establish specifications/acceptable limits (maximum safe residues clearly establish whether illegal, non-approved and unsafe combinations of pesticides are present)
  • Implement routine testing programs universally with extensive baseline testing at the onset and less rigorous examination as these chemicals are proven safe)
  • View trends over time
  • Maintain a monitoring program

Next week I’ll go into greater depth using India’s new Plant Protection Formulations (PPF) rules and the Plant Protection Code (adopted but with enforcement postponed until January 2015).

Gebely Joins David Lee Hoffman 

Tony Gebely, a social media favorite in the tea community; promising author and successful online retailer has joined Pu-erh expert David Lee Hoffman, founder of the The Phoenix Collection.

TEABIZ_NTK_140922_TonyGebely

Tony Gebely

Gebely, the founder of Chicago Tea Garden, has 10 years of digital marketing and web development experience as well as a cornucopia of tea knowledge. He will work alongside Hoffman and his assistant Jeannie Freudenberger to first learn all aspects of the business including sourcing, fulfillment, tea tastings, and marketing.

“I am excited to have Tony join our team as he brings to the table the skills necessary to bring tea to the next generation” said Hoffman, “and he aligns well with the philosophy that I began my tea venture with a quarter of a century ago.”

“I’m excited to work side-by-side with such an esteemed pioneer in the American tea industry. David simply has the best Chinese teas and I could not be more proud to work with him to bring them to the burgeoning tea market” said Gebely.

The Phoenix Collection is a wholesale tea company founded in 2009. Hoffman, who has been called the “The Indiana Jones of Tea,” owned and operated Silk Road Teas which he started in 1990. He sold the business in 2004 but retained his vast inventory of Pu-erh teas which are now offered through The Phoenix Collection. Hoffman was also the subject of a feature-length documentary All In This Tea by Les Blank and Gina Leibrecht. Hoffman has shared his discoveries and techniques online and in YouTube videos with some success. Look for Gebely to supercharge the company’s online presence.

Gebely and his new bride Katie just moved to the Bay Area. His new book is due next year.

To learn more visit: www.thephoenixcollection.com.

Tea Sales in K-Cups

14i3_MotherParkers_EcoCupEvery single single-cup manufacturer I spoke to at the North American Tea Conference confirmed that sales of tea in both licensed K-Cups and compatible non-licensed capsules are booming. As noted in last week’s post, Package Facts estimates capsules will account for 10% of sales in the bagged/loose category. Paul Higgins, Jr. at Higgins & Burke,  Ron Sadler at Twinings North America, Harney & Sons, RC Bigelow, Keith Hutjens, the tea sourcing director at Starbucks and Jeff Allard, director of product development at Snapple, all praised the format as an opportunity for innovation and a means of enticing new tea drinkers.

14i1_SingleServe2_Tea_Tazo_zenIRI Worldwide, a market research firm based in Chicago (www.iriworldwide.com), tallies sales in major retail channels such as drug stores, grocery and department stores like Target, Wal-Mart and Bed, Bath & Beyond. During the 52 weeks ending July 13, sales of loose leaf and bagged tea were up 6.2% in grocery SLIDES-INNOVATION_SingleServe_LiptonEnergy - Copystores to $818 million. Drug stores showed a 13.6% gain to $25 million and multi-outlet chain locations reported  an amazing $1.3 billion in tea sales, up 7%. A decade ago grocery stores and supermarkets were  the dominate sales channel. Very little tea was sold in drug stores. IRI does not break out sales by format so it is not possible to identify precisely how much of these category gains 14i1_SingleServe2_Tea_Twiningsare from K-Cup sales, but it seems likely that most of the bump in multi-channel and drug is from capsule sales, typically big brands. Another clue is that the big jump in sales occurred after Lipton, Twinings, Celestial Seasonings, Snapple and Bigelow began selling 14i1_SingleServe2_Tea_Tetley_BritishK-Cups. Several report earning more than $20 million annually in K-Cup sales. Another indication: sales of instant tea (typically in jars) is plummeting. In drug stores category sales fell 31%; in multi-outlet stores sales of instant tea are down 9.3% and in drug stores sales of instant are down 8.9%.

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Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs business decision-making. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.


Tea Biz posts are available to use in your company newsletter or website. Purchase reprint and distribution rights for single articles or commission original content.  Click here for details.