The U.S. Food and Drug Administration is considering new requirements for nutrition labeling for food and beverage products that will, among others, impact companies with ready-to-drink tea products. The FDA feels that the 20-year-old labeling systems would benefit from an overhaul to better inform consumers in their choices.
There are two fundamental parts to the proposed changes. The first addresses the actual nutritional information being reported. There would be a reevaluation of the daily nutritional values of certain vitamins and minerals. Vitamin D would be added, while Vitamins C and A would be eliminated. Additional information about sugar would be provided as well. Serving sizes would be most affected by the rules rewrite. The new serving sizes would better reflect how people actually eat and drink today. For example, a 20 ounce bottle of cola would no longer list the contents as two servings. A bottled drink that would usually be consumed during one sitting would need to have nutritional information reflect the values for the entire bottle. Larger bottles would list the amounts for a single serving, as well as the values if the entire bottle is consumed. The second change impacts the actual layout of the label. Calories would become more prominent. The chart showing daily nutritional values would be reversed so the percentages for each item would be listed before the actual amounts.
According to the Wall Street Journal, smaller companies are concerned about the added costs that will result from these changes. Calculating serving sizes and redesigning and printing labels can be a significant investment for small shops. Bottled rooibos company Rooibee Red Tea commented, noting that the new information would not fit on their existing label, requiring a redesign running as much as $30,000.
The FDA is currently accepting public comment both on the revised nutritional reporting and on the proposed redesign. The comment period closes on June 2, 2014. Once changes are approved, companies would have two years to come into compliance.
Hard numbers are hard to find but a year after it was sold to Starbucks Teavana appears to be on a roll.
At the company’s annual meeting in March CEO Howard Schultz introduced Oprah Chai Tea in a surprise announcement that brought the celebrity on stage to discuss her love for tea.
The audience was treated to samples and Schultz said $1 from every 2 ounce package would support Oprah’s favorite charities. He announced the construction of 20 new Teavana tea bars in 2014 with major cities including Chicago and Los Angeles. The tea goes on sale Apr. 29.
Schultz reasserted that “a year after the acquisition of Teavana, we are more convinced than ever that we have the opportunities to transform the tea category in the way we have transformed coffee all around the world.”
Earlier in the year, during the company’s quarterly earnings report, Shultz said that Teavana’s two flagship stores in New York and Seattle are demonstrating that Starbucks’ single largest investment to date is beginning to pay off.
“Recent research confirms that Teavana now enjoys the highest level of awareness of any super premium tea brand and like Starbucks, Teavana had a solid Q1,” Schultz told analysts.
Starbucks reported a record $4.2 billion in revenue during the quarter including $159.2 million in the segment that includes Teavana. Overall the company grew revenues 12% with comparable store sales rising 5% in the Americas where store traffic increased 4%.
Financial record footnotes* state that an increase of 174% over Q1 FY13, “is primarily due to the addition of Teavana retail store revenues beginning in Q2 of FY13.” The $159.2 million combines revenue from Seattle’s Best, Evolution Fresh, Digital Ventures and Teavana. The first quarter includes holiday spending and is always strong but revenue in the segment is on track to post $630 in combined sales, most than half of which will be from Teavana.
In the company’s annual report, released in September, the financial segment that includes Teavana grossed $393.7 million for the year which was up 88.7% compared to the previous year largely due to the contribution from Teavana, but the exact amount Teavana contributed was not stated. Net revenue for the segment increased $185 million during the year, “driven by incremental revenues from the acquisition of Teavana in the second quarter of fiscal 2013 (approximately $156 million),” according to the financial filings.
Prior to the Starbucks acquisition Teavana reported quarterly earnings of $43 million and estimated annual sales of approximately $250 million. The company operated 284 stores at that time so a useful guesstimate is annual sales of at least $350 million. The final number will depend on how many stores are built. Teavana’s mall venues typically gross $850,000 to $1 million in sales. Going forward analysts will be able to compare year-over-year results.
Schultz said that “one year into the integration of Teavana, we are poised to begin the roll out of additional stores on the heels of the successful opening of our first two Teavana tea bars in New York City and Seattle.” The company, which currently operates 366 stores, intends to open 1000 more in the next five years. This averages 4 to 5 stores per week, a threshold easily met by a company that currently opens 1,500 coffee shops a year.
As it did with coffee, Starbucks is building gorgeous Tea Bars to showcase the brand in highly visible locations like New York City’s Central Park and Seattle. It will then roll out smaller venues in major cities around the country. These stores are cost-efficient and designed to drive profitability.
“These two beautiful new stores are already providing us the key insights that will help us achieve our goal of combining and leveraging Teavana’s strength and authority around loose-leaf tea and tea merchandising,” according to Schultz. Starbucks understands consumers and what it takes to profit from innovative, handcrafted beverages and a retail store development to create a new retail platform and a unique international premium tea house experience.
Reading consumer response online offers a glimpse of these insights:
On Yelp! Jackie F. from Miami writes: “I had heard about this store opening and made sure that I visited on my weekend trip to NYC… love the environment, service and choices that were available. I have purchased my first three loose teas and sugar and looking forward to buying more in the future. Emily was extremely attentive and helpful during my selection process… she wasn’t pushy or overbearing. Can’t wait to get home and make it on my own.”
Nathali Z. from Brooklyn writes: “I came here led by my cousin who is a Teavana aficionado. I was excited to be in this new space and have my first Teavana Tea. The place was busy with people being helped by sales associates. When we ordered our tea the staff was very friendly, cheerful and attentive. There is an area to sit down and have our “bites”. My cousin got a chocolate brioche and I had a croissant. They were yummy but not spectacular. The tea on the other hand delicious! It was very calm and my cousin and I were excited to be one of the first people here. Definitely coming back!”
Katie R. in New York writes: I LOVE THIS PLACE! I’m so glad that Starbucks has finally opened up its first tea location… Long overdue… I’d visit this over a Starbucks coffee shop any day. I’m tea obsessed and Teavana has the best teas, hands down. The chai latte was incredible. The food selection looked great, too! I just hope they expand to other locations in Manhattan, so I don’t have to make the trek to the Upper East Side.”
This is Yelp! after all, so there were also complaints: “Plenty of cash registers, not enough tables and chairs… “NO where to sit…. and “I really wanted to like this place, but my gut is that it is a concept that won’t work… and “Because there is no coffee, it is not a place to be patronized by groups of people together, because some will inevitably prefer coffee…” comments overall were were positive or benign: “Pretty spot! I got the coco caramel sea salt latte, which ended up being too sugary and sweet for me, even after they remade it without putting any syrup in it!! The jasmine silver needle in a pot was good, though!”
Marketing is much stronger under mighty Starbucks and the public relations team that handles the account at Edelman is first-rate. In January the timely introduction of a limited edition Golden Dragon Yellow tea drew media attention and the Chinese New Year loyalty card and teaware are further evidence of integration of the brand. Customers loaded $1.4 billion onto Starbucks cards last quarter, up $260 million from the previous year. Teavana branded cards are interchangeable with the familiar mermaid which means that 40 million cardholders can conveniently charge a drink. Customers activated more than 2 million new cards a day in the week before Christmas.
Premium single cup is the fastest growing segment in at home coffee and Starbucks has grown its share to 18% of the segment over the last two years, said Schultz. The company has now sold 2 billion K-Cups. Last spring the company introduced Teavana flavors in K-Cups™ and this fall Teavana chai launched in Starbucks’ Verismo single-cup format.
Upgraded Teaware
The website has not undergone a lot of visible changes, but a close look shows an upgrade in teaware including an expanded number of exclusives. Porcelain and bone china are featured along with a packaging refresh with a QR Code and new graphics. The Teavana smartphone app has been updated to make it easier to locate stores. Teavana has 328,000 Facebook likes (Starbucks has 36 million and 5.6 million Twitter followers).
Mall-based stores as a whole were hard hit by a 15% slowdown in retail foot traffic and since the majority of Teavana stores are located in malls that had to hurt. Most of Teavana’s 366 stores in the U.S. and 62 shops in Canada are company owned. It also has 28 franchised stores in Mexico.
The tea market is a huge opportunity for the company. Globally tea is estimated at $90 billion with only a fraction of the tea sold as “value-added.” In fact, the majority is not even packaged. The success of the flagship stores means the company will expand more quickly now.
Two developments hint at the future for Teavana. During a major reorganization of the senior management last week it was announced Schultz “will expand his focus on innovation in coffee, tea and the Starbucks Experience as well as next generation retailing and payments initiatives in the areas of digital, mobile, card, loyalty and e-commerce.”
In his remarks Schultz promised “to bring breakthrough innovation to the tea category in the U.S. and Canada this spring and summer and to the international markets in the years ahead.”
A second clue is that Teavana founder Andrew Mack has retired from Starbucks. Teavana named Starbucks Vice President Annie Young-Scrivner the new President of Teavana and placed Teavana under the direction of Cliff Burrows, who is group president, U.S., Americas and Teavana. Young-Scrivner previously led the Tazo Tea division and was in charge of Starbucks Canada. Burrows, 54, joined the company in 2001 and previously worked as managing director of the U.K. division where franchising is common.
Look for Teavana to expand overseas via traditional franchising. The EMEA region now has 2,033 stores of which 1,177 are franchised. Starbucks has very strong franchise relationships in both Europe and the Middle East. Sales growth in the region was 11% last quarter with revenues of $339 million. A turn-around in the EMEA results, which were previously slack, suggests an opportunity for expansion that would include Teavana.
Financial Footnotes:
The Teavana sale closed Dec. 31, 2012. The final accounting states that Starbucks paid $615.8 million in cash. At closing the company repaid $35.2 million in long term debt. Intangible assets such as the Teavana name were valued at $105.5 million. Teavana’s proprietary tea blends were valued at $13 million. An astounding $467.5 million of goodwill represents the intangible assets that do not qualify for separate recognition, such as established global store presence in high traffic malls and high-sales-volume retail venues, Teavana’s global customer base, and Teavana’s “Heaven of tea” retail experience in which store employees engage and educate customers about the ritual and enjoyment of tea.
Adult Tea Drinkers Exceed Soda Drinkers in National Survey
NEW ORLEANS, LA– The National Coffee Association’s survey of drinking trends for the first time in decades revealed the number of past-day tea drinkers is greater than adults choosing soda.
What did you drink yesterday? is one of the National Coffee Drinking Trends questions: Soda fell to 41% behind coffee, tap water (54%) and tea (44%). Coffee topped the list with 61% of those queried. The survey engaged a nationally representative sample of about 3,000 people 18 and older. It is conducted in January and February each year.
Coffee has often been the first choice in surveys dating to 1950. Water is subdivided into tap water 54% and bottled water (46%) for a total 100%. Past-day incidence of tea drinking was next ahead of soda, milk, juice and alcohol. The big change was in carbonated soda which fell 9 points compared to last year’s survey. Tap water is up 7 percentage points in part due to economic conditions and as the most popular soda alternate.
Individuals 40-49 years of age are the most frequent coffee drinkers at four cups per day. The average number of previous day cups was 3.4 for past day drinkers.
Sports, energy drinks and energy shots were consumed by 14% of respondents (totals do not sum to 100 as many respondents reported drinking several different beverages the previous day). The percent of people drinking coffee is on the rise as well as tea and hot drinks in general. Past day drinkers are predominately hot coffee drinkers (93%) with 7% drinking iced or frozen coffee. In the 2014 survey 73% of Americans reported drinking coffee in the past week and 79% in the past year.
Also significant is the fact that 34% of coffee drinkers drank a gourmet/specialty coffee the previous day. Daily non-gourmet coffee drinking is down to 35% from last year’s 39%. Most coffee is prepared at home (85%) but 35% of previous day coffee drinkers report they purchased coffee away from home. The total exceeds 100 as many respondents drink coffee prepared at home as well as the office, restaurants and coffee shops.
Single-serve continues its meteoric rise, 29% of previous-day coffee drinkers reported their coffee was prepared with a single-cup brewer. The study showed 15% of American households now own a single-serve brewer with 25% of those who do not have a brewer indicating they will purchase one within six months. Only 53% of those who brewed coffee at home used a drip brewer. The remaining coffee at home is prepared on an espresso machine (12%) or from instant, 12%.
New York Coffee & Tea Wraps Up…Tough week at the tea auctions… Third Street Chai breaks into Whole Foods in a big way…New book on Homegrown Tea
New York Coffee & Tea Another Sold Out Success
This past weekend New York Coffee & Tea Festival filled the floors of the 69th Regiment Armory on Lexington Ave. in Manhattan. Once again this year the show was sold out well in advance of the weekend, including tickets for a VIP hour Saturday morning that allowed early admittance to those ticket holders. 7,000 attendees were expected.
Sixty exhibitors set up shop across the 25,000 square foot space. A number of presenters, well-known to tea aficionados, were on the festival schedule. Jeni Dodd of Jeni’s Teas and Thomas Shu of ABC Tea presented on Taiwanese teas. Emeric Harney, the creator and manager of Harney & Sons’ Harney SoHo tea cafe, was on the schedule to talk about the people and plants of tea. Judith Krall-Russo prepared a talk on the history of women and tea.
The pairings are always quick to fill up and this year was no exception. L’Espalier’s tea sommelier and author of Culinary Tea, Cynthia Gold, introduced attendees to the art of pairing tea and cheeses. A Gift of Tea’s Jo Johnson talked tea and chocolate and Capital Teas’ Peter Martino explored tea infusions for cocktails. Shu and Dodd teamed up again to talk about finding “harmony” in tea, solving the mystery of the perfect combinations of tea, water, timing, and temperature.
Given the speed of ticket sales and the fact that next year will be the 10th anniversary, you may want to start planning your trip for 2015 now.
It was a tough week at the tea auctions this past week as prices were lower than anticipated. African Tea Brokers reported that Kenya tea prices were low this week with top grade teas, broken pekoes and pekoe fannings all selling for less than the week prior. Nearly 14% of the tea was unsold and more than 17% was unsold the previous week. Pakistan was the big buyer.
Bangladesh saw lower prices also for the sixth week in a row. A glut of poorer quality leaf that remained from the end of the season was blamed. 54% of the tea was left at the end of the sale, topping the 50% that was left at the previous auction. An auction official blamed the quality of tea on offer, citing big demand for high quality tea which seemed to be at short supply.
Things at Coonoor were no better where the Coonoor Tea Trade Association reported that 34% of their tea remained unsold at the end of the auction even at a lower price point than usual.
Third Street Chai Releases Ready-to-Drink Tea Line
Boulder, Colo. based Third Street Chai has been selling this spicy tea since 1995, a time when most people had never heard of the stuff. Nearly twenty years later, they’re still in the thick of things. They’ve established themselves as a source of hand-blended chai (blending and milling whole spices for each batch) and claiming the title of the first Fair Trade certified chai. Now they are preparing to release a new ready-to-drink teas at Whole Foods stores nationwide.
Third Street will be selling unsweetened and lightly sweetened black and green teas, incorporating flavors like raspberry, honey and mint. These Fair Trade certified, non-GMO drinks will be sold in 14 ounce containers.
Whole Foods helped make this product a reality by selecting Third Street for one of its Small Producer loans. Their in-house microbrewing and focus on traceability of ingredients made the company stand out.
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Starbucks has underscored Teavana’s role in the company by teaming with chai-loving icon Oprah Winfrey, who arrived to cheers at Starbucks’ annual shareholders meeting in Seattle March 19 to introduce Teavana Oprah Chai, a custom blend arriving in Teavana and Starbucks stores next month.
A year and a half after Starbucks bought Teavana, Starbucks CEO Howard Schultz is still touting the company’s commitment to tea – “the $90 billion global tea market,” as he told the shareholders several times.
“We’re going to do in the long term for tea what we have done for coffee,” Schultz said, noting that he sought a like-minded partner to promote Starbucks’ refocus on tea.
The introduction of Oprah Chai is not only promoting a love of tea, but also reinforces Starbucks’ charitable efforts. (At its annual meeting Schultz emphasized its recent support for veterans’ groups and hiring veterans and veterans’ families.) Because Winfrey is also known for her charitable work, sales of Teavana Oprah Chai will benefit the Oprah Winfrey Leadership Academy Foundation, which supports education programs for youth. For every two ounces sold, $1 goes to the charity.
The blend goes on sale April 29 in Teavana and Starbucks stores in the U.S. and Canada. It is described as an infusion of cinnamon, ginger, cardamom and cloves, blended with loose-leaf black tea and rooibos. Winfrey developed the blend with Teavana teaologist Naoko Tsunoda.
Baristas at the meeting offered samples of sweetened and unsweetened varieties to good reception, even for this generally coffee-focused crowd. (Starbucks annual meetings are appreciated for their generous spread of coffees and bakery items – which this year were all from La Boulange, which Starbucks acquired a year ago).
Winfrey and Schultz settled into overstuffed chairs on stage to discuss their deal.
Schultz related that he had observed Winfrey drinking tea at a wedding they both attended. “You didn’t think much of the brand,” she reminded him wryly. He didn’t, and so he sent a sampling of Teavana Chai to her hotel room, which began a conversation that led to her designing Teavana Oprah Chai with the Teavana development team.
“Starbucks is not just a coffee company. It’s about nurturing the human spirit,” Winfrey said. “And that has been my goal in life. This felt like something I really loved and I really cared about and that would be fun to do.” She said she is a longtime chai drinker and welcomed the opportunity to develop her own blend. Teavana Oprah Chai will be served to guests on “Steep your Soul,” a new segment on the OWN Super Soul Sunday show, when guests share their recharge rituals. “I offer them my chai, and they take it whether they like it or not,” Winfrey declared.
Schultz referenced both the common ground of commitments to social causes and having gone through difficult times as businesses. Headlines flashed on the display at the shareholders meeting referenced both lucrative times for Starbucks and the rocky start of the OWN cable network. He said he sought a partner who “loves tea” and “is committed to giving back.”
The packaging is distinctive, too: the canister is an attractive light olive tone with copper lid. The clever box design has an orange base but that same olive-green lid, short enough to show the orange base.
Teavana Oprah Chai will also be featured in a new store design, Teavana Fine Tea + Tea Bars, open now in Seattle and New York and scheduled to open 20 additional locations in the coming year including Chicago, Los Angeles, and New York City.
Tea Biz serves a core audience of beverage professionals in the belief that insightful journalism informs business decision making. Tea Biz reports what matters along the entire supply chain, emphasizing trustworthy sources and sound market research while discarding fluff and ignoring puffery.
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There are two fundamental parts to the proposed changes. The first addresses the actual nutritional information being reported. There would be a reevaluation of the daily nutritional values of certain vitamins and minerals. Vitamin D would be added, while Vitamins C and A would be eliminated. Additional information about sugar would be provided as well. Serving sizes would be most affected by the rules rewrite. The new serving sizes would better reflect how people actually eat and drink today. For example, a 20 ounce bottle of cola would no longer list the contents as two servings. A bottled drink that would usually be consumed during one sitting would need to have nutritional information reflect the values for the entire bottle. Larger bottles would list the amounts for a single serving, as well as the values if the entire bottle is consumed. The second change impacts the actual layout of the label. Calories would become more prominent. The chart showing daily nutritional values would be reversed so the percentages for each item would be listed before the actual amounts.
