Dennis Weaver is the co-founder and president of the Organic Marketing Association, a non-profit that growers CANNOT pay to join. The consumer-facing OMA celebrates the fun side of organics by building awareness with slogans, puns and Instagram-inspired illustrations of vegetables like celery with the headline “Stalking You” or lemons calling you to “Pucker Up Baby.”
Organic Marketing Association President Dennis Weaver
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The Organic Marketing Association sells with humor.
Organic’s Market Share Has Plateaued
Organic Marketing Association President Dennis Weaver explains that organic food is delicious and nutritious, “So why is organic stuck at 5% market share with plantings on only 1% of US acreage?” he asks. One reason is that organic suppliers spend too much time talking about what’s not organic, he explains. They are in a defensive bubble, he says. Consumers are far more interested in how tasty, fun and easy it is to choose organics.
Dan Bolton: Sales of organic foods and beverages are steady with broad distribution in the US, but growth plateaued in the 15 years since organic foods first became available at mainstream grocers. How did OMA come about?
Dennis Weaver, president and co-founder Organic Marketing Association
Dennis Weaver: A group of us from a wide range of backgrounds happen to believe that organic good food is the best for you, me and the planet and that more people ought to be enjoying the wholesome, healthful benefits of organic good foods and so we’ve created the Organic Marketing Association to do just that to inspire you.
The Organic Marketing Association is a new, fresh bold, high-energy nonprofit designed to present organics in positive ways. We’re flipping the script to the fun, delicious, and entertaining side. We won’t try to educate anyone. Instead, we’ll focus on making positive associations with the word organic and the things that make people happy.
It’s a simple formula that works. It’s called the Law of Attraction.
The law of attraction states that people are more apt to move towards what they want rather than avoid. We’re walking away from the tired organic narrative that was negative, argumentative, disparaging.
“We won’t try to educate anyone. Instead, we’ll focus on making positive associations with the word organic and the things that make people happy. It’s a simple formula that works,” says Weaver.
Dan: Describe OMA’s newly launched website and how it breaks free of the conventional paradigms for marketing organics.
Dennis: The website is full of color and fun and smiles and people living life to its fullest, a presentation of organic that’s always on the positive. Lot’s of fun stuff to see, read, do and buy and it’s real easy for brands, retailers, distributors, brokers, manufacturers, influencers, sponsors, allies and farms to get in where they fit in and join the fun ‘good works’ of driving the healthy and delicious Organic Good Food and Beverage Market Share forward for the good health of people and planet.
You can buy boosted Facebook ads. The most important thing is the engagement rate. In 2019 the average engagement for food and beverage was 0.12%, for all industries it is 0.09%. Why? They’re not very fun.
Our taglines and headlines cause a smile if not “out loud” laughter, cause conversational comments and lots of personal shares with their friends. Because we load in fun and happiness, our average engagement rate is 13.5%! We claim we’re 13,166% funnier than anybody else. Proof fun wins! That engagement rate is where the money is and so we’ve refined that skill.
Organic Good Food is the life of the party and we’re bringing the party to their house! Organic Good Foods are the healthy high!
And way back in 1944, songwriter Johnny Mercer got it right in his song “Ac-Cent-Tchu-Ate the Positive”!
Dan:How can OMA benefit the organic segment of the global tea industry?
Dennis: The most important ingredient in tea is the workers and farmers. Farmers can participate in the Organic Marketing Association for free, because without the organic farmers, we’ve got nothing you can buy.
All of our organic good food, farm health, and beauty fabric friends benefit by the Organic Marketing Association positioning their organic good food, tea, wholesome fun, delicious over-the-top taste. It’s designed to encourage people to make the organic good food choice for their own good health.
We tell your story singing a song and with product and storyline placements, put your organic tea in their hands, mind, and mouth.
The Organic industry has struggled to speak outside of the Organic bubble—spending way too much time focusing on what’s not in Organic when the mainstream consumers care a lot more about how tasty, fun, and easy products are and how cool the brands will make them look. So the Organic Marketing Association is flipping the script. Instead of continuing the 5% narrative, we speak to and pursue the 95%.
Organic variety is extensive and availability mainstream, “Why only 5% market share?” asks Weaver.
”If you want to introduce the mainstream consumer to the fun side of Organic while building awareness for great Organic brands…”
Three alcohol and two non-alcohol blends offer mixologists new options.
Sparkling Teas are Nicely Suited to Gourmet Dining
Jacob Kocemba, a Copenhagen-based sommelier credited with creating a new genre of low-alcohol teas has produced a range that’s elegant, contemporary and interesting.
It all started when Kocemba was head sommelier at a restaurant in his native Denmark. His head chef requested a wine to pair with a new dessert for the next day. It was a dessert that used an expensive French strawberry.
“In my wine cellar I had 1,700 wines,” says Kocemba, “but none of them matched the dessert.” He decided to step away and sleep on it. The next morning, there was still no wine he was happy with. So he went to the pastry chef, tasted each ingredient that was going into the dessert, then tasted them all combined. In a moment of inspiration, he stared for a moment at his tea shelf and saw many possibilities. That night he created a drink with tea that was an unexpected success that became special but not yet finished.
“Someone introduced me to carbon dioxide. I had every fifth weekend off, and started working with it,” says Kocemba. In 2011, a couple of years after his first forays into tea, Kocemba started the Kocemba Sparkling Tea Company. Three years later, he was back working as a manager in a Michelin-starred restaurant. But evidently, he could not leave the story of sparkling tea incomplete. So in 2016, once again, he quit his job to pursue his work with sparkling tea. In 2017, he partnered with Bo Stan Hansen to launch Sparkling Tea Co. in Copenhagen.
Kocemba talks about sparkling tea as one does of wine or champagne. It’s a category unto itself, with plenty going for it. But is it for the wine lover or the tea devotee? Both, says Jacob. “You will find a lot of links to the tea, you will recognize it as a tea drinker. Others will recognize the balance and sweetness and acidity, depending on what they are familiar with.”
The sparkling teas made by Kocemba are carefully crafted. Take for instance the BLÅ, a non-alcoholic tea, and one of the most popular teas in their range. It’s made with a whopping 14 teas, including an Earl Grey, the Lady Grey, a Fujian tea, both green and black teas from Assam, a Darjeeling, and an Indian jasmine tea — all organic and single-origin.
Each tea is extracted at different temperatures. “Just like champagne,” says Jacob.
Sparkling Tea offers two non-alcoholic and three alcoholic variations. Vinter is based on chai. Kocemba’s inspiration was Glögg. “In my opinion, it tastes like shit,” he confesses. But rather than dismiss it, he set to ask how he could translate the flavors into something drinkable. The result was Vinter, with the warm hit of spices from chai, that are joined by notes of bergamot oil from an Earl Grey.
Without doubt, Kocemba’s teas are complex. He uses from 6 to 13 teas to achieve the desired outcome. If white tea brings the velvety texture, green is sought for depth and umami while black tea lends a backbone to building layers. The blended teas are bottled with white wine or grape, chosen for their natural sweetness, and to enhance the flavors of the tea. A sparkling tea, is served chilled, in a champagne glass.
In 2019, Kocemba and Bo created a private label for the hallowed Fortnum and Mason. Jacob narrates an interesting story of how that came about. “One of the employees of Fortnum and Mason followed us on Instagram. He liked us. We were in London and wrote them a mail asking if we could drop by. They were stunned at how we look at tea.” Jacob created two non-alcoholic sparkling teas based on their teas, both still in production. The brand lists this as the most innovative product in their 300-year history!
It brought them attention and visibility, but Kocemba is not in a hurry to chase numbers. “We want to build this category,” he says. It is a difficult product to produce, evidently demands deep understanding of flavors and a lot of skill and precision. Jacob admits that it’s not an easy genre to propagate because of the craftsmanship it requires. At Sparkling Tea, he still makes all the bottles, with a batch taking 6-8 weeks to produce.
It is a category that offers plenty to both wine and tea drinkers. Adds Bo, “Both will experience a completely new and innovative way of enjoying tea, which broadens the use of tea and makes it relevant at even more occasions.”
Now, that ought to be reason enough to carry a bottle to the next dinner party.
New York’s Tea Drunk tea house is normally bustling with tea lovers gathered to sip and learn. Since opening in 2013, founder and Tea Master Shunan Teng, an accomplished speaker and tea educator, shared her knowledge by telling stories of her annual buying trips while pouring tea for customers at the shop’s beautiful tea bar. Last March, Shunan, who normally spends three months a year with heritage growers in China, was grounded – worse yet, her thriving business was locked down.
Shunan Teng on attributes that lead to the ageless popularity of heritage teas.Teng normally travels for several months in China visiting historical growing regions and sourcing tea.
Online Tea Education Club in a Class All its Own
Dan Bolton: Shunan, what inspired you to create the online Educational Tea Club, a $50-per-month subscription service that delivers tea samples to home-bound tea lovers?
Shunan: When the pandemic hit it was mandatory close downs so we couldn’t really share tea with our guests anymore in person. There was this need to somehow stay connected and offer tea lovers this kind of tasting experience. Tea is a shared experience, right?
We always had an educational key club before. What we did was send people extensive ratings on featured teas.
Dan: Since the onset of the pandemic, tea retailers have created many virtual tea experiences. How does your program differ from other online courses?
Shunan: Everybody was, you know, trying to create content virtually.
We decided to create tea courses that bring a lot of essential information about the origin, the cultivar and also the processing of the tea. We supplement that with two virtual tastings that we host each month.
Our club has two tiers. The the first explores true origin Chinese teas that are historically famous. This is a great way for people to get into tea.
We also have a higher tier.
Those teas are to be had once in a lifetime. They represent some amazing vintages.
When I talk about where the tea comes from, I don’t mean ‘I drink Chinese tea’ versus Japanese tea or say, ‘I like teas from Yunnan’. We consider basically all the external environment that might affect the tree itself from the slope and direction of the sun and how the sunlight is actually dispersed which leads to temperature differences.
There’s so many different things, a whole checklist of things — all the external things that affect the tea itself.
Dan: You described a growing level of consumer awareness and appreciation for heritage tea and interest in what you call the “geeky” aspects of cultivation and production of ancient teas.
Shunan: The core competence of Tea Drunk as a company is our tea. We don’t do just any tea.
Gimmicky terms, such as “fair trade,” even organic, and single origin, don’t really apply to the Chinese tea industry. We specialize in historical and historically famous tea.
Why?
There is a long history of drinking this tea which means there is so much that we already know and can share. These teas have been highly sought after by generations of connoisseurs.
What we are experiencing is a connection with the past — passed down to us.
Will the pandemic induced pivot to selling tea direct to consumers be the catalyst the farm-to-cup movement needed? 2020 accelerated a shift to digital media, one that many tea producers embraced. Did this bring more customers? Do online stores increase sales? Tea Biz posed these questions to Rudra Chatterjee, Managing Director of century-old Luxmi Group, a tea industry vertical that auctions millions of kilos annually. Last year the Kolkata-based Luxmi quickly adapted to selling 250-gram packets of tea directly to thousands of consumers, a pivot that Chatterjee says brings significant benefits.
Rudra Chatterjee Luxmi Group, Kolkata, IndiaLuxmi now offers teas directly to consumers from 25 owned estates in India and Africa
Will the Pandemic and Pivot Online be the Catalyst the Farm-to-cup Movement Needed?
Aravinda Anantharaman discusses a pandemic pivot with Rudra Chatterjee, Managing Director of the Luxmi Group, which owns tea estates in West Bengal, Assam and Tripura in India, and Rwanda in Africa producing collectively 20 million kilos of tea annually.
Tea Biz:How has 2020 been for you? Did you shift to selling online?
Rudra Chatterjee: This was the first time that we sold tea directly to consumers. And the reaction is amazing because, after all as growers of tea, it’s great to hear from someone who’s drinking that tea at home. Also, for us to get feedback one week or two weeks after we produce the tea. Because tea growing is, in some ways, quite a remote occupation because … you make the tea, it goes into the auction, you get a date which is a few weeks or usually a few months away. And then you just see a price and the name of a customer. Nothing more. But here you are getting emails, questions on how to brew the tea, pictures of how they are drinking their tea … It’s fascinating for us. We are getting more and more customers from around the world but also from within West Bengal, who are reaching out to us and actually subscribing to our teas – not just buying our teas but asking for delivery once a month or once in fifteen days. Which we love. It’s been energizing for me and my colleagues who are growing the tea in the estate.
We are getting more and more customers from around the world but also from within West Bengal, who are reaching out to us and actually subscribing to our teas – not just buying our teas but asking for delivery once a month or once in fifteen days.
Do you think selling direct to customers online is here to stay?
Chatterjee: It is not still the dominant way we sell. The dominant way we sell is the auction. We depend on the auctions. We depend on the large companies coming and buying tea from the auctions. This is a very small part. Each sale online is for 250g or 500g. It’s difficult or inconceivable for us at this point to imagine we are going to sell a lot of tea like that. But one thing I have learnt through the pandemic is that whatever I thought was inconceivable happened. So I don’t know what the future holds. Even if this doesn’t become a major source of revenue for the company, it is certainly a major source of conversation. Tea planters are always great at that from who bought their tea from different parts to actually googling the place the tea order came from. It’s great fun for us. I don’t know if it will be a major part but I sure hope people see that the tea is great and they continue ordering at least at the level they are ordering now.
Are there any consumer favorites from the various Luxmi teas?
Chatterjee: So our most successful has been Makaibari, Darjeeling, which is not a surprise. Makaibari has a name that people recognize, especially people who have lived in Darjeeling at some point, they may have been to Makaibari. And so that is popular. We are seeing quite a bit of demand for green tea, and also within India, which I am quite surprised by because green tea was never sold to the domestic market – it was always sold to Amritsar and from there, exported.
In general there has been interest in all our teas, whether it is the Rwandan teas … and the comments are very knowledgeable. There was one about how the Rwandan tea was very bright in colour which is exactly the right description for it, that is a tasters description, it’s a brisk and bright tea. And the discussion of the first flush vs second flush in Darjeeling. How the first flush is mellow. Also, I think people being at home, they probably had more time to brew the tea in the right way. People are much more curious when they buy from estates, what kinds of teas are being grown and produced this time of the year, so those kinds of conversations are very encouraging.
What are the advantages of selling direct to customers?
Chatterjee: I think one of the really interesting outcomes of being able to sell the tea is that there is a better margin for producers when they sell directly. There can be much more fair trade and what percentage of the revenue of these tea packets can go to the people who are working. Because we don’t see the front end of the business as producers and the front end who are the retailers don’t see the issues we are dealing with either. Even if we do very little of the whole gamut, even if it’s 5% of our business, we understand the whole issue and the challenges which are very difficult to solve. The workers, their wages, their education, their health, in an environment where there is no margin in the business as a producer. Yet there is significant prices that the final consumer pays. How much of it goes into packaging, on advertising and other things. And how much of it should come to developing healthier environment at the production site. All these conversations are things that will become more relevant, more discussed as we run the whole gamut even for a small part of the business.
Has it been challenging to get online and adopt to this new way of business?
Chatterjee: It hasn’t been challenging at all. Tea estates are designed for sending samples and we are sending samples to buyers around the world regularly. It just happens to be B2B buyers and we just happen to have a courier system that works. Someone who knows how to make that work. Doing a B2C sale – I guess the volumes are so small so it’s okay. If the volumes were to get bigger, we need to train some people in the estate which would be a fantastic thing for the people, to train workers to become logistics guys. That will be a great opportunity for the workers. I am quite excited overall.
I have set up an alarm when there’s a sale – it happens 4-5 times a day but when it happens I WhatsApp it to the manager who has produced the tea. Any email is immediately answered because people are very excited. It’s just the knowledge of what the customer says about the product, what they think about the brewing. There was one comment where someone said, I know you are not supposed to have Darjeeling with milk but I love my Darjeeling with milk, and the manager says, if you want it with milk, maybe I will make a stronger brew and send you something. As a consumer I am very excited as well, to be an individual customer and asking for your own processed product, in a product like tea. For many consumers, tea is like sugar and milk and you never thought you could get it changed based on your preferences. But you can. It’s cooking. So if you want your tea with milk you have to make sure you have a stronger leaf which holds your milk. And so all of these things are, I think it’s a good move, and combined with the fact that I have also seen – we have a hotel in the estate that we started a few months ago – I have actually seen people visit the tea estates. The combination of hearing from customers and seeing customers in tea estates is – the first time for more than 100 years in the history of Luxmi tea, this is happening. It’s quite amazing.
Tea families benefit from higher margins when companies sell directly to consumers
The largest specialty tea retailer in North America will permanently shutter all but 18 of its 231 outlets in the US and Canada following bankruptcy filings in both countries.
In March, following Canadian stay-at-home orders, Montreal-based DAVIDsTEA, a pioneer in specialty tea retail, closed its downtown storefronts and suburban mall locations and furloughed most of its staff. As Canada cautiously began re-opening, the company’s retail stores remained closed.
By June eviction proceedings had begun against some of the company’s stores for failing to pay rent. In July the company closed all 42 of its US locations and 82 Canadian locations.
Negotiations with landlords led to more favorable lease terms, according to the company. Seven of the stores are in Quebec, five in Ontario and the rest in Alberta, British Columbia, Manitoba, and New Brunswick. All are located in major shopping malls where foot traffic is sufficient to enable profits.
The company sent lease termination notices to the remaining locations and expects they will be closed by summer’s end.
“We believe that a select group of our best-performing stores, complementing our growing online and wholesale business model and supported by an entrepreneurial organization, will enhance DAVIDsTEA’s ability to emerge from the Companies Creditors Arrangement Act (CCAA) restructuring process as a more sustainable and resilient organization,” stated company founder, chairman and interim CEO Herschel Segal.
Frank Zitella, who is both CFO and COO said in July “we are fully committed to continuing to serve our loyal tea-loving customers with passion and ensuring that their favorite blends of tea are available online and in grocery stores and pharmacies, both during and after this restructuring.”
During the fiscal quarter ending May, DAVIDsTEA reported sales decreased 27.3% down $12.1 million to $32.2 million. “Sales in grocery stores and pharmacies across Canada continues solid growth,” according to the July 31 filing. Zitella wrote that “with first quarter sales growth of over 120% year-over-year, we are extremely pleased that our loyal tea-loving customers have shifted to buying our teas online, and in supermarkets and drugstores. The strong performance of these sales channels provided us with the confidence that we are on the right path for the future.”
In an April 27 update, Zitella wrote that “before COVID-19, our path to profitability was predicated on making the business more productive, expanding our product portfolio, and optimizing our sales channels.”
“The post-COVID-19 retail environment creates significant challenges for our unique in-store customer experience,” writes Zitella, who announced a pivot to online sales and expansion of wholesale distribution in grocery stores. The decision follows a multi-year decline in brick & mortar sales.
In the US “we will focus exclusively on our very successful e-commerce sales
“We ended the fiscal year with a solid financial position, and we have taken decisive action to align our operations with our growing online and wholesale channels. In adapting our business strategy to this new reality, we expect to emerge from this crisis as a leaner and more effective company, able to seize opportunity from a landscape ready for health and wellness tea,” according to Zitella.
Full-year revenue was $196.5 million, down 7.7% compared to FY 2018 but wholesale sales up 86% compared to fiscal 2019. The wholesale side of the business supplies 1,500 Loblaws grocery stores and 1,000 other grocery locations.
“This could represent a turning point for DAVIDsTEA and accelerate substantially the anticipated evolution towards online sales to drive long-term profitability and connect with a bigger audience than ever,” writes Zitella.
The company has a market capitalization of $23.5 million Aug. 1 and was trading at 90-cents per share. Shares were valued at $19 in 2015, rising to $35 following an initial public offering, but have since been in decline.
EDITOR’S NOTE: This story was updated Aug. 1
Regions are reconsidering the pace of restaurant re-openings after a spike in COVID-19 cases.
US Retail Re-openings Stall
The largest restaurant chains are reopening to a new normal that includes tea. Dunkin’ for example, is testing a bubble ice tea at some locations.
A study of credit card spending by Bank of America reveals a big gap between sales at independent and small chain restaurants and the 200 largest restaurant chain operators (500+ locations). Prior to the pandemic, Nations Restaurant News, reported that consumer spending was comparable in the two categories.
Green iced tea with strawberry popping bubbles at Dunkin’
“But by mid-April, although the entire restaurant industry was seeing negative year-over-year consumer trends, the spending gap between large and small restaurant chains had widened to nearly 35%,” NRN reports.
In July credit card spending at large chains was positive (compared to last year) for the first time while spending at smaller operations was down 20%. Reporter Joanna Fantozzi noted that smaller chains are more likely to be casual and quick-casual concepts, while large chains are often limited or full-service concepts. “Casual dining and quick-casual have been hit harder by a shift to social distancing, which explains some of the gap between big chains and other restaurants in the data,” according to Bank of America.
While restaurants in all 50 states are in the process of re-opening, those in Arizona, California, Texas, and Florida reversed course and 12 states have paused re-openings amid a resurgence in Covid-19 infections. The New York Times reports a mix of local and state government restrictions in Nevada, Colorado, New Mexico, Louisiana, and Michigan. Colorado reversed its policy and now mandates the wearing of non-surgical masks in situations where social distancing is not possible. Alabama, Arkansas, and Montana also made masks mandatory this week.
Georgia’s governor suspended all mask mandates, saying they are unenforceable, but major retailers including Walmart, Kohl’s and Kroger now require customers to wear masks regardless of local regulations.
East Coast and Mid-Atlantic states are mostly continuing or have completed reopening, showing how the COVID-19 resurgence in the U.S. has affected the Southern and Western States disproportionally (see map).
New Bubble Tea Emoji Speaking of bubble tea, Friday July 17 is World Emoji Day when Apple releases its version, described as representing a tea originating in Taiwan and commonly served with tapioca pearls, also known as boba, in a plastic cup with a wide straw.
World Tea Expo Postponed Until July 2021
The June 2020 World Tea Conference + Expo that was postponed until October has been canceled, according to Questex, organizers of the event. In a release, Questex explained that due to the COVID-19 pandemic, the Colorado Convention Center in Denver declared that no large-scale events can take place in the building for the rest of 2020. This is the show’s first cancelation in 18 years.
“Our thoughts go out to everyone who has been affected by the current situation,” said Questex CMO Kate Spellman. “Our number one priority remains keeping the entire community safe,” she wrote in the press release.
“Our team is working through all of the logistics that are involved with cancelling an event,” she continued. “We understand that you will have questions and concerns. All attendee registration tickets purchased for the original World Tea Conference + Expo 2020 dates will be honored for a full credit towards the 2021 event,” according to Spellman.
Questex derived 70% of its revenue from live events until this spring. The company’s CEO Paul Miller told Folio Magazine “it takes a lot of webinars to make up for the revenue lost when a single conference is cancelled, especially because attendees aren’t accustomed to paying for access to online editions of physical events.” The pause has provided an opportunity to reevaluate every aspect of the business, from minute details to bigger questions, he said.
“Coronavirus or not, I think it was time probably for a change,” Miller told the magazine. “Is a one-location, three-day event really the future? Or is it 12 locations, with a keynote broadcast live and a breakaway for local programming? Are these the things that people might appreciate, not having to get on a plane or give up five days of their week? We’re in a crisis, let’s not waste it. Let’s rethink everything.”
World Tea Expo is the largest gathering of tea professionals in North America, attendance has varied from a few hundred in the early years to more than 5,000, including many international tea suppliers. In recent years the show has attracted 150 exhibitors and 3,500 attendees. Questex purchased the event last December and relocated it from Las Vegas to Colorado.
The 2020 edition was originally scheduled for June but stay-at-home orders and the general disruption that marked the initial months of the pandemic led Questex to postpone the event until Oct. 15-18.
Founder Jesse Jacobs closes four Samovar Tea Rooms in San Francisco
Samovar Tea Lounges Begin Hibernation
Samovar founder Jesse Jacobs announced cafe and restaurant operations at the company’s San Francisco stores “will enter a hibernation period until the current health crisis turns around.”
The company’s Yerba Buena Gardens and SF International Airport locations closed during the first wave of the pandemic. All four locations will enter “hibernation” Sunday, July 19. Pickup and delivery at the Fillmore Street and Valencia Street cafes are available until then and retail products are half off. Operations continue as before at the company’s e-commerce tea shop.
“It’s with misty eyes and a heavy heart that I am announcing a major transition for Samovar,” Jacobs writes on the company’s home page, but he stressed “This is NOT goodbye…”
Jacobs founded the company 17 years ago after a career in high-tech consulting. “When I started Samovar Tea Lounge I realized that tea would be the perfect vehicle to satisfy just what the world needs today: to slow down, unplug, and wake up,” said Jacobs.
Jacobs will host tea-inspired, real-time virtual experiences “to keep the human connection alive.” First in the series is “Mindful Tea Tasting Mediation“, 7 am (PST), Monday, July 27. Click here to register.
Kenya Court Halts Tea Reforms
The Nairobi High Court halted the immediate implementation of controversial government-ordered tea industry reforms pending judicial review in September.
In April Agriculture director C.S. Peter Munya, acting on behalf of President Uhuru Kenyatta, intervened to curb predatory behavior amid falling prices. Kenya is currently record levels of production due to fair weather with little impact from the contagion in rural areas until recently.
Kenyatta’s reforms require the Kenya Tea Development Agency to pay 50% of the price of monthly deliveries. The remainder is to be paid as an annual bonus. In the past, KTDA factories paid farmers Ksh14-16 (1Ksh = USD$0.01) per kilo. Buyers will now pay 10% down with the balance due before export. Factories must pay farmers within 30 days after receiving auction proceeds. Also, brokers representing factories will be limited in the number they represent (no more than 15 factories in the current proposal).
Once an outline of the reforms was announced, Munya named a committee of industry executives, brokers and media to evaluate policy and review regulations and administrative reforms curtailing the powers of the Kenya Tea Development Agency (KTDA).
KTDA responded with a suit alleging bias and conflicts of interest, citing specific committee members. In her ruling, Lady Justice Pauline Nyamw- eya said KTDA’s concerns “met the threshold of an arguable case” and scheduled a judicial review to begin in September.
Kenya’s exports fell by six million kilos during the first five months of the year, and auction prices continue to decline, influenced by disruptions in demand and a global tea surplus.
Accessing markets is challenging, according to industry brokers. Demand for Kenya’s black CTC (cut, tear, curl) tea fell or remains flat among critical trading partners including Iran, Afghanistan, Yemen, and Egypt (down 15%).
The unit price of KTDA marketed teas fell by 6.8% during fiscal 2019/20 reaching a 12-year low of $2.42 per kilo. July 1 ended a fiscal year. Export earnings during the first five months of the year declined by Ksh1.3 billion (USD$12 million)
Need to Know
Tea Industry News for the Week of July 6
Tea Sales on Amazon
D2C Lifeline for Small Retail
Global Restaurant Report Grim
FDA’s New FSMA Portal
Tea Sales on Amazon
Overall, consumer spending in the US and Canada is down, but tea sales online and on Amazon have increased, according to market research firm JungleScout.
At the height of the lockdown, Amazon customers were spending $11,000 per second on virtually anything carried in grocery, apparel, housewares, even automotive. The company hired thousands to meet demand and earned the loyalty of hundreds of thousands of new Prime members despite the inability to guarantee same day deliveries. Prime membership rose to 52.4% from 45.2% during April largely due to COVID-19.
Grocery was one of the top sales categories and as a staple, tea fared well. Kathy Cummins, Head of Data Analysis at HINGE GLOBAL said the US Amazon total tea category (counting bagged tea, loose-leaf, and ready to drink) is $29 million. This is small compared to the $1.2 billion of coffee sales which consists mainly of single-serve capsules and pods generating $929 million. Hinge is a Cincinnatti, Ohio-based e-commerce consultancy founded in 2015 with deep expertise in sales and marketing on Amazon.
“Like coffee, we have seen an average 34% annual growth rate for tea on Amazon, suggesting that consumers are adopting this channel for this category.” said Cummins, adding, “The Subscribe and Save program, as well as the huge assortment of flavors, options, and product formats, are contributing factors.”
The “teas” category on Amazon consists of ready-to-drink, bagged, loose-leaf, capsules & pods, powders, and liquid concentrates, explains Cummins.
“Because of this diversity, sales for tea tends to be more volatile than coffee, and there is more head-to-head competition/switching with non-teas (such as flavored waters, water flavor enhancers, and non-tea ready-to-drink alternatives), according to Cummins.
“Sellers competing in teas should take special care to have strong copywriting and efficient paid marketing to stand out in the crowd,” she said.
www.hingeglobal.com Cincinnatti, Ohio
Brand Discovery
A June survey of Canadian consumers revealed that almost half (45%) reported discovering new brands through online resources while researching COVID-19. Website visitors are seeking products that keep them and their families safe, while also seeking the easiest way to purchase them, according to Google Think. “More than 20% of Canadians purchased a brand that was new to them during COVID-19 that they plan to continue to buy,” according to Deloitte State of the Consumer Tracker (April 2020).
In its report on consumer trends, JungleScout writes that COVID-19 has the potential to solidify consumers’ e-commerce brand loyalty. During the pandemic 63% of consumers increased or maintained their online spending and 61% increased or maintained their Amazon spending.
“About 50% of customers are buying more groceries and cleaning supplies with 30% or more buying fewer electronics, office supplies and clothing. JungleScout found that 61% of consumers plan to reduce their spending on non-essential items in the future.
The report found 90% of customers have shopped on Amazon and 65% do so monthly. Thirty-nine percent of respondents said they would be fine if they never had to shop in a physical store again.
Walmart
Amazon grabbed the headlines but online sales at Walmart grew 74%, contributing to a $134.6 billion first quarter. Comparable sales rose 10% from a very large base, indicating many new customers.
“During the pandemic, customer loyalty went out of the window as consumers shopped around much more …in order tofind the supplies they needed,” GlobalData Retail Managing Director Neil Saunders told Retail Dive.
“As the largest grocer with a massive footprint, it (Walmart) became a destination for all kinds of shoppers. This included many people who don’t usually visit the store much for groceries,” said Saunders.
Walmart is soon expected to rollout unlimited same-day delivery without a per delivery fee for Walmart+ consumers willing to pay $12.95 per month ($98 annual).
“Overall, the pandemic has helped Walmart,” Saunders said. “Before the crisis it was the nation’s retailer and that position has only become more entrenched.”
Global Restaurant Report Grim
Restaurant owners globally are assessing retail carnage in the wake of the coronavirus pandemic that will likely claim 2.2 million restaurants in 2020.
In the US the National Restaurant Association estimates a shortfall of $120 billion in restaurant and foodservice sales from March through May.
Bloomberg News reports that the pandemic is permanently reshaping the restaurant industry. Consulting firm Aaron Allen & Associates estimates 10% of restaurants globally will disappear with an additional 20% forced to go through a financial restructuring. The report quoted an even more pessimistic OpenTable which notes the US restaurant industry, which employs 15.6 million workers, was already suffering from rising debt and excessive competition “before the global pandemic caused a dramatic and unprecedented shift in consumer behavior.”
Delivery and curbside service are now common, but currently bring in only 35-40% of prior sales, forcing chains including Panera Bread and Tijuana Flats to offer groceries for the foreseeable future. Estimates place grocery orders at 10-25% of total sales.
OpenTable CEO Steve Hafner predicts 25% of US restaurants might close permanently. “Even in the best of times, restaurants operate on really thin margins. So if you add on capacity restrictions, new safety, and service protocols, it’s really tough for a restaurant to make it,” he told Yahoo! Finance. On May 14 total reservations and walk-ins on OpenTable were 95% below reservations on the same date the previous year. Nationally, year-over-year restaurant sales are now about 65% of sales during the same period in 2019. OpenTable tracks 60,000 restaurants globally.
YELP! which lists 140,000 businesses large and small, reports 41% of its listings have shut down for good. Los Angeles experienced the largest number of closures at 11,774 but Las Vegas was much harder hit per capita with 1,921 closures, according to YELP! which counted 23,981 restaurant closures along with 27,663 retail shops. Approximately 20% of the businesses that were closed in April have reopened.
There are about 22 million restaurants worldwide. The greatest concentrations are in cities like New York where there are 27,000 restaurants of which 4,800 are now open for outdoor dining.
Graphic courtesy Yahoo! Finance
D2C Lifeline for Small Retail
Online-only tea retailers such as London’s offblak.com launched as direct-to-consumer (D2C) ventures but more recently D2C has become a business-saving lifeline for brick & mortar retailers during the pandemic.
Online tea sales increased during the past six months as home-bound consumers spent the most on everyday household goods, groceries, and medicines. A survey of Canadian consumers found that 30% reported going online in April to purchase for the first time products they would normally buy in-store.
Retailers with close ties to their customers benefit most as their cost of acquiring individuals to sell to is low. Those who are thriving are going beyond e-commerce sites. Jesse Jacobs, founder of Samovar Tea Lounge, launched tea-tasting sessions via Zoom after closing the company’s four cafes.
A first-party data strategy is critical to learning about customers and delivering a personalized experience, which can result in a greater return from marketing investments, according to Google Think. A direct link with customers means retailers can offer more flavors and ranges not available in supermarkets and storefronts with limited shelf space. A cafe, for example, might offer six or eight teas on its menu but easily double that number of offerings online. Those with blending skills can offer exclusive, limited-edition, low-run teas at a premium delivered directly to your home.
Bundling is also an attractive option.
Pantry Pickup available at the Unilever U-Shop include Rejuvenate herbal, Lipton Yellow Label and Tazo Golden Turmeric Latte tea.
In Canada, Unilever introduced bundles of commonly purchased groceries that include shelf-stable Tazo tea and boxes of Lipton Yellow Label and Rejuvenate herbal tea along with Knorr soup and seasoning multipacks. An enclosed recipe card explains how to make an entire meal. The U-Shop is integrated with Google’s Merchant Center and Shopify.
“The site features product bundles to help get around the low unit cost vs. higher shipping costs — a challenge for most CPGs,” according to Google Think.
Home cleaning, laundry, and home hygiene bundles are currently available at discount in the UK via leverdirect.co.uk. Delivery is free.
During the past few months breakfast shifted from drive-thru to home-cooked while dine-in dinners and restaurant lunches declined. Since few tea drinkers order hot tea with their restaurant takeout (75% prefer beverages from home) providing a packaged single-serve option is good business. Offer larger format teabags for making iced tea — a family favorite given that for the first time in decades, the number of meals shared by family members is on the rise.
The Huffington Post reports that 30-35% of families share fewer than three meals a week together prior to the pandemic.
Building an omni-channel strategy is likely to pay off. A 2017 survey among U.S. consumers showed that 23% of respondents drink tea every day, while only 10% never drink tea at all.
FDA’s New FSMA Portal
The US Food and Drug Administration (FDA) unveiled a web portal describing in detail a 10-year blueprint for implementation of the Food Safety Modernization Act (FSMA).
In a press release FDA Commissioner Dr. Stephen Hahn MD, writes that “Many believe we will see more changes in the food system over the next 10 years than we have in decades. Foods are being reformulated; there are new foods, new production methods, and new delivery methods; and the system is becoming increasingly digitized.” ?
“To keep pace with this evolution, FDA is taking a new approach to food safety, leveraging technology and other tools to create a safer and more digital, traceable food system,”? he said.
“Smarter food safety is about more than just technology. It’s also about simpler, more effective, and modern approaches and processes. It’s about leadership, creativity, and culture,” said Hahn.
FDA: New Era of Smarter Food Safety
The ultimate goal is to reduce the number of food-borne illnesses in the US. The blueprint identifies four objectives:
Smarter tools and approaches for prevention and outbreak response.
New business models and retail modernization
Tech-enable traceability
Food safety culture
FDA said it intends to push for a transformation of food and dietary ingredient record keeping. Much of this is still done on paper, which hinders the Agency’s timely response to outbreaks of food borne illnesses. The Agency said it also intends to push for greater transparency in the supply chain, while still being mindful of confidentiality and proprietary interests, writes Hank Schultz inNutra Ingredients USA
FDA announced it will convene a summit to foster new food ingredients and production technologies. Mankind can safely ingest 200,000 of the world’s 400,000 species of plants but the world’s population commonly eats only about 200 plant species. Three crops, maize, rice, and wheat account for more than half the calories and proteins humans derive from plants. Humans require one million calories a year to thrive. Corn produces roughly 15 million calories per acre, enough that if the US harvest of 14.2 billion bushels were used to feed people it would supply 17% of the world’s caloric needs.
Bankruptcies are accelerating. Commercial Chapter 11 filings are up 43% over June 2019 with 609 new filings compared to 424 in June of last year. Prior to the pandemic, about 95% of all bankruptcy cases were filed by individuals, rather than businesses, according to a brief by the Poynter Institute. The 2019 Small Business Reorganization Act (SBRA) became law in February helping small businesses move through the bankruptcy process more quickly and with lower costs. During the first half of the year, 3,604 companies filed under Chapter 11, up 26% compared to 2019. These include 30 US companies with liabilities greater than $1 billion. Z-Score, a formula for predicting insolvencies developed by NY University professor Edward Altman, predicts the total will exceed 60 by year-end, according to a Bloomberg Business report.
