This morning, Euromonitor International’s Senior Beverages Analyst Howard Telford presented to World Tea Expo in Long Beach, California on a ‘Global State of the Industry: A Review of the Top Tea Trends and Markets Around the World’. The presentation focused on the largest and fastest growing tea markets on a global basis and offered insights into the top trends that are driving sales from Istanbul to Brazil using Euromonitor’s latest Passport beverages data. The presentation discussed the latest drivers for consumer demand across the globe and what it means for producers and distributors in the upcoming year.

1. GLOBAL STATE OF THE INDUSTRY
A REVIEW OF THE TOP TEA TRENDS AND MARKETS
AROUND THE WORLD
HOWARD TELFORD
MAY 2015

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Volume v Brewed Volume
Retail/off-trade; Foodservice/on-trade
Brewed iced tea = packaged tea
CAGR (Compound annual growth rate) over a 5 year period
Definitions
DEFINITIONS
Coffee
Tea
Black
Tea
Fruit/
Herbal
Tea
Green
Tea
Instant
Tea
Other
Tea
Other Hot
Drinks

4. WHERE IS TEA TODAY?
OPPORTUNITY AREAS
WHERE ARE WE GOING?

5. 43.1US$ BILLION
2014 RETAIL
VALUE RSP
7.7%COMPOUNDED
ANNUAL GROWTH
SINCE 2009
13.3US$ BILLION
ABSOLUTE
RETAIL VALUE
GROWTH
SINCE 2009

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Tea is the second largest global packaged beverages by volume
WHERE IS TEA TODAY?
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
MillionsofLitres
Global Beverage Market, Total RTD Volume, 2014
286
BILLION LITRES

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Top 10 Volume (Litres) 2014 Growth
China 48,335 mn 5%
Russia 23,929 mn -
India 17,450 mn 4%
Egypt 15,929 mn 1%
Pakistan 12,895 mn 4%
UK 9,852 mn -3%
Indonesia 9,348 mn 5%
Iran 8,887 mn 9%
Japan 6,746 mn 1%
Turkey 6,564 mn 2%
Global top ten in retail volume in 2014
WHERE IS TEA TODAY?

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Top 10 Value (Dollars)
China $9,671 mn
Russia $3,954 mn
Japan $3,538 mn
USA $2,390 mn
India $2,065 mn
Germany $2,014 mn
Turkey $1,327 mn
UK $1,283 mn
Pakistan $1,170 mn
Uzbekistan $1,111 mn
Global top ten in retail value in 2014
WHERE IS TEA TODAY?

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How tea preferences look by market…
WHERE IS TEA TODAY?
Leading Tea Category
By Retail Brewed Volume, 2014
Black Tea
Green Tea
Fruit/Herbal Tea
Other Tea
No Data

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Consumption of black and green tea dominates emerging markets
WHERE IS TEA TODAY?
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Black Tea Green Tea Fruit/Herbal
Tea
Instant Tea Other Tea
RetailRTDVolume(millionlitres)
Retail Brewed Volume 2014
Developed Markets Emerging Markets

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Hot Drinks by Volume… ….Hot Drinks by Value
0
50
100
150
200
250
300
350
Volume
TotalBrewedVolume-billionlitres
Coffee
Tea
Other Hot
Drinks
0
10
20
30
40
50
60
70
80
90
Value
RetailRSP(Fixed,Curent)-US$billion
Coffee
Tea
Other Hot
Drinks
Value versus volume: The song remains the same
WHERE IS TEA TODAY?

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A slow down in Russia
What’s changed in the last year?
WHERE IS TEA TODAY?
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
(Forecast)
%growth
Russia– Tea Retail Brewed Volume Growth 2009-14

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A (sort of) slow down in China
What’s changed in the last year?
WHERE IS TEA TODAY?
0
2
4
6
8
10
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
(Forecast)
%growth
China – Tea Retail Brewed Volume Growth 2009-14

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India’s ascension into the global value top 5
What’s changed in the last year?
WHERE IS TEA TODAY?
2009 2014
1 China China
2 Japan Russia
3 Russia Japan
4 USA USA
5 Germany India
6 UK Germany
7 Turkey Turkey
8 India UK

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Strong tea growth; but
traditional styles of
consumption are old-fashioned
New tastes, new occasions lead
to new opportunities for value
growth
EMERGING:
Distribution, Local Appeal,
Convenience
DEVELOPED:
Health, Functionality, Variety
Consumers are seeking something new
WHERE IS TEA TODAY?

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Our tastes are changing…
Developed market baby boomers, Millenials
Urban growth, growth of global cities
Smaller households
Experimentation with new flavours, formats and use occasions
What are the changing consumer drivers?
WHERE IS TEA TODAY?
30
32
34
36
38
40
42
44
1984 1994 2004 2014 2024
MedianAge
Median age in US, AUS, CA
US Australia Canada
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Urban
Population
Rural
Population
Global expected population growth
2014-19

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…and how we shop is changing
What are the changing consumer drivers?
WHERE IS TEA TODAY?
Hard
Discounters
Premium
Grocery
Image: Whole Foods Market®Own Image

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What are the changing consumer drivers?
WHERE IS TEA TODAY?
0% 20% 40% 60% 80% 100%
Emerging
Developed
2014 Tea Retail Distribution,
Developed v. Emerging Markets
Modern Grocery
Traditional Grocery
Non-Grocery + Non-Store
 …in developed and emerging markets…
Modern v
Traditional

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Tea’s versatility makes it special
OPPORTUNITY AREAS
Flavour Wellness
Occasion Format
Iced tea blends
Fruit teas
Milk teas/bubble
teas
Tea Lattes
Tea and Juice
Blends
Specialty Teas

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0
5
10
15
20
25
US
0
10
20
30
UK
When do you snack, drink coffee, or drink tea? US and UK
OPPORTUNITY AREAS
Source: Euromonitor Out and About Survey (2012)

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0
5
10
15
20
25
India
0
10
20
30
Mexico
When do you snack, drink coffee, or drink tea? Mexico and India
OPPORTUNITY AREAS

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FLAVOUR
Embrace flavour versatility
Lighter, fruitier hot teas
Indulgent, milkier tea lattes
Non traditional: flavour to win younger consumers
FUNCTION & WELLNESS
Wellness claims drive higher prices (4x) and more category value
Flavour and function
OPPORTUNITY AREAS
http://www.angelica.it/ https://www.dolce-gusto.co.uk/ http://www.tetley.co.uk/
http://fr.special-t.com/

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Gold Peak
• +22% (2014)
• Doubled in
size since 2010
Pure Leaf
• +44% (2014)
• New growth
driver for
Pepsi/Lipton
Wong Lo Kat
• +25% (2014)
• Brewed tea is
China’s #2 soft
drinks
category
Fuze Tea
• +30% (2014)
• Latin
American
volume growth
Beyond hot tea? Some of the top brands in soft drinks are tea!
OPPORTUNITY AREAS
Image:
http://www.thirstydudes.com/review/ma
ster-kong-honey-jasmine-iced-tea-3446
Own imageOwn image Own image

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Versatility: Carrier for functional ingredients
Sparkling, CSD alternative
Super-premium
Beyond hot tea? Exploring new use occasions
OPPORTUNITY AREAS
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
North
America
Western
Europe
US$/litreoff-trade
Hot Tea v Iced Tea Unit
Price Comparison
Hot Tea - UP per
litre
Iced Tea - UP per
litre
Image: www.bevnet.com
Image: www.bevnet.com
Image: www.bevnet.com

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0
1
2
3
4
5
6
7
2009 2010 2011 2012 2013 2014
%oftotalretailsales
US Tea Pods Share of Category Retail Value
Format: Where are we with tea pods?
OPPORTUNITY AREAS

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Occasion: How we buy tea..
OPPORTUNITY AREAS
http://www.indesignlive.com/
http://www.hhcid.com//
Own image
Own image

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0
10
20
30
40
50
60
70
80
90
China India
Households(%ofTotal)withanAnnualDisposable
IncomeOverUS$15,000(PPP)
Population Entering ‘Consumer
Class’
2004
2009
2014
2019
2024
But the future is bright…
WHERE ARE WE GOING?
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Mnlitres
Historic and Forecasted Total
Tea Brewed Volume 2000/2019
Asia Pacific Middle East and Africa
Western Europe Eastern Europe
North America Latin America
Australasia

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Driving value in global tea in 2019
WHERE ARE WE GOING?
Flavour Wellness
Occasion Format
Top 10 Largest Hot Drinks
Markets by Value 2014 and
Growth 2014-2019
Country
Sales 2014
(US$ million)
% CAGR
2014-2019
China 9,671 4.1
Russia 3,954 0.7
Japan 3,538 -0.8
USA 2,390 1.3
Germany 2,065 2.8
India 2,014 7.0
United
Kingdom 1,327
-1.4
Iran 1,283 10.0
Uzbekistan 1,170 2.5
Pakistan 1,111 7.3

29. THANK YOU FOR LISTENING
Howard Telford| Senior Industry Analyst - Beverages
Howard.Telford@euromonitor.com
@HowardT_EMI
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