• Tea in Foodservice is Recuperating

    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
    TEAIN22-Restaurant 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-face retail. 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 and botanicals 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 has grown 76% on menus during the past four years, according to Datassential MenuTrends Infinite. It is the one tea beverage that benefited from the pandemic-induced growth in delivery.

    “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 Fortune India.

    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.

    Early Bird Registration
    • *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 mix
    HTeaO grand opening Pecos, Tex.
    Comfy but empty due to COVID
    Chai Point in Bengaluru, India

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  • Tea Biz Podcast | Episode 23

    Tea Biz Podcast Logo

    Hear the Headlines

    | Sri Lanka’s Clean Tea Ambitions
    | COVID’s Toll on Tea Garden Workers
    | Tea Day Auction Yields Record Prices
    | Nayuki’s Lucrative IPO

    Tea Price Report

    The worst of the pandemic’s second wave seems to be behind India as the number of cases have come down in many parts of the country, and lockdown restrictions are slowly being lifted. The focus now turns to production and prices across auction centres. Read more…

    Features

    Tea Biz this week travels to Boulder, Colo. where Maria Uspenski, founder of The Tea Spot explains the relationship of beneficial adaptogens and tea…

    …and then to Milwaukee, Wis., where Jeff Champeau, vice president of business development at Rishi Tea & Botanicals, explains that marketing seasonality is a great way to introduce craft-brewed tea into our lives.

    Maria Uspenski
    Maria Uspenski

    Adaptogens and Tea

    By Marilyn Zink | Herbal Collective Magazine

    Our guest this week is Maria Uspenski, a cancer survivor, and author of Cancer Hates Tea. In 2004 Maria founded The Tea Spot, a tea wholesaler and teaware design company in Boulder, Colo.  Read more…

    Maria Uspenski on Adaptogens and Tea
    Jeff Champeau, vice president of business development at Rishi Tea & Botanicals
    Jeff Champeau, vice president of business development at Rishi Tea & Botanicals

    Healthful Effervescence

    By Dan Bolton

    Tea is on a trajectory akin to small-batch, craft-brewed beer where carefully selected ingredients are individually prepared to showcase their best characteristics. Recipes emphasize balance, with efficacy and taste foremost. Excellence in blending and brewing preserves high concentrations of polyphenols and other beneficial plant compounds with minimum calories, nothing artificial, the convenience of cans – and the fun of fizz. Read more…

    Jeff Champeau on sparkling craft-brewed teas
    Jayampathy Molligoda, Chairman SLTB
    Jayampathy Molligoda, Chairman Sri Lanka Tea Board

    Sri Lanka’s Clean Tea Ambitions

    By Dan Bolton

    The Sri Lankan government’s ban on chemical fertilizers including nitrogen, phosphorus, and potassium urea pellets, in favor of organic fertilizers is generating vigorous debate as the tea industry weighs methods for increasing yield.

    Jayampathy Molligoda, chairman of the Sri Lanka Tea Board, attributes the gradual decline in productivity in Sri Lanka’s tea gardens to continuous application of chemical fertilizer. In a 2,500-word article titled “Sustainable Solution to the Decline in Tea Production, Export Revenue and Livelihood” Molligoda advocates a “radical shift in our perceptions, our thinking, and our values.” He writes that the only viable solutions are those that are sustainable.

    His views are in sync with business leaders in Sri Lanka from many industry sectors, who are advocating a “green normal” in which companies collaborate to protect nature. One such coalition, known as Biodiversity Sri Lanka (BSL), is at the heart of building “truly sustainable economies and livelihoods.”

    Molligoda’s challenge is science as critics point to the myriad difficulties of switching from a compact, precisely applied plant food to a bulky and much more expensive alternate. Organic fertilizers are limited in their capacity to deliver nitrogen (12%) compared to chemical fertilizers (46%) and the price can be 50 times greater per kilo than synthetics that sell for less than $1 per kilo.

    Sri Lanka’s growers can produce enough fertilizer for 100,000 hectares and the nation’s 27 licensed domestic organic fertilizer manufacturers can provide enough fertilizer for 224,000 hectares. The country will have to import sufficient fertilizer essential for 500,000 hectares of paddy land and 600,000 hectares of other crops, including tea, according to a report in Economy Next.

    BSL is chaired by Dilmah Tea CEO Dilhan Fernando who writes that, “beyond the pandemic, we all face a threat that could literally suffocate, starve and extinguish humanity. The measures we must take now to assure our health, food security, and survival must be universal, science-based, innovative, and definite.”

    Biz Insight – The prize for Sri Lanka are teas that not only reflect the island nation’s extraordinary terroir but demonstrate in laboratory tests a level of purity no other tea producing country has achieved. In short, Sri Lanka will grow the cleanest teas in the world.

    COVID's Toll on India's Tea Gardens
    COVID’s Toll on India’s Tea Gardens

    COVID’s Toll on India’s Tea Gardens

    Last year the coronavirus pandemic plunged India’s economy into a recession for the first time in nearly a quarter of a century. Tea production, tea exports, and tea retail all suffered, but rural workers were largely spared the high death counts experienced in the nation’s crowded cities.

    That is no longer the case as the COVID-19 second wave crests. The tea industry employs 3.5 million workers who reside in small homes and who rely on crowded vans for transport, resulting in much higher rates of infection than in 2020. Currently more than half of the 800 tea gardens in Assam and 300 of the registered gardens in West Bengal report active cases. Confirmation in a single tea estate of 20 or more cases results in the designation of containment zones. There are now 3,000 active cases among tea workers in Assam, but deaths of tea workers are rare at 102. Kerala reported 331 deaths of tea workers with 11 in Tamil Nadu. On June 15 West Bengal reported 4,371 active cases and 84 deaths.

    The rate of infection has dropped significantly since May, but vaccine hesitancy remains ‘rampant.’ Fewer than 100,000 tea workers in Assam have received their first shot with only 6,000 getting the required booster so far. Globally only 10% of the world’s population had been vaccinated as of June. Read more…

    Jorhat Tea Auction Centre
    Jorhat Tea Auction Centre

    Tea Day e-Marketplace Auction Yields Record Prices

    Selections of Indian tea harvested on May 21, International Tea Day, sold at record prices this week on a cloud-based digital marketplace launched at the height of the pandemic.

    The auction was conducted by mjunction, India’s largest B2B e-commerce platform.

    A whole leaf tea from Pabhojan Tea Estate sold for INRs 4000 (about $54 per kilo US) with a specialty green from Diroibam earning a winning bid of INRs 1000 (about $13.50 per kilo US). More than 93% of the teas on offer were sold.

    Pabhojan Tea Estate INRs4000 Record Price
    The Pabhojan Tea Estate orthodox above brought INRs 4000 ($54 per kilo)

    Additional tea estates with lots sold includ Lankashi, Aideobari, Muktabari, Rungliting, Narayanpur Panbarry, Durgapur, Tirual, and Kathonibari.

    Since June 2020 the marketplace’s 300 registered users have traded 1.3 million kilos of tea. Read more…

    Nayuki’s Lucrative IPO

    China’s fresh-fruit, bubble, and foam-cheese tea chain Nayuki debuted with a $656 million valuation this week on the Hong Kong stock exchange. Shares of the initial public offering traded at nearly $20 and were 190 times oversubscribed. Husband Zhao Lin and wife Peng Lin opened their first store in Shenzhen in 2014. Each is now a billionaire based on their holdings.

    The company operates 500 locations in China with 300 more planned in 2021 and 350 in 2022. International locations include Japan and the US. The IPO debuted before a planned IPO by cross-town rival Hey Tea, a larger venture with 450 Chinese locations that has also established a foothold in the US.

    Nayuki introduces a new flavored tea weekly
    Nayuki introduces a new flavored tea weekly

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  • Tea Biz Podcast | Episode 22

    Tea Biz Podcast Logo

    Hear the Headlines

    | Cold Brew is Trending for Iced Tea Month
    | DAVIDsTEA in Canada Settles its Debts
    | Kenya Exports Surge but Auction Prices Remain Low
    | PLUS Smith Teamaker’s Ravi Kroesen explains the company’s new plant-based café concept and Amy Dubin-Nath talks about the future of whole leaf Indian teas.

    Tea Price Report

    As India’s second flush gets underway, the mood is glum as the industry continues to deal with many challenges. Local media reports on rising imports of tea into India and in Darjeeling, producers have expressed concern about zero-duty imports from Nepal. Read more…

    Features

    Tea Biz this week travels to Columbus, Ohio to visit with Amy Dubin-Nath, founder of Janam Tea and an ad hoc India tea ambassador to the US.…

    …and then to Portland, Ore. where Ravi Kroesen, head teamaker at Smith Teamaker, explains the many uses of tea at the company’s recently opened plant-based café.

    Amy Dubin-Nath
    Amy Dubin-Nath

    India’s Spectacular Specialty Teas

    Amy Dubin-Nath sees a bright future for specialty teas originating in India, “but I don’t think it is going to be a quick flip where people are only after high end teas.” Instead, the process will be gradual, following a path similar to wine. “Do I want to see the spectacular teas of India keep selling at a high price?” she asks, “Yes, definitely, as that elevates the perceived value, making it something precious. I believe that message should be spread throughout the world — including in India.” Read more…

    Ravi Kroesen, Head Teamaker Smith Teamaker
    Ravi Kroesen, Head Teamaker at Smith Teamaker, Portland, Ore.

    A Plant-Based Café where Tea Reigns Supreme

    By Jessica Natale Wollard

    The intent of the new café concept, says Smith Teamaker Ravi Kroesen, is to “develop foods that really reflect our ethos of plants, as well as utilizing tea as an ingredient.” The new Smith Teamaker café sources locally with a menu that includes snacks, lattes and iced concoctions with full meals that demonstrate how tea and food can live in harmony from leaf to cup to plate. Read more…

    Cold Brewed Tea
    Cold Brewed Tea

    Iced Tea Month: Cold Brewed Teas are Trending

    By Dan Bolton

    The challenge of correctly steeping a delicate green to avoid bitterness disappears when the tea is brewed overnight in the fridge. “I’m cutting calories and want something more flavorful than water,” begins one Reddit thread. “Can you explain to a total cold brew newbie how to get the most flavorful green tea without additives.” The responses were enthusiastic and numerous, evidence that the technique rivals more traditional fresh-brewed, flash-chilled black tea.

    Whether boiling tea to pour over ice, or making cold brew, the tea to water ratio is critical. Begin with about twice the normal weight of tea, 6-8 tablespoons for 1.5 quarts (or 8-12 grams per 950 milliliters). Stale tea requires more leaves, quality whole leaf requires fewer. Make sure your vessel is airtight as tea will pick up the scent of leftovers.

    Allied Market Research estimates RTD tea generated $30 billion in 2019 and will grow 5.5% annually to $39 billion in 2027. Health-conscious millennials are driving sales. Mintel reports that 25% of new tea innovations are RTD. In China where 78% of consumers are frequent drinkers of freshly brewed hot tea, RTD enjoys 49% penetration, which is greater than tea bags, according to Mintel.

    Biz Insight – Cold brew coffee experienced remarkable five-year growth in both bottled ready-to-drink and foodservice. North America is the largest cold brew market globally with 66% market share, followed by Europe (17%) and Asia (11%). In the US – 2015 toles of cold brew coffee are expected to increase ten-fold from $110 million to $945 million in 2025, according to Statista market research. Three-sixty market research estimates the market globally will reach $2.8 billion by 2026.

    DAVIDsTEA Settles Debts

    A Quebec Superior Court approved the Montreal-based tea company’s plan to settle $118.2 million in claims for $18 million payable in July. A US Bankruptcy Court this week approved a similar plan for resolving debts owed by DAVIDsTEA’s US subsidiary.

    The settlements are a final step toward exiting a year-long reorganization precipitated by the closure of all but 18 of the company’s more than 200 locations. The settlement will be divided with $15.3 million going to Canadian creditors and $3.1 million to US creditors, according to PwC, Canada. The company has sufficient cash on hand to meet settlement obligations.


    Under the direction of CEO Sarah Segal, DAVIDsTEA has adopted a “digital first” market strategy for sales to consumers. Its wholesale products are now found in 2500 grocery and pharmacy outlets. The company reported sales of $40.2 million in fourth quarter 2020. Revenue from the fast-growing online and wholesale segment has increased from $42 million in 2019 to $97.2 million in 2020. Greatly reduced brick and mortar revenue now accounts for only 12.9% of total sales. Revenue overall declined 38% in 2020 leading to $55.9 million in losses.

    Kenya surge
    Kenya tea exports surge during first three months of 2021

    Kenya Tea Exports Surge

    Despite upheaval at the factory level, Kenya exported much higher tea volumes this year. First quarter exports increased 18.9% compared to 2020, according to the national Tea Directorate. Volume topped 153 million kilos, up from 128 million during the same period in 2020.

    Smallholders that produce 65% of the country’s tea experienced variable weather conditions in 2021 creating an overall decline in production during the first three months of 2021. Growers, primarily in the far west, harvested 18 million fewer kilos since January compared to the same quarter in 2020. Auction prices are on the rise, reaching $1.84 per kilo last week but remain below the $2 per kilo threshold considered essential to cover production costs. Weekly prices so far averaged $2 only once in 2021. Tea prices averaged $1.80 per kilo in 2020, down from $2.05 per kilo in 2019.

    Biz Insight* – Kenya’s tea growers are benefiting from payment of 50% of the total due thanks to national reforms instituted this spring. Half the price for green leaves delivered within the month to Kenya Tea Development Agency (KTDA) factories, is paid by the 20th of the following month. The balance is paid in the fall at the end of the financial year. KTDA’s factories are owned by smallholders and managed by KTDA.

    *Corrected 6.20.2021

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  • | DAVIDsTEA Reorganizes

    Tea Industry News for the Week of July 13

    • DAVIDsTEA Reorganizes in Bankruptcy
    • US Retail Reopenings Stall
    • World Tea Expo Postponed Until 2021
    • Samovar Tea Lounges Begin “Hibernation”
    • Kenya Court Halts Tea Reforms

    DAVIDsTEA Reorganizes in Bankruptcy

    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 to find 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).

    Download the blueprint (152mb)

    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 in Nutra 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.

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    Dan Bolton

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