Emilie’s retail shop and tearoom, founded in 2017, spans 2,500 sq. ft., seats 20, and is co-located with Centered Spirit, a cultural and Holistic Center, housing her husband Alex’s holistic medicine practice. Emilie was born in France and grew up in Paris. A graduate of the Sorbonne in business management with post-graduate degrees in marketing. Fluent in Spanish, Emilie was the marketing director for Lacoste in Mexico City. Emilie curates a selection of brands that share the “French Finish,” a style that showcases French expertise in wine, culinary, essential oils, and perfume for more subtle and smoother tasting blends.
Caption: Emilie Jackson in the shop’s classroom where she teaches customers about tea.
Emilie Jackson on the evolution of retailing specialty tea.Emilie’s French Teas is located near downtown Kansas City, Missouri, a city of 500,000 in the US Midwest.
Emilie’s French Teas
By Dan Bolton
Specialty tea retailers in the US and Canada that survived lockdowns are now experiencing a precarious “post-pandemic” “pre-recession” economy marked by steep inflation and rising interest rates. Retailers say that while the pandemic increased demand for better quality tea, in-store traffic has declined as consumers enjoy their tea at home. Home has always been the preferred option for tea drinkers, but before 2020 tea in food service accounted for 20% of global tea revenue. Until office workers return to the world’s cities for daily lunch and afternoon tea breaks the 20% threshold will be difficult for the tea industry to achieve.
To attract customers back to their cafes, tea rooms, and shops, retailers seek to make each location a destination. To encourage in-store purchases retailers teach courses in person and via webinars, promote happy hours, host evening entertainment, conduct food pairings and tea tastings, schedule travelogues with demonstrations on tea making, and offering delivery services, curbside pickup, and even drive-thru.
Dan Bolton:How do you describe teas that define French tea culture?
Emilie Jackson: There’s a difference for me between tea cultivation and tea culture. Tea cultivation is where you actually grow the tea. I explain to our customers where tea comes from and how I pick the partners that I work with. I make sure they know it’s fair trade and that the teas have no pesticide or anything like that. It’s one thing common to all the tea we collect from all around the world.
We suggest that for most of our teas customers first drink it without milk or sugar because you’re gonna miss some of the subtleties, right? So, we have real aficionados and some others who don’t know as much about tea. I say to them maybe you don’t like this particular tea, ‘try another’ I say, there’s a tea for everybody.
“What really makes the difference in teas from France is how we finish the blend. We use our wine, culinary, essential oils, and perfume expertise to make the right blend.”
Emilie (Potier) Jackson
What really makes the difference in teas from France is how we finish the blend. We use our wine, culinary, essential oils, and perfume expertise to make the right blend.
France has a long history with wine. When you think about grapes, there are different grapes for different styles of wine. For a long time we were one of the only places who knew how to grow the best wines. Wine makers came to learn and soon there were new regions and new cultivars. Now you get great wines from all over the world. Sometimes in places that you would not even expect. Tea is traveling a similar path. I think tea is experiencing a constant evolution. There’s different regions there’s different soil and climate (and now the impact of climate change) in countries that goes into the tea itself — without even talking about scented tea. You can get some great blends with subtle notes not just because of the terroir but also because of the year it’s been picked. So that’s fascinating and that’s why I like about French style tea blends. When we do a scented tea we never overpower the tea itself you always can taste if it’s a black tea, green, oolong, or white.
Dan:Do you perceive that your customers are trying to refine their taste in tea and buying more expensive tea? Or do you feel people are beginning to trade down because of inflation and concerns about a recession?
It’s a good question. First of all, for us, we’re already a niche market. We were more, you know, high-end products in the specialty tea category. So the people that come to see us, whether they know our brand, or they’ve been to France, experience some of that here. They come here looking for that. So we’re already more niche. So I think, yes, we’ve probably been impacted by the fear of a recession. And we probably are going to experience a greater impact. I hope people can still find small pleasures that they can buy, like a good loose leaf tea. And that’s one thing about our teas: price ranges are higher, but there are small things you can do for yourself that don’t break the bank.
Dan:Is experiential retail the key to customer retention?
Emilie: I’ve been in the retail business for a long time, and experiential is not new. When we created the shop, it was always about sharing our love of travel and our love for different cultures. You can see that I am from another culture. The photos, decor, and items in the shop are from places we have traveled to and the tea gardens we visited. Experiential retail creates an experience, a universe where people can feel transported.
What I’ve seen before andafter COVID is that fewer people are visiting retail shops in general, whether it’s fear of being around people or whether it’s just a change of habit, a lot of people, even the older generation who like to purchase their tea in-store now has learned to do so online. Online shopping has increased. I have people close by who order online and then just pick up the tea. So, in that regard, that’s what has changed.
I have observed that people in the US go out a lot. COVID and everything refocused their attention on home habits. People started during the pandemic to make things at home, including many people who turned to tea because it was comforting. Tea came indoors. So that was good for us so far as packaged sales, but at the same time, making it at home meant fewer trips to the tea room.
So if you look at the tea room itself, of course, that’s going to have an impact, right? So, as far as changing strategy, it’s more about how you deliver your product or put it in the hand of your customers, whether they want that to be in-store or just want to have the product delivered.
I don’t know if it will change my strategy because it’s all about education. And I’ve always wanted to educate people about the different types of tea because there’s so much misinformation out there. Social media has pros and cons. One of the cons of online selling is that there is a lot out there, and the information is not always good. So how, as a consumer, do you find the right information?
Dan:Online sales were a lifeline for many, many smaller tea rooms when they were ordered to close and later as they faced restrictions preventing their previous service level.Your client base stayed loyal, but some appear to have changed their buying habits permanently.
Emilie: First of all, we were kind of, I mean, lucky in some ways; it’s just like when COVID hit, I was just finishing the online store. So, when clients started to ask, Hey, can you, you know, do curbside or anything like that? We were able to do it, you know, it’s a learning curve plus the technology. As far as logistics and everything, people sometimes don’t understand that tea made from Camellia sinensis is mainly grown in Asia, Africa, and India. When it comes to deliveries in the fall and winter, you get even more sales because, in the US, there is a spike when it’s colder. Everybody was ordering online, and all the different services, UPS, DHL, and USPS they didn’t have enough workers.
It’s hard for us because everything else also increased if you think about it, you know, the overhead for just having a brick and mortar shop is very high. People don’t think about that. But that is a lot of the costs incurred, and then shipping has definitely increased. We don’t have the volume in order to decrease the shipping cost when shipping prices go overboard — we’re talking about a quarter or even one-third of the cost of goods. Sometimes when the client is close by, I will deliver it myself.
Dan:Did you pass these costs on to your customers?
Emilie: Well, actually, not that much, not as much as it was suggested I do. But it’s pretty hard, you know, to know at which point the customer can take it.
Dan:Will you discuss the role of retail in educating consumers?
Emilie: It depends on your market, and you know, how you position your brand. I like teaching, it’s my passion, I love learning, so anything that I learn, I always pass it on to the customer.
Most often, I think they enjoy that. Some maybe don’t care, but most like to learn the processes. People are becoming a bit more aware that from the same plant, you get six types of teas. I explain how producers can get a white tea that is aged which makes it even more complicated. I answer many questions about caffeine.
I also compare tea to coffee with people who are more into coffee. They understand the differences between regions and how it affects taste. In the same way, I explain how tea is picked and how that impacts the taste of each tea. At the end of the day, it’s fascinating. That’s what I love about tea you can learn something new every day until you pass away.
Centered Spirit
The Centered Spirit Cultural and Holistic Center holistic healthcare resource for the local community with several health practitioners that complement each other’s skills along with an apothecary and teaching area.
The Center provides a safe environment for healing, relaxation, and a place to learn about cultures, traditions, and tea rituals around the world. Founders Alex and Emilie Jackson share a passion for the healing traditions of Central America, Mexico, and Europe. Their love for these and other cultures is embedded in every part of the Center, allowing everyone who enters to feel transported, embraced, and at peace.
Sri Lanka is in turmoil politically and financially; the country of 22 million is struggling as widespread demonstrations continue. Unrest is tied to food inflation exceeding 50%, with critical shortages of cooking gas, fuel, and reliable electricity. The country has defaulted on its foreign debt, and its currency devalues with a credit rating that discourages outside investment. Government bankers are at an impasse in negotiating a bailout from the International Monetary Fund that will depend on difficult reforms, including higher taxes and governance changes. Tea producers are confronting all the above challenges, yet the Ceylon tea brand remains resilient. Last year, the industry generated $1.32 billion in US foreign currency, exporting 300 million tons of tea, of which 270 million was high-value orthodox tea.
Export earnings increased 6.72% during the 2021 calendar year compared to 2020. Every subcategory reported growth, with exports of tea bags growing 84%, tea packets up 10%, sales of bulk tea up 2.5%, instant tea sales of 19.5%, and green tea up 22.8% through December, according to the Export Development Board.
Industry veteran Niraj De Mel was named Chairman of the Sri Lankan Tea Board in June 2022, his second appointment to a position that he previously held in 2004. In this discussion with correspondent Dananjaya Silva, Managing Director at PMD Tea, de Mel explains the challenges and solutions facing Sri Lanka’s tea industry.
Listen to the Interview
Sri Lanka Tea Board Chair Niraj de Mel discusses challenges for the tea industry.Niraj de Mel with Bigelow Tea CEO Cindi Bigelow and Prasanna Panabrooke. Photo via Bigelow Blog
During his 45 years in tea, Niraj de Mel has worked as a taster, broker, exporter, and educator. He is past chairman of the Tea Exporter’s Association and the Colombo Brokers Association and served as vice chairman of the Colombo Tea Traders Association. He is the founder and director of The Mel’s Tea Academy in Colombo.
Dananjaya Silva – Tea professionals globally say they are happy to see a safe and steady hand on the tiller as you return to steer the Sri Lanka Tea Board. Given the current political situation, how secure is your position?
Niraj de Mel – Well, to start, let me tell you a bit about the developments before my appointment [on June 20]. Come the middle of May, the industry got together, and because they thought it was time, we told the authorities what we knew best and what was best for the industry.
So, arising from that, they also decided on the people best suited best-suited for the positions at the TRI [Tea Research Institute] and the Sri Lanka Tea Board. I was asked to step back into my previous role as chair for obvious reasons. The immediate past chairman went along with this delegation and met the minister [Minister of Plantation Industries, the Hon. (Dr.) Ramesh Pathirana] to discuss these things and told him that after the debacle as a result of a wrong decision on fertilizer, it’s time that we get the feedback from the experts. Plus, the industry will tell them exactly how things should be run. We have been doing this for the last 155 years, and it’s arising from that conversation that I’m in this seat today.
Dananjaya – Now that a new president has been named, will changes in the cabinet likely means a new appointee to the Minister of Plantation Industries post?
Niraj – I sincerely hope that he [Dr. Pathirana] will be reappointed to the position. Of course, there is no issue whatsoever because he and I will get on.
He’s a minister who sizes up things quite well. He’s a learned man being a medical doctor himself. If there is going to be a change in ministers, the Associations will take up with whoever who’s appointed to the position of Minister plantations that you know that I should remain. Be that as it may, I’m here to do the job.
First and foremost, we need to steady the ship.
Dananjaya –The ban on importing chemical inputs, including most fertilizers, was halted in October, but the effects of the setback linger.
Niraj – Mistakes were made, but circumstances that led to that decision have changed. The big development is a result of the Russian-Ukrainian war, a conflict between some of the world’s largest fertilizer suppliers. Fertilizer has since become scarce and prices went sky high, impacting Sri Lanka at a time when our currency itself also depreciated, compounding matters for the average tea farmer. It’s now virtually impossible for him to afford this kind of price.
To address that, the Sri Lanka Tea Board considered an initiative that has been knocking on the door since January. I see from the minutes a request for funds from the promotion levy to be used to facilitate a loan scheme so that farmers get fertilizer to start feeding these bushes, which have been starved for nutrients.
The board has since delivered fertilizer to nearly 100 factories to offer to smallholders and regional plantation companies. They are working to ensure that the estates will have sufficient fertilizer within about one and a half months.
Editors Note: The Hindu reports that India, on July 17, delivered 44,000 metric tons of urea under a credit line extended to Sri Lanka, as part of New Delhi’s ongoing efforts to support the island nation’s farmers and help bolster bilateral cooperation for food security, the Indian High Commission in Colombo said.
Dananjaya – It seems we’ve returned to the days of old during the colonial period when the Planter’s Association essentially told the Governor of Sri Lanka what was good for the country. Because what was good for the planters’ community was good for the country.
Niraj – Absolutely. Absolutely. It’s time actually that all the private sector did that, not only tea. The private sector has long been the engine of growth in this country, be that planting, manufacturing, exports or brokering. All that is well handled by the private sector and the government sector, such as the Tea Research Institute of Sri Lanka, does the research.
Dananjaya – The crisis not only impacts the rural tea sector. Service providers report difficulties obtaining financing, fuel, and reliable electrical power in Colombo, Sri Lanka’s hub for blending, packaging, and shipping. Will you describe how the tea board is addressing these concerns?
Niraj – I think there needs to be some clarification on this. The private sector basically handles it, but we are trying as far as possible to assist. I have tried to instill into the minds of the officials that we have to be an enabling outfit.
Going back to your question No. 2, there’s one item that was missed: the fuel factor. Actually, that has taken precedence over fertilizer now because the collection of leaves as well as bringing the manufactured tea out is essential to run your factories. Exporter functions, particularly the tea bagging sector, where the machines have to be run continuously, all require an uninterrupted power supply. Power cuts that have been prevailing in this country for the last 4-5 months are an encumbrance to the people, as a result of that, now compounded by the fact that there’s fuel scarcity, particularly diesel. So given the availability of fuel we are trying our best to contact all concerned with the right message to ensure that the producers get their fuel quota.
They cannot have it the way they used to have, because the country itself is, you know, is importing fuel ship by ship. The private sector importers, in particular, have stepped in, which is very magnanimous on their part. To fast-track this process, the government has said, well, if you can produce the foreign exchange, you can certainly get the fuel across. So, the private sector exporters banded together to give off whatever they could.
Dananjaya –As new problems have arisen over the course of this year, from power cuts to rationing fuel, the tea industry has drawn on a battle-hardened core of tea professionals who are able to react quickly and make provisions to see that the industry continues to operate.
Niraj – That’s right. That’s right, reaffirming that Sri Lanka tea has for 155 years been one of the most resilient industries in this country.
There will be little disruptions here and there, but the fact of the matter is we are managing, though it’s challenging. There is great unity among the stakeholders, particularly now with these current issues which they had to face together. We started at the beginning of the pandemic back in 2020. Everybody came together in two and a half weeks to quickly convert to an electronic platform to conduct the auctions, which was great. That carries on to this day. The Colombo traders are very, very confident that there will not be a return to the old outcry system. I started life as a broker and enjoyed the outcry system, but the fact-of-the-matter is we have to move with the times. The platform has enabled us to quicken the process, giving buyers, producers, and brokers time to spend on other things.
Cricket is an apt metaphor… Cricket is the only game that stops for Tea, the country might be 74/8, with a bumping pitch and blinding light, but the Tea sector continues to bat on at the crease.
“Play up! Play up! and Play the Game! “
– Niraj de Mel
Dananjaya Silva is the managing director of London-based PMD Tea and a fourth-generation tea man whose family business, P.M. David Silva & Sons, dates to 1945 during the Plantation Raj in Ceylon’s Dimbula Valley.
In 2021, Sri Lanka launched a ?4.5 billion global promotion to increase the export volume and value of Ceylon tea, a billion dollar brand. The campaign targets 12 markets, including the UK, EU, Asia, and North America. In parallel, the board is pursuing a Protected Geographical Indication by the European Union. GI status affords global trade protection under the World Trade Organization and officially recognizes the authenticity of the Ceylon brand.
Caption: Jayampathy Molligoda, Chairman of the Tea Board of Sri Lanka
Jayampathy Molligoda, Chairman of the Tea Board of Sri Lanka
Why Sri Lanka is Seeking GI Status for its Ceylon Brand
A Protected Geographical Indication (GI) is a seal of authenticity awarded products that have a specific geographical origin and possess qualities or reputations that are due to that origin. Correspondent Dananjaya Silva sat down with Sri Lanka Tea Board Chairman Jayampathy Molligoda to discuss why the tea board is pursuing GI status and what this means for prices for producers, exporters, and for the nation’s tea.
Dananjaya Silva: Will you explain how geographical indication protects Sri Lanka’s multi million dollar investment in promoting Ceylon tea in foreign markets?
Jayampathy Molligoda: The World Trade Organization [WTO] TRIPS* agreement is the trade related aspects of intellectual property rights. So, the law relating to geographical indications originally emerged from the TRIPS agreement under WTO. Everything stems from that.
Geographical indications are exclusively for unique offerings like Ceylon tea, or Ceylon cinnamon which identify the product as originating in a Sri Lankan region: quality, reputation, or any other characteristics of Ceylon tea are essentially attributable to its geographical origin.
Ceylon tea is a registered trademark owned by Sri Lanka Tea Board in Sri Lanka. But what is important is that globally 95% of our tea is being marketed in 140 countries. At least 50 to 60 countries take about 90% of our tea. So, it’s a reputed name globally. Unfortunately, over a period of time we have lost some of the markets Pakistan, Egypt even Russia, their market size has come down drastically for the tea. As a result, we have been selling around 28 million kilos out of our 280 million kilos.
One important point I will explain in detail the Ceylon tea is associated with the Lion logo. To qualify for the Lion logo, one has to pack in Sri Lanka 100% pure Ceylon tea so that’s the problem. Ceylon tea, although is a registered certification, it’s not registered legally in other than a few countries.
As a result, there had been some misusers of the name. We were unable to take legal action on some of the infringements, so depriving our genuine exporters’ ability to service and increase their market share in Ceylon tea products.
Ceylon tea is unique, we all know Ceylon tea is unique. Our tea masters know how to prove that through the testing methods, but that is not acceptable to European Union countries. We have to scientifically prove that this Ceylon tea originating from Sri Lanka has unique characteristics because of its geographical origin and reputation. So that is why we are trying to get this GI registration under intellectual property rights.
Dananjaya: In addition to the legal protection it affords, will you discuss how Protected Geographical Indication status also speaks to the unique qualities of Sri Lanka’s tea-growing regions. GI status establishes a strong, distinguishable, and marketable reputation.
Jayampathy: The GI status is a marketable reputation for producers because the producers follow farming traditions. It’s the cleanest tea in the world so that is the brand story for Ceylon tea. If you go back to the TRIPS arrangement under WTO, the original purpose behind geographical indication was to give recognition to the producer, the farmer.
“Our objective is not only to stabilize but to obtain even better prices in terms of U.S. dollars and to get more market share.“
– Jayampathy Molligoda
Dananjaya: Will obtaining GI status help stabilize prices?
Jayampathy: Our objective is not only to stabilize but to obtain even better prices in terms of U.S. dollars and to get more market share.
If you carve off our 300 million kilo per annum production, basically 285 million of that is what is known as Orthodox Ceylon tea. So that orthodox type of Ceylon tea is not ideally suited for tea bags and that may be one of the reasons why we have lost share in the mass market.
Since CTC is different than Orthodox, we have to find a niche market. Our brand marketing strategy rests on three pillars. First, Ceylon tea is an authentic product, as we explain. Next we demonstrate our sustainability credentials compared to other competing countries and products citing, for instance, the fact that our farmers, our regional plantation companies practice environmental sustainability and attend to the social wellbeing of the people under the Tea Control Act. Finally, there is the wellness factor. Because of these three pillars we are getting a premium price for our tea.
As a matter of fact, at the auction level and the wholesale level, we command $3.50 per kilo converted to U.S. dollars at the Colombo auction. The Mombasa Auctions and Calcutta they get less than $2, roughly say $2, according to information provided by ITC [International Tea Committee] as well as FAO, the Food and Agriculture Organization’s Intergovernmental Group findings.
Recently domestic prices have gone up. In order to get more dollars, the authorities have taken the right course by allowing the rupee to fluctuate, but it has to be carefully managed float in my personal view.
There is a tipping point our exporters must address to sell tea at a very high price. The tea board then works to ensure those FOB prices are trickled down through the factories to the farmers. It is more important getting this money to the farmer, not to give benefit to the exporters or the big time players to earn more money.
So we pitch our Ceylon tea in that particular niche as a differentiated product. So how do we differentiate? It’s only through certifications and indications. Once we have obtained GI logo, it can be combined with other quality standards and the traceability can be assured so they know where the tea comes from.
That’s the game plan. We just use the global tea promotion to explain the benefits of differentiated tea.
London-based Dananjaya Silva is managing director of PMD Tea and a fourth generation tea man whose family business, P.M. David Silva & Sons dates to 1945 during the Plantation Raj in Ceylon’s Dimbula Valley. The company was founded on Brunswick Estate in the fertile Maskeliya Valley as a small independent Tea shop for tea plantation workers to gather, relax and enjoy a quality cup of tea.
The GI mark of authenticity defines the origin boundaries and enhances legal protection for food products.
Overview: The TRIPS Agreement
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement is the most comprehensive multilateral framework for protecting intellectual property. It was enacted in January 1995 to establish a public register of rights that is accessible globally. It bolsters protection afforded by the issuance of CTMs (certification trade marks). The advantages of a Protected Geographical Indication include additional protection when a CTM is not accepted in a jurisdiction; the ability for GI holders to obtain reciprocal protection of a mark mandate under EU Regulation 2081/92; and the fact that GIs describe with legal precision the product’s direct links with origin.
India Chief Correspondent Aravinda Anantharaman reviews a momentous year for the tea sector in a country that produces 20% of the world’s tea. India’s tea drinkers are projected to consume 1.3 million metric tons of tea in 2022. Consumption outside the home (except in tea lounges and airports) has returned to pre-COVID levels and at 840 grams per capita, remains well below most countries, suggesting much room for growth. Her report is the sixth in the series of TEAIN22 year-end reviews and forecasts.
Two years of COVID reset tea consumption at restaurants and cafés, initially reinforcing traditional expectations of comfort and warmth but evolving to permanently disrupt delivery, takeaway, menu choices, and celebratory occasions with tea. Tea (except for bubble tea) largely missed out on the rapid growth of restaurant-quality food delivery, curbside service, and take-out. Beverage service in downtown offices, sales at transit terminals, and inner-city stands remain below pre-pandemic levels. Retail vendors offering afternoon tea at tourist locations, iced tea at sports venues, and food trucks selling teas and juice lost sales to homebound tea drinkers purchasing online or near-to-home suburban locations. COVID reversed the sales growth of tea as a breakfast alternative. Independently operated tearooms with few seats and limited financial resources closed, changed owners, or pivoted online. Tea is consumed more frequently at home, and with food inflation rising and costs driving up menu prices, it is clear that in 2022 tea retail will not return to the familiar patterns of yesteryear.
Caption: Reinventing tea retail, a TEAIN22 Foodservice Forecast
Hear the forecast
TEAIN22 Foodservice Forecast
Diners globally remain enthusiastic about eating out but fearful as omicron infections surge.
Reinventing Tea Retail
By Dan Bolton
The pandemic continues to exert a heavy hand. Everything is so unpredictable that the best advice for a battered tea segment is to stand pat. If 24 months of turmoil has not bankrupted your venture, now is not the time to exit. Those who qualify should judiciously spend government assistance and wait.
Above all, don’t sell out because of Omicron. Retail sales of tea are stubbornly reliable during periods of crisis. Demand for conventional black tea may be flat in developed countries, but tea consumption has more than doubled to 6.4 billion kilos since 2000 — per capita consumption held at 400 grams per capita. According to the Tea Association of the USA, the US tea market grew in 2021 and is now valued at more than $13 billion.
“Tea in the United States was uniquely vulnerable to Coronavirus (COVID-19) since an unusually high proportion of it is consumed at foodservice,” writes Euromonitor beverage analyst Matthew Barry. In 2019, that proportion was 48%. Statista estimates that 52% of spending and 5% of volume consumption in the tea segment will be out-of-home by 2025.
TEAIN22 Forecast: The upheaval in foodservice is manageable. Fears that keep diners away from cafés are diminishing. Out-of-home tea sales in COVID-ravaged India already exceed pre-pandemic totals. It is too soon to know what’s next, so focus on efficiencies in the here and now. The immediate priority is to recuperate and resume growth at a sustainable pace. Retailers that survive will see greater demand, better prices, and fewer competitors.
The path ahead is omnichannel. Elements include experiential online and face-to-faceretail. Teach classes (online or in-person), start tea clubs, serve tea in the park. Offer carefully curated premium teas with an authentic (not necessarily artisan) back story andbotanicals in sachets. Technology is underutilized by tea retailers. Accepting mobile orders and emphasizing takeaway (and drive-thru) communicates convenience and safety. Digital menus and QR codes that open to short videos showcase ambiance and preview the experience. Use predictive consumer intelligence to guide tea discovery online and to save on logistics expenses. Every specialty tea customer, young or old, is now a veteran online shopper seeking value (over price) and confronted with a dizzying number of choices.Concentrating on delivering tea delight – that transforming moment when uninitiated customers first taste premium quality tea –has never been more essential.
Adaptations by tea café and restaurant operators to meet new challenges including high turnover and more significant labor expenses are mainly defensive. Fewer footfalls in shopping districts, hospitality centers, and tourist locations and resorts are a formidable obstacle to full recovery.
While restaurants are experiencing aggressive consolidation and a rush of capital to finance M&A with more than a dozen IPOs in 2021, tea’s transformation will be mainly self-financed. There is little outside investment, and there are no IPOs or $650 million sales of home-grown tea chains to Starbucks on the horizon. Carve-outs are more likely than rollups. In 2021 Unilever shed 34 market-leading brands, including retail outlet T2, due to sluggish growth. The fact that CVC Capital Partners spent $5.1 billion, paying 14x EBITDA to acquire Unilever’s legacy brands, is notable.
Online sales show great promise, but garden-owned and direct-to-consumer brands are crowding a minimal marketplace for premium tea. Worse, automated comparison shopping suggests online prices will converge, driving down margins as advertising costs increase. Devising profitable business strategies, redesigning the retail experience, and remodeling storefronts will take time.
Innovations are emerging: Upscale boba tea rooms, nitro cold brew tea in bars, drive-thru iced tea shops, premium fruit tea outlets, subscriber-only tea clubs, and Livestream marketing. The mix of retail innovations and market-moving developments below (most visible in the West) will shape the future and fortunes of tea foodservice and foodservice suppliers in 2022.
Unprecedented Uncertainty
Defenses against pandemic-driven trends that appeared entrenched in 2020, including Lockdowns and the Pivot Online, continued to evolve in 2021. The restaurant segment and tea-themed cafés initially “hibernated,” as Samovar Tea Lounge founder Jesse Jacobs described. In the spring of 2020, he shuttered locations grossing $1 million annually, hopeful they would soon reopen. The office crowds in downtown San Francisco never returned. A year later, with depleted resources and no longer attracting outside investment, high-cost malls and downtown shops closed. By August 2021, well-respected operators like Roy Fong abandoned the Imperial Tea Room in Berkeley after 16 years. Shunan Teng, who founded Tea Drunk, closed her East Village tea shop in New York the same month. Mary Greengo, who founded Queen Mary’s Tearoom in Seattle in 1988, scaled back to a small packaged goods storefront across from the restaurant. In Sylvania, Ohio, Sweet Shalom Tearoom permanently closed after 20 years. Samovar Tea became an online-only tea retailer, and Jacobs now sells Detroit-style pizza at the former tea shops.
In contrast, small towns tenaciously supported Victorian-style tea rooms. Retirees sold many to a younger generation. According to Sinensis Research, there were more than 1,600 specialty tea shops in the US before the pandemic. Sinensis Research did not survive to count the survivors. Still, researcher Abraham Rowe would have found many fewer conventional “wall of tea” shops and far more bubble tea locations – 3,392 according to IBIS World.
In short, retail is reviving. Camellia Sinensis closed its Montreal tearoom in July 2020 and has been remodeled and will reopen in 2022. The LoKey Café in Spokane, Wash., opened this week, and in Atlanta, the Juniper Café opens next week.
Lockdowns
Always considered extreme, lockdowns for a time all but eliminated 20% of the tea industry’s revenue and continue to depress foodservice sales globally. Staff from chaiwallah stands in Mumbai to five-star restaurants on the Riviera shuttered their stores during the Alpha waves, shuddered in fear as Delta rampaged and now face nimble Omicron as the third year of the pandemic begins.
The National Restaurant Association estimated 110,000 US eating establishments closed in 2020, eliminating 2.5 million jobs as foodservice sales declined by $240 billion below estimates (off 24% year-over-year), making 2020 the worst year for restaurants in history – 2021 had to be better – and it was for a time. Vaccines built confidence, and at mid-year, the NRA forecast a 19% increase in foodservice sales to $789 billion. That didn’t happen. Summer lockdowns to control the Delta variant are to blame. While China, New Zealand, and Australia still tolerate zero-COVID periodic, geographically limited lockdowns like those currently in place to counter the Omicron variant are the new normal.
Diners will eagerly return whenever and wherever infections ease. Perilously-thin margins in the foodservice segment pose a more significant threat and will further tighten in 2022. On median, restaurants have only a 16-day buffer* (cash on hand) to meet their financial obligations.
Tea wholesalers servicing hotels, restaurants, cafes, and coffee shops were in disbelief in 2020 as standing orders simply stopped. Foodservice clients that survived often doubled their orders in 2021 to ensure stock in hand. Wholesalers weathered the crisis in part by supplying packaged tea blenders who worked overtime to restock grocery outlets with shelves stripped bare. The top sellers? Plant-based functional beverages with a reputation for health and wellness. In other words, tea. Sedate center-aisle tea overnight became the fastest moving of the fast-moving consumer goods in stores through much of 2020.
In 2021 the spotlight shifted to botanicals.
Botanicals
Plant-based, functional, botanical beverages (ignoring those with psychoactive properties) eroded tea sales the past two years. Still, there is no gloom for those whose first concern is customer well-being. Rishi Tea is now Rishi Tea & Botanicals with products on the shelf next to Bigelow Botanicals and Yogi Herbal Teas.
Consumers seek the calming promise of herbal teas during a time of anxiety and stress rather than traditional medicinal uses. The popularity of adaptogenic teas shows that evolving consumer taste preferences, healthy living habits, and convenience are the primary factors boosting sales.
According to Research and Markets the botanicals market globally was valued at $93.6 billion in 2020 and will achieve a CAGR of 6.63% from 2021-2026,
Brazil, Canada, the US, and a handful of European countries account for nearly the entirety of global growth in herbal tea because it is in these countries that the wellness trend that is boosting the category is strongest, according to market research firm Euromonitor.
Euromonitor writes that at 4% CAGR, “herbal tea represents most future tea growth in many regions. Usage is expanding beyond traditional medicinal and slimming to embrace a wide variety of new occasions resulting from modern wellness trends. This gives herbal tea a number of new areas to target in functional, indulgent, and hydration spaces.”
Europe consumes the largest share of botanicals globally. Germany has emerged as the leading market. Germans in 2020 consumed an additional two liters of tea to average 70 liters per capita, according to The German Tea & Herbal Tea Association. Most of that increase was from drinking botanicals.
Tea-only vendors are at a disadvantage competing with broader plant-based specialists such as Martin Bauer Group with a century of tea and botanicals expertise. In 2022 if you can’t beat them, join them; botanicals drive innovation, additional drinking occasions, and deliver health benefits. Relish the fact that virtually every botanical benefits with tea as its base.
As the pandemic ebbs, herbals will represent a much larger share of total consumption than in 2019, with calming and immune support functionalities showing especially high rates of interest, according to Euromonitor.
The average revenue created by tea per capita in the United States amounted to $32.53 in 2020. At the same time, per capita volume purchased by US consumers amounted to 400 grams. Per capita spending by Americans will further increase in the next few years, until reaching a per capita revenue of $46.95 in 2025.
– Statista Consumer Market Outlook
Source: SimilarWeb data reported by Barbell Investment on Seeking Alpha
Tea Pivots Online
Online sales are a lifeline for tea retailers large, and small. Statista market research estimates that 5.8% of total US revenue in the hot drinks market (coffee, cocoa, and tea) was generated through online sales in 2021.
The US is a commodity tea market. The Beverage Marketing Corp., in 2018, estimated loose-leaf sales at 0.7% of the total US tea market, with ready-to-drink and tea bags accounting for 90% by value. About 23% of Americans drink tea daily compared to 27% in the US and 47% in the UK.
Amazon and Walmart account for the greatest percentage of online tea sales in the US, but the more expensive and premium teas are offered on hundreds of websites that feature direct-from-origin loose leaf.
Confined consumers who appreciate the convenience of doorstep delivery from their local tea shop’s selection of 100 teas soon discovered the more than 3,000 varieties globally. Delivery costs are reasonable, and niche vendors drive tea discovery by educating consumers about producers and specific origins.
Producers that launched direct-to-consumer brands online, including Luxmi and Tata Tea 1868, broadened their base and earned far more per kilo than at auction. In 2021 every imaginable beverage competed online, forcing marketers to spend a fortune on advertising to generate incremental sales. The standout product is curated subscription boxes that deliver 75 to 1,000 grams of tea (enough for 15 to 45 cups) and sell for around $25 to $35 per month. Exclusive tea clubs that offer rare and premium teas charge subscribers $150 to $300 per year. Sri Lanka’s Dilmah Tea awards loyalty points to club members who earn discounts.
Siliguri-based Teabox pioneered AI-powered curation that predicts seasonal and regional consumer demand for Indian tea. New Delhi-based Vahdam Tea expanded its capacity by partnering with Goodricke Tea to service a global market. In the US, Sips By, founded by Staci Brinkman, is an online subscription marketplace that delivers tea brands from around the globe.
Brand marketers are experimenting with subscriptions, endorsements by tea bloggers, social media influencers, YouTube videos, Tik Tok, and live streaming.
Quivr, a nitro-infused tea maker in Belchertown, Mass., promotes its $3.99 cans on Amazon Live(stream). Founder Ash Crawford told CNBC “It’s like clockwork or guaranteed that if we go live and I do a show, sales are increased for the next 24 hours by like 150%,” said Crawford.
Art of Tea founder Steve Schwartz, in Los Angeles, is a master marketer and blender whose teas are featured on platforms including OzLink and The Collective.
Zach Kornfeld is a novice in tea and one of the Try Guys an online influencer program with 7.3 million followers. In August 2020 he launched his Zadiko private label tea, selling 25,000 units valued at $500,000 in 12 hours.
Online sales resurrected bankrupt DAVIDsTEA, North America’s largest specialty tea chain. The company had fortuitously relaunched its website before March lockdowns forced the permanent closure of 166 locations including 42 US stores. In 2021 the company, trimmed to 18 locations, emerged from its financial peril as an online powerhouse and grocery brand with store-in-store pharmacy partner Rexall Drugs.
The company earned $26 million as the pandemic raged in 3rdQTR20 with e-commerce and wholesale sales accounting for 84.3% of sales. The surge ended by 2021 but online sales remain impressive. The company is on track to earn $100 to $125 million in sales at 40% gross profit margins.
“The 15.3% decrease in 3rdQTR21 sales year-over-year is largely due to a pandemic-fueled surge in online sales for our tea blends and accessories during the better part of fiscal 2020,” said Frank Zitella, President, Chief Financial and Operating Officer, DAVIDsTEA. “Progress achieved in transforming DAVIDsTEA can better be measured by the 18.5% sales increase compared to the second quarter, which is a better measure of our progress since we began our transformation into a digital-first tea merchant,” he said.
Source: SimilarWeb data reported by Barbell Investment on Seeking Alpha
Coresight Research notes that the growth of single-channel online retailers, including marketplaces, now trails their omnichannel counterparts.
“The e-commerce boom should have been a heyday for digital-first retailers, yet one of the most striking features of this trend has been the general failure of online-only (or online-predominant) retailers to seize the opportunity to outperform in the only channel in which they compete,” writes Coresight CEO Deborah Weinswig. Stores serve as an online billboard for a retailer’s websites while online-only competitors are forced to pour money into advertising, she explains.
There were never enough local tea shops where US tea drinkers could taste a selection of good teas. There are many fewer now, making tea discovery online a top priority in 2022.
Bubble Tea
Sonic, Dunkin, and now Starbucks are blowing up the bubble tea trend following difficult days for the niche. Virtually all bubble tea is consumed away from home, and in 2020 just as lockdowns eased, a shortage of Taiwan boba virtually halted sales globally. The bubble tea market reached $2+ billion in 2019. Forecasts of $4.3 billion by 2027 are overly optimistic.
The category has momentum, with legendary fan support in Asia where bubble tea drinkers line up daily rain or shine.
Once a cheap 1980s Taiwan street-stall novelty made with hot powdered milk, boba (named for its tapioca pearls) is now served cold. The colorful beverage blurs the line between dessert and drinks, making it welcome at fast food and fast-casual restaurants, as well as cafes and kiosks. In 2015 vendors began enhancing ingredients, added fresh milk and cream, and customized orders by level of sweetness, adding whipped cheese, candied toppings, and fresh fruit.
“Bubble tea is loved most by Gen Z, a generation that’s grown up overall more used to the idea of global dishes and flavors,” writes Datassential. The sweet mix of milk and tea can be ordered at 20,000 US outlets, including major fast-food chains. IBIS World estimates 3,392 boba shops, including home-grown Kung Fu Tea, Lollicup, San Francisco-based Boba Guys, Gong Cha, Coco, ViVi Bubble Tea, Tiger Sugar, and Yi Fang Taiwan Fruit Tea.
Globally Taiwan bubble tea maker CoCo Fresh operates 3,000 locations. Gong Cha, also based in Taiwan, has more than 1,500 locations in 15 countries. China-based HeyTea, valued at $9 billion, operates 800 locations, and cross-town rival Nayuki which raised $656 million in its Hong Kong IPO to build 1,000 new storefronts, is valued at $2.5 billion.
In late December, a Tik Tok video revealed Starbucks had developed flavored “coffee popping pearls” for its cold-brewed “In the Dark” coffee. The company later confirmed that boba drinks are in trials in Palm Springs along with milk tea and Iced Chai Tea Latte at $5.25 for a grande.
Chai Point (Bengaluru, Karnataka)
Comfy chairs and inviting interiors to encourage leisurely conversation made Chai Point the ideal place to meet friends and take an office tea break with associates. Founded in 2010, the company had expanded to 169 locations during its first decade. Co-founder and CEO Amuleek Singh Bijral preserved the simple mission of “brightening lives and bringing people together” while building the venture into India’s largest chain of tea cafes with annual turnover of $25.5 million.
The company’s innovative online tools go well beyond standard sites and communications that focus on the customer contact point. Chai Point’s relationship-building through technology includes customer face recognition at point of sale, an extensive cloud computing infrastructure that connects to business customers for “touch-free” 30-minute ordering and delivery, a real-time inventory management system, and customer feedback apps.
Overnight COVID lockdowns cut revenue by $15 million. The pandemic transformed the company into a delivery dynamo operating from 120 locations and growing 120% in revenue as the first wave crested. Chai On Call delivery began in 2014. Chai Point launched vending services in 2016. During the crisis the company operated IoT vending machines at 4,000 locations. As locations closed Chai Point pivoted online, developing a packaged goods line of 15 instant teas sent directly to customers.
In March 2021 as the new wave crested, retail sales were close to 80% of pre-pandemic totals, vending had recovered by half with online retail steady Chai Point doubled down with 15 new products including multi-grain organic cookies and snacks.
Bijral told Fortune India, “We didn’t anticipate the second wave. People were cautious but the intensity of the wave and the kind of hysteria it created among consumers was sort of unexpected.” Like a cat, Chai Point once again landed on its feet.
“We ventured into vending, delivery and now, packaging, because we firmly believe that as a brand, we have to provide the customer an arms-length opportunity to pick our products. So, if the customer is at home, how will he get his tea? If he is in the office, he can go to the pantry and get a quick cup of chai. And if he is in the boardroom, he can get his chai served. When walking around, one can step into a neighborhood store and get chai,” Bijral told FortuneIndia.
Iced Tea Drive-thru (Amarillo, Texas)
Texans brag about their Texas tea, but on a blazing day in the oil fields, HTeaO, an iced tea drive-thru in Amarillo (West Texas), delivers another kind of liquid gold. The franchise chain, founded in 2009, has expanded rapidly despite the pandemic. “We’ve got thirty-two stores open, thirty-seven in some phase of construction, and another one hundred and fifty in development,” founder Justin Howe, President & CEO for HTeaO, told Texas Monthly.
HTeaO resembles a convenience stop with 26 fresh brewed sweet and unsweetened iced tea flavors that can be mixed, garnished, or blended with cut fruit. It’s a fun place to hang out with “happy hours” that draw crowds of patrons rewarded with loyalty points and complimentary tea. The focus is refreshment with pebble ice machines, Tik Tok-inspired recipes, and gallon jugs to go. Twelve-ounce cups are nowhere to be found in these shops. Start with 24 ounces, top off a 44-ounce cup with pineapple or cherries or choose the contractor’s favorite 51-ounce (1.5-liter) Peach-ginger or Sweet blueberry green iced tea. Buy a $3.50 tankard or pay $19.99 for four gallons to take away. Shelves are stocked with healthy snack options and a full line of YETI merchandise.
Construction workers arrive throughout the day to fill their on-site coolers with tea and fill five-gallon containers of double-pass reverse osmosis water, kids mix, and match at the self-serve fountain.
The above are just a few examples of experiential, tech friendly, customer obsessed retailers committed to the leaf we love.
Join me at World Tea Expo, for a presentation with additional examples of tea businesses “Coping with COVID” at 8 am Tuesday, March 22, 2022.
*Cash buffer days are the number of days that a business can continue paying its typical outflows — such as payroll, purchasing supplier, or loan repayment — without bringing in any money, in the form of things like revenue, tax rebates, or transfers from investors’ or owners’ private savings.
Gallons of iced tea to mixHTeaO grand opening Pecos, Tex.Comfy but empty due to COVIDChai Point in Bengaluru, India
