• Episode 32 | India's Unrealized Potential in Tea

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It will take years to rebuild some US foodservice sectors to 2019 consumer spending levels.

US Foodservice Recovery Rates Vary Widely by Sector

By Dan Bolton

Sales at Quick Service Restaurants (CSR) and the Supermarket Prepared Foods segment are well ahead of pre-pandemic totals but “everyone in foodservice is starting from a really different point,” reports Ann Golladay, senior project director at Datassential Research’s Baltimore office.

Datassential calculates that — overall — consumer spending in foodservice declined from $806.7 billion in 2019 to $701.4 billion in 2021 and will not return to pre-pandemic spending levels until 2023.

Golladay explained to webinar participants Aug. 19 that Fast Casual, once the darling of the industry with the largest real growth will not reach pre-pandemic spending levels before 2023 “and that will be nominal growth that does not include inflation,” she said. Golladay estimates inflation at 5% per year “so you will probably have to back down these projections 10% by then,” she said. Consumer spending at fast casual restaurants declined 19% in 2020. The segment is projected to generate $67.4 billion next year compared to almost $68.7 billion spent in 2019.

A survey of the nation’s grocers found that 74% reported increased sales in 2020. The consumer spend for prepared foods at supermarkets in 2022 will be $38.8 billion, rising by 119% compared to 2019 dollars.

Recreation, lodging, and convenience store foodservice segments will take even longer to recover. Lodging, for example, will have only achieved 71% of its 2019 consumer spend by 2022.

Until workers return to downtown offices, the business and industry foodservice sector, projected to reach pre-pandemic sales of $6.9 billion, will never recover.

Tea Biz Insight – Jack Li, principal at Datassential identified five “x-factors” that could disrupt the official projections. These include new variants, vaccine mandates, additional and extended lockdown, sustained inflation, and a combination of labor and supply chain bottlenecks.

Tariffs on Chinese tea imports to the US penalize consumers

Afghan Tea Market Concerns as Taliban Conquers Kabul

By Dan Bolton

Afghanistan is a major tea consuming nation and a smuggler’s paradise for tea. The country became a profitable middleman by clever manipulation of border regulations there were only recently reined in after decades of openly flaunting Pakistani Customs enforcement.

Bidding on tea at the Mombasa auction slowed this week as the Taliban occupied Kabul, according to the East African Tea Trade Association (EATTA). EATTA reports that Afghanistan gets most of its tea via Pakistan where there have been no disruptions at all, according to The East African. Shipments between India, another major source of tea, and Afghanistan were halted this week.

It is too soon to know how the collapse of the Afghan government and return of the Taliban will alter the tea market, but smuggling was rampant during the 1996-2001 Taliban regime. In Helmand province traders said that “if we smuggle 40kg (heroin), we give the Taliban 4kg.”

Pakistan Customs lists black tea and green tea as two of the five most smuggled commodities. Tea exports to Pakistan surged in 2020, increasing 18.7% in value compared to 2019, making it the world’s highest valued tea import market at $590 million. Kenya accounted for $497 million of last year’s import spend, growing 27% following a decision by the Indian government to no longer export tea to Pakistan.

Afghans prefer green tea to black, yet hundreds of thousands of kilos of black tea are landed annually at the Port of Karachi, Pakistan. Until recently Pakistan charged a combined 38% tax and duties on tea making the import cost of tea 32% higher than tea imported into Afghanistan. Afghanistan is a landlocked nation so huge quantities of African tea, mainly from Kenya, are delivered to the Pakistani port tax-free, taxed at a low rate at the Afghan border, and then transported to large warehouses where it is broken into retail packets and smuggled into Pakistan. Smugglers pay a 12%-15% bribe and transportation cost, pocketing the difference.

Biz Insight –Pakistan’s Competition Commission considers smuggling to be “the biggest threat faced by the domestic tea industry, causing loss of millions of rupees to the government and forcing legal importers out of business,” according to a 2019 report. A crackdown on violators in late 2020 led to a 55% increase in customs duties collected (a proxy for illegal trade) and evidence of a concerted effort by Pakistan to decrease the cost of legal imports, making smuggling unprofitable.

Tea retailers in downtowns squeezed by high rents and slow return of office workers.

Delta Delivers Retail Setback

By Dan Bolton

Consumer spending declined in the US, China, and Europe in July. In the US infections from COVID Delta variant surged, reaching 140,000 new cases per day. Sales at restaurants, stores, and online declined 1.1% compared to June 2021, according to the US Commerce Department.

The impact on tea retail is uneven.

Revenue at restaurants and bars sales grew by 1.7% on average with much greater gains in regions where a high percentage of the population is vaccinated. In the US second quarter spending grew at an annual rate of 11.8% with total retail sales 17.5% higher than the pre-pandemic levels  ̶ offering a glimpse of how much potential there is for a return to normal.

Economists now say the third quarter will dampen that outlook. Tea shops in downtown locations anticipating the September return of office workers will largely avoid lockdowns but can’t meet expenses in high-rent locations. Meanwhile footfall in European and American malls declined. In China online sales growth slowed to 4.4% from an average 21% in July, confirming consumer hesitancy worldwide.

Biz Insight Tea retailers occupying valuable real estate face tough choices. Jesse Jacobs, founder of well-respected Samovar Tea House Cafes, a local chain that reliably generated more than $3 million annually for years, was first forced to close its three locations, then hibernate. This week Jacobs and his brother Joshua announced that Samovar will pivot to serving Detroit-style pizza. Joyride Pizza will occupy the Valencia and Yerba Buena locations. In San Francisco where general retail rents average $40.54 per sq. ft. per year and restaurant retail costs $45-$75 per sq. ft., serving pizza is profitable. He told Eater San Francisco, “I spent 20 years developing Samovar into an iconic brand. Similar to other restaurateurs across the country, COVID-19 dissolved the brick-and-mortar businesses to the point of no return. We needed to creatively adapt to the moment.” Teas remain on the menu and www.samovarlife.com retains its lustre as a premium online tea retail destination but without office workers, and with government bailouts exhausted and commercial landlords agitating for relief, tea retailers in downtown locations are unlikely to survive.

San Francisco’s Samovar Tea Cafes are rebranded as Joyride Pizza

Latest podcast episodes


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Episode 32: Foodservice Recovery Rates Vary Widely by Sector

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| Afghan Tea Market Uncertain as Taliban Conquers Kabul | Foodservice Recovery Rates Vary Widely by Sector | Researchers Confirm Heart Healthy Aspects of Tea

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Episode 31: Why are Tea Tariffs Still in Place?

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| Delta Delivers Foodservice Setback | Why are Tea Tariffs Still in Place? | Victory for Japanese Tea Marathon

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Episode 30: India’s Top Tea Producer Faces Bankruptcy

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McLeod Russell India Expected to Restructure | Tea Authentication Standard Chemically Verifies Origins | Soggy Soil Keeps Terracotta Kulhads in Short Supply

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India Tea Auction Mandate Chafes Producers | Smallholders Seek Higher Raw Leaf Minimums | Sharetea Ranks 6th Among Fastest-Growing US Retail Chains

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Episode 28: Children Benefit from Drinking Tea

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Research Reveals That Children Benefit from Drinking Tea | A New Definition for Specialty Tea Gets Refined | Unilever’s Tea Brand Divestiture is on Pace

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Episode 27: Defining Specialty Tea

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The European Speciality Tea Association Adopts New Criteria for Differentiating Specialty Tea
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Episode 26: Rooibos Revived

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Darjeeling is Experiencing a Severe Downturn | Researchers Discover Expanded Role for Microbes in Tea Making | Oxfam India Defines Living Wage for Assam Tea Workers

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Episode 25: World Tea Expo

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| EU Enforces Single-Use Plastics Ban
| Easing Iranian Sanctions Benefits Tea Trade
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Episode 24: Reviving Darjeeling

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| Logistics Companies Invest to Right the Ship | Kenya’s Newly Elected KTDA Board Ousts Executives | Hain Celestial Streamlines Tea Selections

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Episode 23: Adaptogens and Tea

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Episode 22: Spectacular Indian Tea

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| Cold Brew is Trending for Iced Tea Month | DAVIDsTEA in Canada Settles its Debts | Kenya Exports Surge but Auction Prices Remain Low

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Episode 21: Sustainable Wholesale

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|Food Inflation Dampens Enthusiasm Over Rising Tea Prices | India’s Tea Industry Under Duress | The European Union Grants Rooibos GI Protection

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Episode 20: Japan Tea Marathon

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Episode 19: Himalaya Tea Opportunity

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| Tea History Collection Unveiled | Indian Commodities Logjam | THIRST Undertakes a Human Rights Analysis in Tea | A Series of Major Quakes Rattle Yunnan

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Markets today are volatile and confusing – more so due to the pandemic and changing consumer behavior. The best way to respond locally is to keep the big picture in mind. Knowing the underlying trends behind the daily headlines helps tea professionals better interpret the news of the day. This overview is one in a series of 15-minute talks on the business of tea. – Dan Bolton

Click below to view the presentation in Spanish:
Dia Internacional del Te Detras de los Titulares



About

Tea Biz offers insight in real-time for beverage professionals scanning daily news items about their trade.

Tea is both art and craft. It nourishes and inspires. It is the most ancient of plant-based medicines, simultaneously energizing the body as it soothes the mind. Intimately local in character, the tea trade exerts global influence, employing millions to supply consumers at far greater volumes than coffee.

It is a fascinating, intricate topic… far more complex than one person can master. That is why the Tea Biz Podcast enlists 40 voices skilled in 12 languages to tell the story of tea: authentic reporting relies on the expertise of tea professionals who know the tea lands from birth and speak the native tongue.

Transparency is storytelling grounded at origin.

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Tea Biz TEAm

Aravinda Anantharaman

“What came first, the tea or the story? For every tea I drink, there seems to be a story in the wings, waiting for a listener. Tea and stories, can’t have one without the other! I am in search of both.” 


Jessica Woollard

“The world of tea has endless stories. Stories of history, culture, business, agriculture and tradition. I feel so lucky to be able to tell some of them.”


Kyle Whittington

Kyle Whittington

“Tea draws us in. The tea itself, teapots, ceramics, and the stories behind the tea’s own books. I can’t resist picking up yet another book on tea and adding it to my tea bookshelf. Can you?”

Dan Bolton

“Tea is proven to enhance the well-being of those who drink several cups a day. It inspires a process of discovery among imbibers, cultivating a deep appreciation for the growing, crafting, and preparation of great tasting tea. Finding your own favorite tea leads to a daily ritual and, in time, a healthy life-long habit.”


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