• Bitcoin Primer

    World Tea News recently published an article on the emergence of many popular tea brands on offer in Bitcoin’s new online MegaStore. 

    Larger retailers with a thorough understanding of the risks should definitely consider accepting Bitcoins as this digital currency promises to significantly lower the cost of online transactions. BusinessWeek reported Dec. 27 that Overstock.com will accept Bitcoins beginning in mid 2014. With 2012 revenue of $1.1 billion Overstock is the largest retailer to accept the world’s leading cryptocurrency. There are now 12.1 million Bitcoins in circulation, valued at $13 billion.

    Should your venture accept Bitcoins?

    The novelty of buying things with Bitcoins has a certain appeal to consumers but most of those who own Bitcoins are holding them tight anticipating an increase in value greater than current savings rates.

    Prices for tea in the MegaStore (which lists 100,000 items and went live in August) are displayed as a percent of the current value of a Bitcoin. A single coin was trading for $858 last week when the article was published. At that rate ?0.0842 was the equivalent of $72 (all dollars US unless otherwise stated). Between Dec. 5 and Dec. 7 Bitcoins dropped from $1242 (the price of gold) to $600 in 48 hours. On Dec. 23 Bitcoins were trading for $634 making a dollar worth ?0.00157. On Dec. 31 the buy price was $735.80. On Jan. 4 the buy price topped $1000.

    This volatility illustrates one of the obstacles to widespread use of any peer-to-peer payment system. To insure that Bitcoins remain “rare” there will ultimately be only 21 million in circulation. This means that even small numbers of speculators trading Bitcoins will alter its value in the market.

    The fact that the currency lacks liquidity and is accepted by only a small (albeit fast-growing) number of vendors suggests Bitcoin will emerge as the strongest of the cryptocurrencies but anyone can create a competing product, make it equally scarce and useful provided enough vendors accept it as payment.

    To reduce this risk Bitpay and Coinbase were established as Bitcoin wallets willing to immediately convert the digital currency into dollars (and other local currencies). Retailers use these wallets to accept Bitcoins and generally sell the Bitcoins they collect every night to minimize risk. At Coinbase there are no chargebacks or exchange rate risk and no fees on the first $1 million in transactions with 1% fee to cash out Bitcoins after $1 million in sales. Bitpay charges $300 per month for accepting Bitcoins on up to three domains with no transaction fees. A single domain account is $30 per month and accommodates 20 shopping cart plugins.

    Other advantages include the fact that retailers can accept mobile payments from any country in the world without PCI Compliance; direct deposit to your bank daily and accept payments over wi-fi and 3G/4G without the need for NFC terminals.

    Critics point out that Bitcoins are not legal tender and therefore are not regulated by legal tender laws. Bitcoins have no intrinsic value which means if they fall in value, unlike gold and silver, they could fall to zero. There is no government backing, no Federal Deposit Insurance Corp. rescue plan. Bitcoins are not going to replace the U.S. dollar.

    All that said, there is value in a frictionless exchange of a universal currency that is not subject to geopolitical influence. The payment system is transparent and math-based, not subject to government manipulation. It protects against identity theft. It is private but not anonymous to guard against money laundering and fraud. Bitcoins will grow in popularity so long as online purchases require credit card authentication with its requirements of a billing address and the burden of fees and onerous service charges.

    Compared to existing payment systems Bitcoin is almost as handy and frictionless as cash.

    Learn more at: Bitcoin.org and BitcoinFoundation.org and BitcoingCharts.com and BitcoinMagazine.com

  • The Future of Tea

    SOUTHAMPTON, Bermuda — The North American Tea Conference annually hosts an Industry Breakfast to consider difficult issues by engaging stakeholders from all sectors of the supply chain in a Q & A session.

    LOGO-TeaInTriangleOrganizer John Snell with Mother Parkers Coffee & Tea writes “this year was exceptional with the various representations from all sectors, including the two largest global tea producers and significant branded and private label packers; pepper this group with a liberal smattering of importers, affiliated trades, Tea Boards and Associations and you have a veritable bouquet of invested industry grey matter.”

    “No subject is taboo with everything from labor, legislation and competing land use in the dock. The convivial atmosphere of the tea industry is unique and enables honest debate around these tough issues and I quietly applaud the individual collective to keep the needs of those working in tea at the fore, despite the balance book imperatives of modern business,” reports Snell.

    What follows are three of the six questions posed. Each links to a discussion thread. The more who share their opinions on these topics the better. In a few months Tea Biz will summarize the main points and share this with the Tea 2030 project on the Future of Tea.

    Question No. 4

    North America, like other consuming countries, has constructed many positive release gateways to imports, in order to protect the consumer. The latest is the FSMA offshore Supplier requirements. Is this screening of the food supply chain relevant and what are the ramifications for Producers, Importers and Packers that do not exist within GFSI standards today.

    Question No. 5

    Given the incredible success that the Tea Association of the US and Canada have had, with respect to addressing the lack of manageable import MRLs (maximum residue levels) for tea, we may have 30 within 5 years. If this is the case, we can Authorities to start applying a little more pressure on imports to live up to these standards. Are we confident that Production will be able to live within these MRLs or is the specter of yet another set of policed benchmarks a call for action for Producers. Should the collective technical committees from all Origins, finally, be interested in pushing for a Harmonized system and which is the right international vehicle for this action?

    Question No. 6

    If market economics need to prevail then do we need to assess the mechanisms for selling tea in order to increase interest and liquidity?

    Is there enough volume to consider a Futures Exchange which could be based on soluble solid content, a scientific parameter rather than a more subjective quality standard, more in line with extract buyers who are used to having a hedging mechanism to work with?

    What are the pros and cons for such a mechanism?

    Related Posts:
    The Future of Tea (Questions 1-3)
    Tea in the Triangle: Plotting Tea’s Future


  • Tea in the Triangle: Plotting Tea’s Future

    SOUTHAMPTON, Bermuda — MGVK Bhanu, chairman of the India Tea Board, on Tuesday hosted a calypso evening for 150 tea executives vested in the North American market.

    MGVK Bhanu, Chairman of the India Tea Board, greets attendees.
    MGVK Bhanu, Chairman of the India Tea Board, greets attendees.

    The three-day North American Tea Conference, jointly sponsored by the Tea Association of the USA and the Tea Association of Canada, is focused on the future of tea. As is tradition, business sessions and presentations follow festivities, but the topic spurred serious conversation from the onset.

    Global demand is steady with a pronounced shift to higher-quality tea as the growing middle class in tea lands exerts its buying power. However, producers are confronting many challenges including a temporary glut of CTC grade tea.

    Bhanu led a delegation of tea producers that spanned his native land. Firms include Rossell, Kanan Devan Hills, Balaji Agro and McLeod Russel India. The East Indians are upbeat as production will top 1 billion kilos with strong exports and a welcoming North American retail market.

    Delegations from Africa, Japan, China and Sri Lanka welcome the upward trajectory of specialty tea but voiced concerns mainly centered on stabilizing prices for commodity tea. Sugar, cocoa, coffee and rubber have all seen very significant price increases in the past five years, typically doubling while the price of commodity tea has risen 40 percent. Growers need additional money to invest in modernization of processing equipment and automation where practical.

    Attendees at the 4th North American Tea Conference, opening reception Bermuda.
    Attendees at the 4th North American Tea Conference, opening reception Bermuda.

    Watch for coverage later this week as speakers Anne-Marie Brouder of the Forum for the Future discuss sustainability and Nigel Melican addresses mechanical harvesting. Rick Winslow with Nielsen is presenting a North American Tea Review that will offer consumer insights and Robert Nelson, who presides over the National Coffee Association will describe the remarkable impact of single serve on coffee retail.

    Gold Medal judges from left John Smith, Shabnam Weber and Nick Salza sniff, taste and touch teas from a dozen countries vying for recognition.

    Conference attendees represent the entire length of the supply chain including transport and storage, logistics and financing, harvesting and processing machinery and trading services.

    Representatives from European-based dynamos including Martin Bauer, Ahlstrom FiberComposites, Wollenhaupt and Glatfelter mingled with executives from the multinational brands including Unilever (Lipton), Tata, Finlays, Snapple Group, Ito En and Nestle.

    John Snell, Mother Parkers and Manik Jayakumar, QTrade Teas & Herbs, judge the Golden Medal Tea Competition entries.
    John Snell, Mother Parkers and Manik Jayakumar, QTrade Teas & Herbs, judge the Golden Medal Tea Competition entries.

    Specialty tea blenders and importers include QTrade Tea & Herbs, Henry P. Thomson, Sandbar Trading (BW Cooper) ; Haelssen & Lyon, Van Rees (North America) and S&D Coffee.

    Retailers Harney & Sons report strong sales growth and the construction of a new bottling plant adjacent to their Connecticut headquarters. The Canadian Tea Association, meeting at breakfast session on consumer enthusiasm for tea once again found that sales of specialty teas once again outpaced commodity tea in that country where 54% of the population drinks tea at least once a week. Association members can review the entire presentation during a webcast in the next few weeks, said President Louise Roberge.

    John and Elyse Harney, Harney & Sons
    John and Elyse Harney, Harney & Sons
  • Expanding your Market through Collaboration

    TWEET: Partnering with craft brewers, ice cream makers and cosmetics co. may help tea sellers expand markets.

    Tea purveyors have created many routes for reaching audience with their products — sales through retail chains, wholesale to restaurants and hotels, catalogs, online shops, at-home parties. Each supplier spends time trying to differentiate itself from the other similar products on the market. Those who gain a loyal following are most likely to survive. But is selling tea enough?

    Many shop owners expand their offerings to include teaware, books and accessories. Other tea companies are exploring new routes for distribution and those paths involve creative collaborations.

    Maya Tea Company in Tucson, Ariz., has seen potential in creating partnerships with craft brewers who are looking for new  flavor profiles. He supplied Borderlands Brewing Co. with a citrus hibiscus blend and a jasmine green for two different beer projects. He also sold jasmine green tea to Terrapin Beer Co. of Athens, Ga. for a special-edition brew.

    Maya Tea isn’t the only one exploring the beer route. Metropolitan Tea sells to Toronto’s Mill Street Brewery, MEM Imports to Everett, Mass.’s Night Shift Brewing, and other companies are building relationships with brewers across the country.

    If beer isn’t your thing, how about ice cream? Tea ice creams are showing up in grocery stores and ice cream stands with greater frequency. Samovar Tea Lounge even offers a recipe on their site so you can make your own. They, of course, are certain to include suggestions of their blends that would work perfectly. Harney & Co. takes things a step further, selling ice cream floats in their Harney SoHo location that utilize both tea soda and tea ice cream. The bonus? Not only are you introducing people to your brand and your flavors, it also takes a great deal more tea leaf to make a batch of ice cream than a cup of tea.

    Consumables aren’t the only distribution channel. I Heart Teas has been specializing in tea-infused bath and body products, including soaps, salts, lip balm and even perfumes. While she also sells tea through her online shop, the most frequent buzz about her lines often focuses on her cosmetic and body care products. As more companies seek to add teas to their cosmetic products, opportunities will continue to arise for ambitious tea purveyors to create valuable partnerships.

    LINKED IN: What creative partnerships are you seeing that are helping tea distributors expand their markets and bring more attention to their brands? We’ve seen teas show up in offerings by craft brewers, ice cream shops, cosmetics companies and others. In what ways does this help and hurt the specialty tea market?

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