The North American tea market is evolving, with a shift towards conscious consumption and an increasing preference for healthy, convenient options, projected to grow significantly by 2016. Investors are capitalizing on this trend through acquisitions and innovative product development, including ready-to-drink (RTD) teas and blends with alcoholic beverages. Major players like Coca-Cola and Pepsi are adapting to these changes, indicating a strong opportunity for growth in specialty and organic tea markets.

1. Those who reach for tea without thinking are drinking unconsciously
Conscious Tea
North America is awakening to the taste of fine tea
and investors are seizing the opportunity
By Dan Bolton
Editor & Publisher
World Tea News | Tea Magazine
www.WorldTeaNews.com www.TeaMag.com

2. OVERVIEW
 Conscious Tea
Seeking variety – most diverse beverage market in the world.
 Aspirational Motivation
America rewards suppliers of convenient/quality tea.
Game Changer in Foodservice
Martin Bauer/Beverage House deal will energize concentrates.
 Tipping Point
Investors see tipping point. Realigning. M&A to speed it along.
 The Opportunity
Convenience: Key to chilled. Education: Key to specialty.
 Timing is Now
Recession reinforced health, drove home value: Tea is both.

3. Five Key Market Facts
The U.S. Tea Market hit $8.6 billion in 2011 (Canada $400 million)
packaged tea accounts for $2.15 billion, specialty tea $1.3 billion.
Mintel International predicts tea to grow 50% between 2011-16.
 Accelerating growth: Projected at 6.6% in 2012 – 8.7% in 2014.
 U.S. is now second largest global importer of tea (volume).
 The declared value of imported teas rose 10% on steady volume.
 Convenience: RTD sales were $6.5 billion in 2011, up 5.2%.
 Investors are working feverously to develop new products and
build retail infrastructure with unprecedented cash.
 Marketing soon to follow.
Source: Mintel International Customer Survey, Tea Association of the USA Fact Sheet

4. PART I: Egalitarian Tea
North America is a diverse, egalitarian tea market where matcha and
rooibos attract the same demographic: 157 million drink tea daily.
 85 % of tea is consumed cold
 60 % prefer sweet fruit flavored tea
 37 % prefer organic tea to conventional
 Green tea imports up 200% in 10 years, worth $1.5 billion (2010)
Retailers know taste is tops but variety and constant innovation are
critical now that health benefits are well understood. Offerings must
accommodate cultural preferences such as greens for Asians and fruit
blends for Hispanics… today retailers also must offer flavors by season
and for several holiday occasions and recently by origin/estate.
Source: Mintel International Customer Survey, Tea Association of the USA Fact Sheet

5. TREND: EVOLVING MARKET
Healthy Blends: Blended with fruit and vegetable juices, tea benefits
from health-halo attributes such as freshness, local, all natural,
anti-oxidant-rich ingredients and add-ins with functional benefits.2
Hard Tea: Mixing beer, hard lemonade, hard apple cider and other
alcoholic bases with tea just got a big push from Molson (Coors Beer
Iced T), Anheuser-Busch (19th Hole) and Samuel Adams (Wicked Tea).
Millennials: Nielsen reports 72% of Millennial households drink tea.
The mix of men and women is nearly even among 17-34 year olds.1
Beverage as Snack: Tea-based smoothies (matcha) attract consumers
seeking beverages as a between-meal snack or light meal.2
Anti-energy: “Relaxation” drinks are positioned as a way to take a
break and relax for consumers with a hectic lifestyle.2 Tea is relaxing.
Sources: 1) Nielsen MarketTrack 2011, 2) Technomics: Canadian Beverage Consumer Trend Report.

6. TREND: Beer Iced Tea
This month Molson Coors Brewing will introduce
Coors Light ICED T Beer in Canada. It contains
4 % alcohol and no caffeine and follows Anheuser
Busch’s announcement they are rolling out 19th
Hole, a mix of tea and hard lemonade. Not to be
out done, Samuel Adams is expanding
distribution of Wicked Tea to the entire country.
The company reported a 54 % sales jump in 2011
earning $85.6 million in F/D/C/MassMarket.
A real opportunity lies in the fact this is a continent of well educated,
high-minded individuals who make notoriously bad beverage choices.
You are in a position to help cure what ails us…. and perhaps save us
from ourselves. You can help us to regain our health.

7. Total U.S. Tea Imports
TREND: Imports Up
Black Tea Imports
Kg (000)
Green Tea Imports
140,000
127,468 Kg (000)
120,000
100,000
80,000
60,000
12,054 Kg (000)
40,000
22,169 Kg (000)
20,000
-
2003 2004
2005 2006
2007 2008 2009 2010

8. TREND:
Tea Incline
In 2011 importers
brought in 212
metric tons and
valued their tea
at $641 million.
This marks a 10 %
increase in value
over 2010 and a
an accelerating
upward trend.
Source: US Department of Commerce GATS database, compiled by FAS. Stats generated March 11 2012.

9. Value of Tea Imports from China
$140,000,000
$114,451,000 (2011)
$120,000,000 All Tea 24% increase over 2010
Black Tea
$100,000,000
Green Tea $74,027,000
$80,000,000
65% of total value
$60,000,000
$40,424,000
$40,000,000 35% of total value
$20,000,000
$-
Source: USDA/FAS Global Agricultural Marketing Database/GATS Stats retrieved March 31, 2012

10. TREND:
Value Up
Imports rose in
value in 2011.
Asian green teas
show big gains:
Japan up 30 %
S. Korea up 27 %
Taiwan up 25 %
China up 24 %
India up 12 %
Argentina 10 %
UK down -21%
Kenya -12%
Source: US Department of Commerce GATS database, compiled by FAS. Stats generated March 11 2012.

11. PART II — Investment Opportunity
 The market for convenient/healthy/quality tea is underdeveloped.
The seven-year retreat of soda extends to even diet soda — creating
a rare opportunity to gain market share. Soda: $74.2 billion (2010).*
 RTD is fastest growing beverage segment, now $6.5 billion (2011).
 Innovations in tea concentrates will soon revolutionize
foodservice preparation and energize botanicals.
A pioneer in organic tea concentrates and a very clever marketer told
me the other day that “given the current vitality of the industry and
the fact that the big players are starting to get serious about
strengthening their positions in tea, it is entirely possible that the
RTD category will grow by 6 % to 7 % a year which would bring the
industry to a projected $10-11 billion dollars by 2016.”
Source: Per capita consumption of soda peaked in 1998 at 864 eight-ounce servings.2008 – 760 | 2009 – 736 | 2010 – 728. Beverage Digest. Stats sheet.

12. Investment Activity Spells Opportunity
 Coca-Cola’s acquisition of organic Honest Tea (which grew to 100
million bottles in 2010) changed the landscape for market leaders
Lipton and Arizona Tea and partner Nestle.
 In January declining sales of Nestea led Coke to dissolve its long-
standing partnership with Nestle, a move that followed Nestle’s
successful acquisition of $50 million organic SweetLeaf and Tailwinds.
Tata is now closing in on Arizona tea and Coke is investing heavily
in Gold Peak, its refrigerated ice tea while launching a line of cold-fill
teas under its FUZE brand to replace Nestea.
 Meanwhile the Pepsi-Lipton Tea Partnership now holds 24 percent
of the market, a share worth $653 million. What’s next?
The lights in Unilever’s R&D labs are burning late into the night.
Source: Per capita consumption of soda peaked in 1998 at 864 eight-ounce servings.2008 – 760 | 2009 – 736 | 2010 – 728. Beverage Digest. Stats sheet.

13. Teavana Consolidated Statement
Teavana Holdings operates 200 stores: 184 in 37 states are
company-owned with 16 franchised locations (13 in Mexico).
Expansion: 54 stores in FY 2011 with 60 in 2012 growing to
500 with franchise growth in the Middle East and Canada.
Sales: Net $168.1 million (FY2011)
 Sales & Administration expense: $50,571,000 (FY2010)
 Net income: +48% to $17.8 million
 Online sales growth: 56% (7% of net, goal is 10%)
 Average store net: $82,193
IPO Asking Price: $17 (July 28 - NYSE)
 Same store sales: +8.6% Share Price: $20-$25 ($22.36 on 3/30/12)
 Sales per sq. ft.: $994 Market Cap: $800+ million
 History: $63.8 million (FY2008) Fiscal year-to-date (March 31, 2012)
$90.2 million (FY2009) Net Sales: +35% to $168 million
$124 million (FY2010) Net operations: +34% to $31.6 million
$168 million (FY 2011) Fiscal 2012 Revenue: Est. $208 million
Source: Second Quarter Financials, Sept. 2, 2011, Teavana 2011 S1 NYSE, Ticker Symbol: TEA FY2011 Report 3/31/2012

14. Barriers to Entry are Lowering
 DISTRIBUTION: Distribution is the most significant barrier to
expansion for mid-tier suppliers and can only be overcome through
acquisition by majors. Majors are eagerly buying innovative lines.
 MARKETING: Marketing is very expensive in the highly competitive
beverage segment but this is a rare opportunity to grab share. Soda
last registered growth in 2004 and continues to decline. Per capita
soda consumption has fallen to 728 eight-oz. servings. Consumers are
spending on either value or premium drinks: Tea offers both.
 RECESSION: Consumer cash is once again on the table (retail sales
are rising despite job market) making this a good time to act.

15. TREND – Foodservice Concentrates
Eighty percent of tea leaf is consumed as fresh brewed ice tea.
More than 50 of that volume is brewed in foodservice outlets.
Loose leaf (& pods) Concentrate
Inconsistent (fresh taste) Consistent (stale taste)
Labor
Training, Cleanup Minimal
Food Safety Closed system: Food Safe
Discard leaf/pods Little waste disposal (discard/recycle)
Advantages of concentrates: Easy to mix. There is no time away
from the sales counter, you make only what you need. Ease of
introducing next generation botanicals.

16. Martin Bauer & Beverage House
Beverage House: Proprietary process, supplier since 1984.
Martin Bauer: Botanicals, tea, extracts supplier 135 years.
“The biggest challenge to the concept of replacing brewed leaf
with a liquid concentrate has been quality, but today’s
technology allows us to produce authentic tasting tea products
that are difficult to tell apart from a fresh brewed tea,”
– Richard Enticott, President & CEO of Martin Bauer Inc.

17. Healthy Beverage Format
In March Starbucks
opened the first of
what will be many
Evolution Fresh shops.
Starbucks acquired
Evolution in Nov. 2011
as entry into the $3.4
billion and growing
cold-crafted juice
category. A patented
interactive juice
dispenser is used to
personalize orders.
TAZO has a spigot.

18. Jamba Juice & Talbott Tea
Jamba Juice Company will retain
the Talbott Tea name and phase
out Mighty Leaf Tea, now in 440
of the company’s 750 locations.
These include 307 company-
owned and operated stores and
443 franchise-operated stores
with 19 more overseas. Talbott a
10-year old specialty brand is
expected to expand its retail
presence in specialty grocery, gift
Shane Talbott, 40, right ,and 15-year partner Steven
Nakisher, 42, founded Talbott Tea 10 years ago. It stores, hotels, resorts and spas.
was named a favorite by Oprah Winfrey in Nov. 2010.

19. Argo Tea
Argo Tea, headquartered in Chicago,
Ill., is a pioneer in tea concentrates in
foodservice, offering tea lattes and
food. There are now 20 locations in
the Midwest and 5 in New York City.

20. PART III – Specialty Retail Drivers
 TASTE. Media & marketers keep the health attributes of tea
top-of-mind but taste remains the primary attribute cited
by 77 % of respondents who purchase tea. Others buy it
because 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
advertise tea more aggressively. Convenience stores with high CSD
see some RTD tea growth and even vending is embracing tea.
 CONVENIENCE. Tea travelers, FUSO® tetrahedral and pyramid tea
bags, bottom dispensing infusers for loose leaf in restaurants and
premium bottled and canned teas (Ito-En, Numi, Republic of Tea)
make it much easier to find and enjoy premium quality tea.
Source: Tea & RTD Tea in the US. Packaged Facts, Oct. 2011.

21. Urban success.
San Francisco’s three Samovar
Tea Lounges promote tea culture
amid 150 teas and gourmet food
and together gross more
than $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).

22. DAVIDSTEA
Expansion to a national chain of tea stores seemed destined for 25-year-old
David Segal, founder of DavidsTea. Sales at the first Toronto store in
2008 quickly topped $3.8 million. Backed by retail veteran Herschel Segal
(Le Chateau) the Mont-Royal, Quebec-based firm has opened a half dozen
annually locations annually since then.
DavidsTea stocks 120+ varieties of tea with
many flavored and seasonal blends. A 50g
pouch of DJ-1 from the Jungpana Estate sells
for $15 and a 250g tin is $75 ($300 kg). A
Japanese Iwachu Hailstone Teapot
sells for $108. The company operates
76 stores in Canada’s provinces and Queen St., Toronto
recently opened two new
stores in New York City.
Lansdowne St., Peterborough

23. CAMELLIA SINENSIS, MONTREAL
Annual buying trips mean all 250 teas are sold within a year. A
$20,000 air exchange system ensures perfect conditions in their
32-seat space. Tables for two focus on the tea. The shop’s four
owners, tasters all, limit expansion to three shops and 30 staff.
The retail/wholesale operation makes up 85% of sales. The teahouse
earns 5% of gross sales and online sales contribute 10%.
Tea is sold in 50 and 100g pouches. Rare
teas in 25g pouches. The average ticket
is $12-$15. Online sales average $10-15.
An organic Fairtrade DJ-1 Darjeeling is
$16 for 100g or $320 per kg. More than
95% of Camellia’s teas are purchased
direct from growers around the world.

24. AMERICAN TEA ROOM
This California tea bar seats six. A pot sells for $5. Tea service with
scones and snacks is $20. Top selling Nirvana, a blend of Japanese
Sencha, berries, figs and kiwi retails for $15/100g. Food is 4% of
sales. Yet the American Tea Room grossed $1.5 million in 2010 and
2011 selling premium loose leaf and teaware. How does he do it?
A typical transaction consists of
four $15-20 bags of tea with an
accessory. Average ticket is $89
and topped $100/Q4 (2011). On
Mar. 20, 2012 he grossed $17,000
($907 per sale) his best day yet.
Exceptional online sales.
Relentless marketing.
Ever-changing offerings.

25. AMERICAN TEA ROOM
“We paid $340 per kilo for a white Darjeeling, and the
rest in the $200 range. We are ordering several first
flushes. I will be in Japan to inspect the first flush Sincha
on sight in late April and we will be bringing in both
white and slightly more oxidized first flushes from
Darjeeling. Our prices for pre-Qing Long Jing are $35 to
$80 for 100 grams. We have been fortunate to sell David Barenholtz,
founder of the
more than 40 kilos of various first flush between May American Tearoom,
and July (when we usually run out). We would buy Beverly Hills, Calif.
more but much of the finest and rarest first flush goes
Arya Pearl:
to Germany so it is not so easy to get the quality we $52 – 2 oz
want. Our Arya Pearl (white Darjeeling) was $144 – 7 oz
$256 – 14 oz
extraordinary last year. It really helped out with sales.”
Inventory 7 kgs.

26. Specialty Tea Growth
 Store count will rise to 4,500 with Teavana +500 and new
format stores Jamba Juice +450 and Evolution Fresh +?
 Expansion of distribution has made organic and specialty
brands widely available (Honest Tea and Sweetleaf Tea)
 Renewed emphasis at coffeehouses to upgrade tea offerings
 Increased menu choices in restaurants (green|loose leaf)
 Continued recognition of tea’s healthy properties leading
to a switch to tea from carbonated soft drinks.
Americans are making a conscious choice in teas.
“The horizons for tea indeed look bright.” Packaged Facts
Source: Tea & RTD Tea in the US. Packaged Facts, Oct. 2011.

27. THANK YOU FOR ATTENDING
North America Awakens to the Taste of Fine Tea
Investors Seize the Opportunity
www.WorldTeaNews.com +1 204 788-1359 (CAN)
Dan@WorldTeaNews.com +1 650 576-0306 (US)
Skype: dwjbolton
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Winnipeg, MB R3L 2S8
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www.TeaMag.com
Dan Bolton
Dan@TeaMag.com
Editor and Publisher