Tea Tipping Point: India International Tea Association - Goa 2012


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Tipping Point

Convinced of tea’s health benefits and willing to experiment with different varieties in seeking superior taste, tea drinkers are visiting an expanding number of retail locations serving and selling packaged specialty tea. Rising affluence and the desire for convenience drive sales of hot and iced teas and have prompted Starbucks, DavidsTea, Argo Tea, Teavana and Unilever to open hundreds of new outlets. Middle class residents in urban India are showing a similar desire for tea at branded shops such as Golden Tips, airport shops like Chamraj (UNITEA) and Manjushree Tea and revitalized tearooms such as Cha Bar at OXFORD book store, Dolly’s Tea shop, Camellia bars, Tea Junctions Kolkata, and independent ventures like Chado Tea India in Mumbai.

Premium Switch

In the past year sales overall continued to climb due to the move to premium rather than greater volumes of tea. A tea cup of fresh leaf is six grams and a tea bag is closer to 4 grams. There is even less tea in a K-Cup but the difference in price is 3x to 6x. Last year Canadians drank about the same volume of tea and the same number of cups per capita but sales of specialty tea exceeded conventional (total volume is still greater for conventional). This is happening in the U.S. Sales in grocery are slipping as traditional brands lose ground. The industry is currently $8.7 billion but will quickly grow to $15 billion in three years (and some say sooner) despite the economic doldrums.

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  • Hard to come by shopper traffic stats for an A mall -- last time I saw real numbers, I was working for Steve & Barry's when they were getting begged to take C mall anchor spots pre-2008, so don't even want to throw those out there. ShopperTrak, a video traffic counter, has this PDF that quotes average daily traffic at about 120K for a couple of A malls in Chicago and Florida.  Mall of America quotes yearly traffic of 40M, which would peg daily traffic at over 100K.  Here is a ClearChannel mall website that has top malls at over 100K per day but many malls much,much lower. http://www.clearchannelmalls.com/markets/My hunch is that the range is quite wide for daily traffic but saying it can get over 100K is fair. The other thing we wanted to confirm -- your 700M figure for sales of hot/iced tea beverage products within Starbucks, that includes bottled RTD Tazo bottles, correct? So the way we can see the market, you have (1) Retail CPG (2) Off-premise RTD tea (bottles/cans sold in places where customers aren't staying to eat food), (3) On-premise RTD tea (bottles/cans sold in places where customers are staying to eat food) and (4) fresh-brewed or prepared tea beverages (anywhere from your local teahouse, including Starbucks and going all the way through an upscale sit-down restaurant.Seems to be general consensus on (1) at $2B (2) at $3.5B-$4B but general disagreement on the foodservice piece that is (3)+(4)   Euromonitor estimates that sales of (3), the on-premise RTD tea, are higher than (2), which they have at 3.9B in 2011.  So "RTD" could be a $7-$8B market itself, without even considering retail or fresh-brewMost sources balk at giving a number for (4), the prepared and brewed teas, because they don't want to survey pricing and because a small portion of (4) is re-sold (1) in sit-down restaurant settings.  So, in fact, restaurant is the hardest number to get. Sage Group recently revised their estimate for 3 and are throwing out a number of $27B for 1+2+3+4. Packaged Facts, Mintel, Euromonitor, all numbers you see, to the best of my knowledge, all of them exclude restaurant, cafe and foodservice. So none of them are accounting for Starbucks $X00M hot drink sales, none of them are accounting for Argo's sales, etc. We're starting to believe that brewed tea market in coffeeshops and teahouses is somewhere between $2B-$3B and sit-down and quick-service brewed market is incremental on top of that.  All of this is incremental to the $2B retail/packaged + $6-8B RTD bottled and canned market.Hope this helps for your presentation and definitely happy to keep trading info back and forth -- and I appreciate the sensitivity to confidentiality and to your not sourcing any of these numbers to PwC.  Thanks.
  • “NACS estimates 2011 hot tea average store sales at $715, RTD tea  at $13,894 and average store sales of xxxxx for dispensed cold tea.” Iced tea numbers are mixed into either the fountain cold dispense non-carbonated beverages total or other dispensed beverages. Will have to get a breakdown. Store count is 148,341. Hot tea brewed, store average 715 x 148,341 = $106,063,815RTD tea, store average 13,894 x 148,341 = $2,061,049,854Dispensed tea, store average ???? x 148,341 =
  • It’s not about affordability, it’s about behavior, it’s about habits and it’s about attitudes. Unlike much of the world fewer than half of the Americans drink teaThe Anglo-Dutch company’s refreshments division, of which tea and its related products are a major constituent, turned over €8.8bn ($11.5bn) in 2011, just under a fifth of the group’s total of €46.5bn. On a regional basis, tea accounts for about a quarter of Unilever’s $1.5bn MENA sales.“A classical example I use, is that if everyone were to brush their teeth twice a day — the size of the toothpaste market would be seven times bigger than what it is today,” believes Mehta. “It’s not about affordability, it’s about behaviour, it’s about habits and it’s about attitudes.”Unilever’s MENA headquarters in Jebel Ali, chairman Sanjiv Mehta’s The Anglo-Dutch company’s refreshments division, of which tea and its related products are a major constituent, turned over €8.8bn ($11.5bn) in 2011, just under a fifth of the group’s total of €46.5bn. On a regional basis, tea accounts for about a quarter of Unilever’s $1.5bn MENA sales.“Tea is a highly penetrated category — nearly everybody drinks it,” Mehta explains, adding that Unilever’s Lipton currently has about 70 percent of the tea market in the region, while products under the Lipton umbrella make up “one fourth” of Unilever’s portfolio in MENA.Given the high penetration Unilever holds in the tea market, Mehta says one of the firm’s focus is on increasing profitability on existing products in this segment.“But if you were to peel the onion, it’s only 40 percent of our tea that is going in tea bags and 60 percent goes in packet [loose leaf] tea,” he continues. “We get a much higher value out of tea bags — it’s nearly a factor of three for every cup consumed.”Sanjiv Mehta was appointed as chairman for Unilever North Africa and Middle East in March 2008 and is based in Dubai.55 percent population is under 35 years in MENA.“If you look at this region, we have nearly 350 million people [and the population] is growing at about two percent to 2.5 percent per annum. So that’s 7 million people coming into our fold every year,” Mehta says. “It’s an economy that, depending on the oil price, can have a GDP up to $1.72 trillion. So, by any length, this is a very attractive market for us.”
  • ATLANTA--(BUSINESS WIRE)-- Teavana Holdings, Inc. (NYSE: TEA) today announced financial results for the second quarter fiscal 2012 period ended July 29, 2012. Highlights for the second quarter: Net sales increased by 38% to $43.1 million from $31.3 million in the second quarter of fiscal 2011. Net sales for the quarter includes $2.0 million of net sales from the 46 Teaopia stores acquired on June 11, 2012. The Company opened 15 new stores and acquired 46 Teaopia stores to end the period with 284 company-owned stores. This represents an increase of 59%, or 105 stores, from the 179 stores at the end of the second quarter of fiscal 2011. Comparable sales increased by 3.5%. Comparable sales include e-commerce and exclude the acquired Teaopia stores. Income from operations, which includes a loss from Teaopia of $2.0 million, was $0.0 million compared to $2.3 million in the second quarter of fiscal 2011. The Teaopia loss was driven by a $0.8 million loss from operations and $1.2 million in one-time transaction and integration expenses. Net loss, which includes a loss from Teaopia of $1.2 million after tax, was $0.1 million as compared to net income of $1.0 million in the second quarter of fiscal 2011. The Teaopia loss was driven by a $0.5 million after tax loss from operations and $0.7 million after tax in one-time transaction and integration expenses. Net loss per diluted share, which includes a loss from Teaopia of $0.03 per diluted share, was $0.00 per diluted share as compared to net income per diluted share of $0.03 in the second quarter of fiscal 2011. The Teaopia loss was driven by a $0.01 per diluted share loss from operations and $0.02 per diluted share in one-time transaction and integration expenses. Andrew Mack, Chairman and CEO, stated: We were pleased to have delivered another quarter with strong sales growth of 38% and earnings per share excluding Teaopia coming in at the top end of our guidance range. We were also very excited to have closed our acquisition of Teaopia, completed our search for our first VP of Marketing and opened our first store in Manhattan, which is performing extremely well. Our integration of Teaopia is well underway with numerous stores already converted to Teavana (TEA) and performing ahead of expectations. Our new stores this year continue to perform above plan, and we’ve already opened 38 of the expected 60 new stores for this year. Finally, our VP of Marketing started with Teavana today, and we look forward to working with him to develop and roll out marketing programs that will further strengthen the Teavana brand and our engagement with customers. Highlights for fiscal year-to-date: Net sales increased by 32% to $87.4 million from $66.3 million in the prior year period. Net sales includes $2.0 million of net sales from the 46 Teaopia stores acquired on June 11, 2012. The Company opened 38 new stores and acquired 46 Teaopia stores to end the period with 284 company-owned stores. Comparable sales increased by 2.5%. Comparable sales include e-commerce and exclude the acquired Teaopia stores. Income from operations, which includes a loss from Teaopia of $2.3 million, was $5.9 million as compared to $8.8 million in the prior year period. The Teaopia loss was driven by a $0.8 million loss from operations and $1.5 million in one-time transaction and integration expenses. Net income, which includes a loss from Teaopia of $1.4 million after tax, was $3.4 million as compared to $4.4 million in the prior year period. The Teaopia loss was driven by a $0.5 million after tax loss from operations and $0.9 million after tax in one-time transaction and integration expenses. Net income per diluted share, which includes a loss from Teaopia of $0.03 per diluted share, was $0.09 per diluted share as compared to $0.12 per diluted share in the prior year period. The Teaopia loss was driven by a $0.01 per diluted share loss from operations and $0.02 per diluted share in one-time transaction and integration expenses. Balance sheet highlights as of July 29, 2012: The Company had $9.5 million in credit facility borrowings and $40.5 million of availability on the credit facility at the end of the second quarter of fiscal 2012, compared to $5.4 million in borrowings and $34.6 million of availability at the end of the second quarter of fiscal 2011. Inventory was $24.9 million at the end of the second quarter of fiscal 2012. Excluding Teaopia, inventory was $23.8 million as compared to $22.7 million at the end of the second quarter of fiscal 2011. Outlook: For fiscal 2012, net sales including Teaopia are expected to be in the range of $222 million to $231 million based on opening 60 new stores and an increase in comparable sales, including e-commerce and excluding Teaopia, in the low single digit range. Net sales from the acquired Teaopia stores are expected to be in the range of $14 million to $16 million. Net income, including Teaopia, is expected to be in the range of $20.8 million to $21.8 million, or $0.53 to $0.55 per diluted share, based on 39.4 million shares, compared to net income of $17.8 million, or $0.46 per diluted share, based on 38.4 million shares in fiscal 2011. Teaopia is expected to reduce net income per diluted share by $0.03, driven by a neutral impact from operations and $0.03 per diluted share in one-time transaction and integration expenses. For the third quarter of fiscal 2012, net sales including Teaopia are expected to be in the range of $42 million to $45 million based on opening 15 new stores and an increase in comparable sales, including e-commerce and excluding Teaopia, in the low single digit range. Net sales from the acquired Teaopia stores are expected to be in the range of $3 million to $4 million. Net loss, including Teaopia, is expected to be in the range of $0.8 million to $1.2 million, or $0.02 to $0.03 per diluted share, based on 38.6 million shares, compared to net income of $0.9 million, or $0.02 per diluted share based on 39.0 million shares in fiscal 2011. Teaopia is expected to increase net loss per diluted share in the range of $0.04 to $0.05, driven by a $0.03 to $0.04 per diluted share loss from operations and $0.01 per diluted share in one-time transaction and integration expenses.
  • David, who recently turned 30, is a McGill commerce grad and entrepreneur who started in retail selling shoes at Athlete’s World during high school. He still has a wiry teenage frame and delicate nail-bitten hands that come alive when he talks. His 80-year-old cousin Herschel Segal (who looks about 10 years younger than his age) is his senior partner and financial backer, not to mention a retail stalwart who founded the Le Chateau clothing chain five decades ago. Davidstea Inc is a private company categorized under Tea and located in Mont-Royal, QC, Canada. Current estimates show this company has an annual revenue of $3,856,640 and employs a staff of approximately 26. Companies like Davidstea Inc usually offer: Thai Tea, Premium Teas, Yogi Tea, Teas and Sun Tea. Business Name: DavidsTeaType of Business: Tea Retailer, Tea Shop, and Tea Room. Year Founded: 2008 in Montreal.Location: Head Office: 5775 Ferrier, Town of Mont-Royal, Quebec, H4P 1N3, CanadaPhone: Toll free: 1-888-873-0006, or (514) 739-0006Website:www.DavidsTea.comWhat is Unique About Your Business?: We have over 100 different varieties of loose leaf tea along with a constantly growing collection of seasonal and special edition teas.
  • Meanwhile, foodservice is not the only approach Argo is taking. It also sells bottled specialty teas, which debuted in Chicago-area Whole Foods and Treasure Island stores and have subsequently been offered to other supermarket chains.
  • Urban Success
  • Camellia SinensisWorld Tea News, Teashop Profile [hed] Camellia Sinensis: Traipsing the Globe for Rare Tea It all started with a love of Darjeeling tea. English-born Kevin Gascoyne discovered Darjeeling and grew into an avid consumer, taster and lover of the Indian tea. In 1989, he was writing about the dark tea for publications in the States, Japan, England and Canada. He also operated a small online tea business dedicated solely to the sale of Darjeeling.  What began as a hobby blossomed into a full-time vocation when Kevin met three Quebecois entrepreneurs who were running a small teashop in Montreal’s Quarter Latin. In 2004 they pooled their collective knowledge of tea and business and came together as Camellia Sinensis, Maison de Thé. Each of Camellia’s principals specializes in a discrete tea-growing region, and each spring during principal harvest they travel to their specialized regions to taste and buy tea. Jasmin Desharnais is the pu-erh and green tea expert traveling to China annually while Hugo Americi ferrets out wulongs from Taiwan and green teas from Japan. Francois Marchand focuses on ancient China, in particular the provinces of Anhui and Hunan. And Gascoyne spends much of his travel time in India with his beloved Darjeelings and also ventures to Sri Lanka, Kenya and Malawi. The intrepid foursome bring back rare teas to fill out a 250-strong tea catalog that shifts and changes with the seasons. Annual buying trips mean that Camellia’s teas are all sold within a year, keeping their customers flush with fresh tea. The mother ship store and school are situated in a bustling shopping and dining area near downtown Montreal. One half of the 1,500-square foot space makes up the narrow retail shop, reminiscent of a Parisian teashop with silver canisters lining one wall. The remaining shelf space is filled with tea ware –everyday ceramic and glass pots to the rare, collectors’ pieces. Books, including the four owners’ latest tome, The Book of Thé are sold as well. Customers simply open a door to enter the Camellia tearoom -- what Gascoyne calls their “showroom” where customers can choose from an expansive menu of teas and their attendant traditional infusion techniques. “The sophistication is in the details – much like Japanese art,” Gascoyne relates. “Customers can explore the subtleties of chemistry at work in different infusion techniques.” They can also delve into a small, but carefully curated, array of tea snacks including Japanese pastries, French patisserie, cookies and scones. A zone sans techno (a no technology zone), Gascoyne and company have gone to great lengths to assure that the tea-drinking environment is just so. Quiet is enforced playfully with a gong that sounds when the noise starts to become a quiet rumble. A $20,000 air exchange system ensures that the temperature is just right throughout the 32-seat space. Tables are for two to encourage focus on the tea at hand.  Camellia expanded their enterprise when they bought a building a few doors down from their shop to house their burgeoning school. The school hosts workshops such as Discovery of Tea and primers on all the great tea regions -- China, Japan, Taiwan, India, Sri Lanka, or varietals such as Pu-erh. Thematic tastings are hosted here as well with Pu-erh and Scotch or Pu-erh and chocolate pairings, as well as a range of gastronomy pairings. Two other shops round out Camellia’s holdings. A retail shop near the world-famous Jean Talon market – a foodie heaven and haven in the Little Italy section of Montreal. Quebec City is home to Camellia Sinensis’ third outpost with a bigger retail operation incorporating the teahouse within. Quebec City also has a satellite school. “We made a decision to stay small and under control so we can focus on quality,” Gascoyne says. “I enjoy the daily life of working behind the counter, tasting tea and introducing people to tea.”  The principals all agreed to stop at three shops and 25 employees, although they went over with the mark with 30 employees when staff needs increased. “We have turned down six franchise offers,” Gascoyne shares. “We are into the quality of life and the quality of tea.” The theme at Camellia Sinensis is accessibility. Everyone is welcome, Gascoyne says. “We discourage elitism and snobbery. Tea is democratic and humble,” he adds. “Regardless of a customer’s level of expertise, we want to open up the world of tea to them. There’s no reason why it can’t be shared. It’s more interesting for everyone to be drinking tea.” [hed] Quebecois Love of Tea An overture d’esprit -- an open spirit -- for trying new things makes Montreal a healthy market for tea merchants. “Montrealers don’t mind paying for things of high quality, especially when it comes to food and drink,” Gascoyne says. “Tea isn’t a grocery store list item here.”  Foodies abound in the city that boasts an inordinate amount of high-end restaurants. Gascoyne describes his adopted city brethren as ‘progressive people in general, forward thinking and a younger society, in general.’ “They are excited about the possibilities [in food and beverage realm],” he adds. This excitement has helped fuel the growth of Camellia, which reports a steady growth of 10% per year since their 2004 inception. Although, their growth curve hit a shallow spot when the economy headed south, the trajectory has consistently been an upward one. The average ticket for the teahouse ranges from $12-$15, while online sales average $10-15 per transaction. Roughly apportioned, the retail/wholesale operation makes up 85% of sales, while the teahouse brings in 5% and online sales contribute 10% to overall sales. It’s a destination spot, says Gascoyne. Tourists from New York, Boston, Toronto, San Francisco, and an enormous amount of French people visit Camellia in addition to a strong core of local customers. Customers range from the novice to experts including an 11-year-old boy who started visiting the shop with his father at age 10, and in the ensuing year became a tea enthusiast who blogs about his weekly tea drinking experience at Camellia. For those who don’t make the trip, Camellia operates an extensive online operation selling their 250 teas, accessories and books to customers worldwide. [hed] Pure Teas: Wine Vs. Sangria Sold in 50 and 100 g. ‘servings,’ or in some cases of extra-rare teas, 25 g. The catalog marks teas that are bought direct from the grower, which is more than 95% of Camellia’s teas. “They are mostly pure teas or terroir teas, although a few blends are thrown in. It’s like wine vs. sangria,” says Gascoyne. “It’s a highly obsessive and impractical business model. Yet we believe so much in it, few people would bother like we do.”  And bother they do. Social development projects have become an integral part of the foursome’s travels. Most recent is Gascoyne’s information exchange between a 17th generation tea farmer near Kobe, Japan and a Darjeeling tea consultant who both spent time in Nepal exchanging their respective expertise in green and black tea. With Gascoyne as facilitator, the two manufactured black tea in the morning and green in the afternoon at both a co-op factory serving 750 farmers and a smaller, artisanal factory focused on greens, blacks and wulongs. Both shared their years of experience with each other, forged a friendship and returned home with newfound skills to expand their operations. This is one of many integrated Camellia projects that are discussed in detail on the shop’s blog and Facebook page – which Gascoyne and company use poetically and prolifically. [hed] No Experience Necessary Gascoyne sings the praises of Camellia’s staff, a dedicated lot who commit to serious training for their respective posts. “We don’t ask for experience, as they often have to relearn all they were taught. We ask for people to have enthusiasm, an inquisitive nature and have a good rapport with people. If potential employees meet those requirements, they embark on a training program that takes place over 6 months with a requisite number of tastings, workshops and required reading. The company culture is truly steeped in tea and staff regularly discuss and share their knowledge of tea. Each employee is given a tin they fill with tea weekly so they are always trying new teas. “We want them to learn our information as much of traditional tea information is a lot of repeated and often erroneous, out-of-date information,” Gascoyne contends. After seven years serving up tea, Gascoyne finds the biggest challenge is to stick to his roots and stay close to the company’s mission, especially when presented with the myriad of options, yet all the while maintaining flexibility. He keeps this in mind as the four venture further into wholesale realms, training staff at other teashops and consulting with tea merchants.  “The best thing about his job? “After all these years, I still like coming to work every day, and the staff loves coming to work. We are all good friends,” he says.“We are a kooky little French-speaking company in Quebec, and we like it that way.”
  • My final slide in the IITA 2012 program is designed to motivate growers in India to set aside a small measure of land, tend it well and bring it to market as a branded, loose leaf product. It is probably a stretch to suggest that doing so will make the grower a millionaire (crorepati) but if I present credible math everyone will see that it is not impossible. The innovation and point that I want to make is that online auctions, demand for origin stories and markets willing to pay $17 for 50 grams of made tea could well shift the economics in favor of growers who make their bread and butter growing CTC but their clotted cream and jam on a single parcel of branded tea. A SMALL GROWER CAN MAKE SPECIALTY TEA AND SELL DIRECT TO A US OR EUROPEAN PACKER.  I MENTOR ONE SUCH IN SRI LANKA AND WE HAVE SEEN HER HAND MADE TEA SELL INT FORTNUM & MASON THIS YEAR.  SHE ALSO SELLS DIRECT TO HARNEY.  THIS CAN BE DONE WITH GOOD EXPERTISE ON OFFER, KEEN OPEN MINDED IMPLEMNTATION OF THE EXPERTISE, & ACCESS TO BUYERS RECOGNIZING QUALITY AND HONEST ENOUGH NOT TO EXPLOIT A NEWCOMER. My concern is that I just don’t know enough about tea to make the correct assumptions. Please test the following: The threshold NOTIONAL TARGET is not really $1 million USD it is $200,000 USD (which at 50:1 equals a 1 Rs Crore) YESThe underlying question: Is it possible to earn $200,000 from the made leaf of a relatively small plot (1 hectare)Working backward from $200,000 if I assume a good yield then the auction price will not seem unreasonably high. With my limited knowledge I calculated a price averaging $63 kg which I believe North American retailers might very well pay.EVEN WHEN MAKING THE VERY BEST HAND MADE TEA IT WILL NOT ALL BE HIGH GRADE – WEATHER AND LABOR AND PROBLEMS GIVE YOU A RANGE.  I WOULD SAY FOR A SKILLED OPERATION IN INDIA 30% HIGHEST GRADE AT $50/KG, 40% MID GRADE AT $20/KG AND 30% LOW GRADE AT $5 PER KG.  A WEIGHTED AVERAGE IS THEN $24.50/KG – SAY $25 IN ROUND FIGURES.  THE TEA WOULD HAVE TO BE TRULY EXCEPTIONAL TO AVERAGE $63/KG ACROSS THE WHHOLE CROP.BASED ON 2,000 KG/HA THIS WOULD GIVE ANNUAL SALES VALUE OF $50,000 – A RUPEE MILLIONARE BUT NOT A CROREPATI – THAT WOULD NEED 4 HA OR 10 ACRES.Questions to answer: What is a reasonable yield from a hectare, what is the finished leaf yield 2000KG BUT REQUIRES A DEDICATED SKILLED FARMER WITH GOOD INPUTS. A good yield helps my case by bringing down the average price per kilo retailers must pay. How many bushes are planted on one hectare? APPROX 10,000[SLIDE 20 – Crorepati]Every garden in India has a special hillside kissed by sun and shielded from wind, with deep rich soil that rapidly drains; a carefully terraced hillside of 60,000 bushes in their prime. These are healthy, sustainable bushes that get just enough shade, just enough mist, just enough care to produce superlative tea.This is true in every region. In every state. In every garden. Once the these nature-blessed leaves reach the factory workers will see they are processed with extra care, I CANNOT SEE THE FARMER GETTING ANYWHERE NEAR YOUR TARGET IF HE RELINQUISHES OWNERSHIP OF HIS LEAVES TO A FACTORY.  HE NEEDS TO BE AN ARTISAN IN CONTROL FROM PLANTING TO SALE OF HIS MADE TEA with pride and the knowledge that done well this patch can enhance the factory reputation, establish a brand domestically and for export and due to the rapid advances in auctioning tea THESE RAPID ADVANCES FAVOR THE HUGE GROWERS NOT THE SMALL GUY it will be possible to find buyers around the globe willing to pay an average$xx.xx per kilo a reasonable rate for tea retailing at $17 for 50 grams. The result: Rs 10,000,000 making the grower a crorepati (millionaire). I PAY $25/KG TO GEORGIAN HAND MADE TEA MAKERS – THIS INCLUDES PACKING & AIRFREIGHT CHARGE.  THE FARMER GETS, I BELIEVE $12/KG.  I SELL RETAIL AT $10 PER 100g AND $86 PER KG.  THESE ARE BARE MINIMUM MARK UPS.  I HAVE BOUGHT SRI LANKAN HAND MADE AT $60/KG EX FARM AND WITH AIRFREIGHT ON TOP OF THIS I HIT CUSTOMER RESISTANCE WHEN MARKED UP FOR A 40% MARGIN A yield of 6,175 kg/acre or 15,252 kilos will become 3,178 kilos of made tea worth $200,000 or Rs 10,000,000 MATH6,175 kg per acre x 2.47 acres to equal a hectare or 15,252 kilos / 4.8 (conversion to made leaf) 3,178 at $62.93. Crore 10,000,000 / 50 = $200,000 USDWITH ENCOURAGEMENT THE INDIAN SMALL FARMER CAN MAKE GOOD TEA AND CAN SELL AT A GOOD PRICE – BUT HE NEEDS CONSTANT ADVICE AND GUIDANCE AND ENCOURAGMENT.  WHILE INDIAN BUSINESSMEN WITH MBA DEGREES SEE THE LIGHT THE SMALL FARMER DOES NOT RESPOND TO THE “AMERICAN DREAM” CONCEPT – IN MY EXPERIENCE THIS UNFORTUNATELY DOES NOT KICK START HIM.  IT WOULD BE SO MUCH EASIER IF IT DID.  
  • Tea Tipping Point: India International Tea Association - Goa 2012

    1. 1. Tipping PointInvestors are spending millions seeking a retail formatthat will trigger the tipping point for tea.Dan BoltonEditor & PublisherWorld Tea News (trade) | Tea Magazine (consumer)www.WorldTeaNews.com | www.TeaMag.com
    2. 2. Tipping PointStarbucks, founded in 1971, had opened only 11 stores by 1987. In itsfirst 20 years the company averaged about five new stores a year.Starbucks posted a $330,000 loss the year Howard Shultz acquired thecompany for $3.8 million. Losses by 1989 topped $1.2 million.And then specialty coffee tipped.In 1992 sales grew 80%. Starbucks opened 53 U.S. stores that year,averaging one a week. Fourth quarter earnings rose 172% as profitsclimbed 70% on sales of $93 million.Years after Starbucks’ 1992 IPO, one of the most successful in history,CEO Howard Schultz publicly attributed his company’s success to thetipping point phenomenon described as:“That moment in time when the momentum for change becomesvirtually unstoppable,” according to Malcolm Gladwell, author of TheTipping Point: How Little Things Can Make a Big Difference.
    3. 3. Talking Points Big investments are fueling rapid retail growth in North America.Tea processing (blending & bottling) is now a $1 billion industry. Quality tea is in demand. Hot beverage sales climbed 18% in 2012. The right retail format will trigger a Tipping Point leading to 1,500new tea shops (totaling 5,000 of 30,000 specialty beverage retailers)with a significant rise in sales of premium packaged tea in grocery.INDIA’S OPPORTUNITY As European Union imports slacken America’s economy improves.Tea enthusiasts there readily pay Rs850 for 100 grams of tea ($17). India’s growing domestic market for branded tea which has drivenprices to Rs200 makes it possible for growers to sharpen their skillsto the point where they can sell direct to U.S. and EU retailers payingRs1400 to Rs2800 ($25 to $50) per kilo. Pay attention to my last slide. It may make you a crorepati!
    4. 4. American Tea Drinkers Daily 48% consume tea (85% black/14% green/65% teabags). Hotdrinkers prefer herbals, with 60% choosing sweet fruit-flavored tea.1-5 Eighty five percent drink iced tea, 5.6 billion servings in foodservice.1-3 Ready-to-drink tea is the fastest growing (11.5%) beverage segmentin the U.S. gaining share against market leading soft drinks and fruitbeverages. In 2011 volume was up 4.8% and growth exceededbottled water. Sales of 100% juice are down 4% and sales of fruitdrinks, some now blended with tea, are up 2.1% and now represent46.4% of the juice market.2 RTD tea sales: $3.5 billion.1 America is now one of the top three tea import markets in the world,surpassing Britain in 2010 and growing faster than Russia (CIS).3 Green tea imports are up 200% in 10 years, now worth $1.5 billionshare of the market (2010).1 In 2011 India sent 13,510 metric tons to U.S. and 1,960 to Canada.31 Tea Association of the USA2 Beverage Marketing Corp.3 Nielsen MarketTrack National (CAN) 52 Wks. Ending July 28, 20124 International Tea Committee: September 2012 Web Summary, Exports by Origin: India5 Source: Mintel International Customer Survey, Tea Association of the USA Fact Sheet
    5. 5. Market TrendsTotal Beverage Sales ($ billions)U.S. $58,851 - Canada $4,937Tea Sales ($ billions)U.S. $8.7 (2011) - $10-$15 (2012)Households that purchased…U.S. 60% (28.9% tea / 37.9 specialty tea)Canada 63% (29.2% tea / 43.9 specialty)FoodserviceHot beverages is leading growthSales up 18% 2011-12 (See Chart)Single-serve (3 billion K-Cups sold 2011)Celestial Seasonings up 162%Starbucks $1.2 billion (mainly coffee)Nielsen MarketTrack 52wk July 28, 2012 (Chart)85.9 84.1 75.8 72.614.115.924.227.40%10%20%30%40%50%60%70%80%90%100%2011 2012 2011 2012CanadaHot & ColdBeverageSalesU.S.Hot & ColdBeverageSales+18% +18%HotCold ColdHotNorth American Beverage Sales
    6. 6. Market Segments & ValueRetail Consumer Packaged Goods ($2 billion)Dry tea consumed in the home (in 25 to 100 ct. boxes, single-serve and some 100g pouches)Off-premise RTD tea ($3.5-$4 billion)*Bottles/cans sold in places where customers arent staying to eat food (grocery/convenience)On-premise RTD tea ($4 billion)Bottles/cans sold in places where customers are staying to eat food (grab’n go)Fresh-brewed premium ($1.5 billion) (predominately hot)Specialty beverage retailers offering loose leaf/premium tea bag, hot or hot over iceTraditional room and modern tea merchant (wet and combination wet/dry)Coffeehouse, tea-themed restaurant and hotel afternoon or dessert tea serviceRestaurant (NDP NUMBER)* (predominately cold)Conventional tea fresh-brewed pod and concentrate prepared in large quantities typically iced.Fast-food and fast-casual teabagsFresh brewed (hot) and convenience iced concentrates for take-awayFine dining includes both loose leaf and premium teabags.*NDP has total foodservice servings at 5.6 billion and Nations Restaurant News reports anumber associated with restaurants broken down by category.*Euromonitor $3.9 billion
    7. 7. Next week Tazo, a $1.4 billion (Rs7,483 crore)Starbucks brand, will open its first stand-alonetea shop in Seattle. The store will offer packettea, herbals and teaware with a unique blendingbar for customers to mix their own teas.This overwrap says “Calm” but Tazo’sentry into the U.S. market will energizethe segment to open 1,500 new shops.Late this year in the EU Unilever/Lipton willunveil its own concept for branded tea retail.Big Brand Tea Retail has finally arrived…Big Brand Retail
    8. 8. Lipton’s first U.S. Tea House opened 15 years agoin Pasadena, Calif. with 52 loose leaf tins, innovativetea lattes, chai and scones that are now standard.Unilever abandoned the concept in 1999.The store never reached its revenue goals, saysPeter Goggi, who was Lipton’s Director of Tea Buying at the time.What is different today? Consumer spending has leaped from$1.7 billion (1999) to at least $10 billion (Rs54,000 crore)Last year American Tea Room, a store very similar to Liptonlocated a short distance away, earned $1.5 million (Rs8 crore).Teavana this year will earn $231 million (Rs1,238 crore) from302 shops with 51 in Canada and 16 in Mexico and 1 in Kuwait.Since 2007 DavidsTea has built 100 stores with 14 in the U.S.What’s Different This Time?
    9. 9. Timeline2012 – Tazo rebrands and introduces custom tea to customers in new retail storefollowing 43% sales gains in foodservice and grocery to earn $1.4 billion in 2011.2012 – The $2.7 billion Lipton brand falters in RTD losing to AriZona and sees slacksales in grocery where premium teas are taking shelf space.2012 – Tea emerges with the strongest health claim among healthy beverages.-------------------------------------------------------------------------------------------------------2011 – Teavana IPO shows that tea merchants, previously seen as drowsyearners, can top $1000 per sq. ft. with 63% gross margins in small format mallshops.2007 – DavidsTea makes the great wall of tea less intimidating by emphasizingsampling with Canadian mall customers, growing to 100 stores (14 in U.S.)2004 – Carbonated soda reaches its assent at 868 cans per year. Relentlessdeclines follow as Americans turn to water, tea, sport and energy drinks and juice.2003 – Argo Tea founded in Chicago. Currently has 30 stores earning $25 million.1997 – Teavana launches and eventually evolves a high-priced hard sell to earn $1million in stores. The tea is a hit with many flavors and strong teaware sales.1994 – Tazo founded in Portland, Ore., sold to Starbucks in 1999 for $8.1 million.1972 – STASH Tea Co. founded in Portland, Ore. Opens only retail store in 2005.1971 – Starbucks founded in Seattle, Wash. Original store sells tea & spice.
    10. 10. In March 2011 Starbucks unveiled a new logoThat CEO Howard Schultz explained “gives us thefreedom and flexibility to think beyond coffee.”A few months later, after Teavana’s successful IPOdemonstrated that tea shops in malls could average$900,000 in annual sales, Starbucks hired CharlesCain, a seasoned tea retailer to head up the Tazo expansion.Annie Young-Scrivner, chief marketing officer of Starbucks, toldstockholders at the company’s annual meeting that year:“Tea is huge. Starbucks is reinventing a traditional beverage.”Last fall Starbucks moved its Tazo operations from Portland, Ore.,to nearby Bellevue, Wash., expanding its blending and distributioncapabilities. Tazo sales rose 43% during the past year.11SymphonyIRI (Bloomberg Businessweek Oct. 23, 2012)Why Starbucks?
    11. 11. No one knows whether Tazo’s concept will workbut sales at specialty tea retailers top $1,000/sq. ft.and that fact alone draws investors into the segment.“The question is not whether there is currentdemand to support rapid growth, but whetherthere is the opportunity to raise the consumersexpectations for, and interest in, good tea the sameway that others have done for specialty coffee, vintagewine, and craft beer.” – Charles Cain, VP, Tazo Tea.Starbucks has the deep pockets to test the concept and theability to rapidly expand should it prove successful.“When they see an opportunity, Starbucks starts small and thendoes things big,” says Cain.Retail vitality is a reality
    12. 12. Lipton Sales SagAlfie Vivian, brand building vice president atUnilever, says that the company’s Lipton teasources 12% of the world’s black tea crop, makingthe $2.7 billion brand the “global market leader.”Business is booming in MENA* where Lipton holds 70% share but inAmerica: “It’s almost become like a generic,” Mintel analyst DavidTurner told Bloomberg Businessweek, “other brands have moreenergy and motivation, and a better story to tell.”1Sales volume has declined in three of the past four quarters for thebusiness unit housing Lipton’s portfolio of teas.Lipton’s RTD teas, worth $652 million in sales in 2011, were pushedfrom first place by AriZona Tea this year. Sales of Coca-Cola’s HonestTea, FUZE and Gold Peak were up 13% capturing market share.In response Unilever’s $11.5 billion refreshment group isworking with Unilever Foodservice on a tea retail conceptto re-energize the Lipton, PG Tips and Lyons brands.MENA (Middle East – North Africa trade region)1 Bloomberg Businessweek Oct. 23, 2012
    13. 13. Battle of the Big Brands$1.4 billionRs 7,483 crore$11.2 billionRs 60,000 crore$11.5 billionRs 61,617crore$46.5 billionRs 249,147 crore0 10 20 30 40 50TazoStarbucksLipton TeaLipton (refreshments)Unilever$ (000,000,000s)Annual Turnover: Unilever vs. Starbucks$2.7 billionRs 14,458 crore
    14. 14. Big Brand Tea Retail$220 million$95 million (est.)$25 million (est.)$1,400,000,000Rs 7,483 core300 Stores100 Stores30 Stores0 200 400 600 800 1000 1200 1400 1600TeavanaDavidsTeaArgoTazoTeavana DavidsTea Argo TazoStore Count 300 100 30 1Revenue (millions) 220 95 25 1400$ (000,000,000s)
    15. 15. Specialty Retail is Driven by…Source: Tea & RTD Tea in the US. Packaged Facts, Oct. 2011. TASTE. Media & marketers keep the health attributes of teatop-of-mind but taste remains the primary attribute citedby 77% of respondents who purchase tea. Others buy itbecause it is refreshing (68%) and healthy (42%) AVAILABILITY. The more readily available, the greater overall sales.Canadian grocers stock larger selections of specialty tea and advertisetea more aggressively. America’s 150,000 convenience stores, all withhigh carbonated soda sales, report 6% RTD tea growth and 1%increase in hot tea sales. Even vending is embracing tea. CONVENIENCE. Tea travelers, FUSO® tetrahedral and pyramid teabags, bottom dispensing infusers for loose leaf in restaurants andpremium bottled and canned teas (Ito-En, Numi, Republic of Tea)make it much easier to find and enjoy premium quality tea.Lets take a closer look at several North American retailconcepts earning at least $1 million (Rs5.4 crore) per store.
    16. 16. In June Teavana Corp. spent $26.9 to acquire 46-storeTeaopia, Canada’s second largest tea chain and now re-branding. Comparable store sales are up 3.5%. Growthwas 38% in the last quarter and annual sales areestimated at $220 million. Sales of dry tea are 55% ofTeavana Corp. (Atlanta, Georgia)Teavana storefront Nashville, Tenn.total (with 20% single estate-80%blends); 41% is merchandise salesand 4% foodservice. The averagetransaction is $40. The stocktrades around $11 down by halffollowing the June 2011 IPO. Storecount will be approximately 350 byyear end with the first overseasstore in Kuwait City. Goal is to total500 stores by 2015. Payback onnew store openings is 18 months.
    17. 17. Teavana Corp.Teavana Holdings operates 302 stores: 284 in 37 states are company-owned with51 stores in Canadian.Expansion: 60 stores in FY 2012 with 105 since June 2011 growingto 500 with franchise operations in Mexico (16) and Middle East (1).Net Sales: $168.1 million (FY 2011 – 200 Stores) Operating income: +86% to $32 million (margin 18.8%) Online sales growth: 56% (7% net) Average store sales: $913,000 Comparable sales: +8.6% Sales per gross sq. ft.: $980 History: $63.8 million (FY 2008)$90.2 million (FY 2009)$124 million (FY 2010)$168 million (FY 2011)Estimate: $220 million (FY 2012)Latest Fiscal Quarter (ending July 29, 2012)Annual Net Sales Estimate: $222-231 millionNet Sales 2nd Quarter: $43.1 million +38%Comparable Store Sales: 3.5%Operating Margin: 10.89%Share Price: $10-$11 ($10.87 on 10/26/12)Market Cap: $419 millionIPO Asking Price: $17 (July 28, 2011 - NYSE)Source: Second Quarter Financials, July 29, 2012, Teavana 2011 S1 NYSE, Ticker Symbol: TEA FY2011 Report 9/4/2012
    18. 18. DAVIDSTEA (MONTREAL, QUEBEC)Expansion to a national chain of tea stores seemed destined for 25-year-old David Segal, founder of DavidsTea. Sales at the first Torontostore in 2008 quickly topped $3.8 million. Backed by retail veteranHerschel Segal (Le Chateau) the Mont-Royal, Quebec-based firmattracted a $14 million investment from Highland Capital in 2012.DavidsTea stocks 120+ varieties withmany flavored and seasonal blends.A 50g pouch of DJ-1 from the JungpanaEstate sells for $15 and a 250g tin brings$75 ($300 kg). A Japanese IwachuHailstone Teapot sells for $108. Theretailer operates 86 stores in Canada’sprovinces with 14 U.S. stores inSan Francisco, New York,Boston & Chicago. Thefirm employs 1,050.Queen St., TorontoLansdowne St., Peterborough
    19. 19. Argo Tea (Chicago, Illinois)Argo Tea, headquartered in Chicago, is a pioneer in tea concentratesin foodservice, offering tea lattes and grab-n-go food since 2003. Thecompany’s bottled teas are sold in 3,000 grocery stores. There arenow 25 locations in the Midwest and five in New York City with a newstore that just opened in Beirut, Lebanon. Theventure is backed by billionaire Sam Zell.
    20. 20. Urban InnovationSan Francisco’s three SamovarTea Lounges promote tea cultureamid 150 teas and gourmet foodand together gross morethan $3.2 million annually.From left: James Norwood Pratt (Author), Joshua Kaiser (Rishi Tea), Jesse Jacobs(Samovar), David Lee Hoffman (Phoenix Collection), Ahmed Rahim (Numi Organic Tea).
    21. 21. CAMELLIA SINENSIS (MONTREAL, QUEBEC)Annual buying trips mean all 250 teas are sold within a year.A $20,000 air exchange system ensures perfect conditions intheir 32-seat space. Tables for two focus on the tea. The shop’sfour owners, tasters all, limit expansion to three shops and 30staff. The retail/wholesale operation makes up 85% of sales.The teahouse earns 5% of gross sales and online salescontribute 10%.Tea is sold in 50 and 100g pouches.Rare teas in 25g pouches. Ticketsaverage $12-$15. Online sales are$10-15. An organic Fairtrade DJ-1Darjeeling is $16 for 100g or $320kg. More than 95% of Camellia’steas are purchased direct fromgrowers around the world.
    22. 22. AMERICAN TEA ROOM (BEVERLY HILLS, CALIFORNIA)This California tea bar seats six. A pot sells for $5. Tea servicewith scones is $20. Top selling Nirvana, a blend of JapaneseSencha, berries, figs and kiwi retails for $15/100g. Food is 4%of sales. Yet the this shop grossed $1.5 million (Rs8 crore) in2011 and 2012 selling premium loose leaf and teaware.How does he do it?A typical transaction consistsof four $15-20 packets of teaand an accessory. Averageticket is $89 but topped$100/Q4 (2011). On March 20sales were $17,000 (Rs9.1lakh) their best day yet. Exceptional online sales. Relentless marketing. Ever-changing offerings.
    23. 23. AMERICAN TEA ROOM“We paid $340 per kilo for a white Darjeeling, therest were more in the $200 range. We orderedseveral first flushes and will be bringing in bothwhite and slightly more oxidized first flushes fromDarjeeling. I was in Japan to inspect the first flushSencha in late April. The prices we are getting forpre-rain Long Jing are $35 to $80 for 100 grams.“We were fortunate to sell more than 40 kilos ofvarious first flush between May and July (when weusually run out). We would buy more but much ofthe finest and rarest first flush goes to Germany soit is not so easy to get the quality we want. OurArya Pearl was extraordinary last year. It reallyhelped out with sales.” - David Barenholtz, founderof American Tea Room in Beverly Hills, Calif.DavidBarenholtz, founder oftheAmerican Tea Room,Beverly Hills, Calif.Arya Pearl$52 – 2 oz. (57 g)$144 – 7 oz. (198 g)$256 – 14 oz. (397g)Inventory: 7 kilosGross: $50,400
    24. 24. How to be a tea crorepatiEvery garden in India has a special hillside kissed by sun and shieldedfrom wind, with deep rich soil that rapidly drains; a carefully terracedhillside of 10,000 bushes in their prime. These are healthy, sustainablebushes with enough shade, just enough mist, just enough care to yield9,000 kg of raw leaf sufficient to produce 2000 kg of superlative tea.This is true in every region. In every state. In every garden.High-grade leaf (30%) brings $50/kgwith 40% earning $20/kg and $5/kgfor the rest. Average: $24.50 – $25.Selling direct to EU and U.S. packersbrings in $50,000 – reasonable for aretail price of $17 for 100 grams.First year: Rs2.6 million (26.88 lakh)In four years: Rs10,000,000 makesthis hard-working grower a crorepati.How to be a tea crorepati: http://www.linkedin.com/manageGroup?dispAddMbrs=&gid=1796519&invtActn=im-invite&cntactSrc=cs-connections&trk=grpmgrtab_inviteExample: Indi/BouTEAque Tea www.bouteaque.comSource: Nigel Melican, TeaCraft www.teacraft.comWorld Tea News LinkedIN Discussion Group www.linkedin.com
    25. 25. Next Steps It takes five years to develop the land, improve your tea-makingskills and establish market relationships to reach this threshold.Join a Small Tea Growers (STP) Self Help Group (SHG) to start. Seek government (India Tea Board) assistance with replanting tooffset social costs such as health and housing facilities for workers. Create a brand. Now that tea retails for Rs200-290/kg in India it isnot essential to export. Innovative marketing and visibility will(Chamraj) bring higher prices. Consumer demand is rising with percapita consumption up 3% annually. Master the local markets first. If you choose to export devise a sophisticated sales presentationtailored to the needs of buyers that serve premium clientele. Dealonly with those who are open-minded, respect the grower’s expertiseand recognize quality tea (firms like Harney & Sons in the U.S. orFortnum & Mason in the U.K.). Share experiences among fellowgrowers to identify buyers honest enough not to exploit a newcomer. Take the initiative. The hard work is done in the garden.Done well it can lead to riches.
    26. 26. 1108-21 Roslyn RoadWinnipeg, MB R3L 2S8Canada+1 204 788-1359 (CAN)+1 415 799-8086 (US)+1 650 576-0306 (Mobile)Skype: dwjboltonDan@WorldTeaNews.comwww.WorldTeaNews.comDan@TeaMag.comwww.TeaMag.comThanks for this opportunity.Dan BoltonEditor and Publisher