What makes one beverage become more popular than another? What makes a beverage take hold at one moment in history over another?
Christine Folch, assistant professor of cultural anthropology at Duke University in North Carolina, explores these questions through her research on three beverages of the ilex, or holly, genus: yerba matte, yaupon and guayusa.
Of the three ilex beverages, yerba matte is the most well known, but interest in yaupon and guayusa is growing. Has their moment come?
Christine Folch holds the leaves of the yaupon plant outside her home in North Carolina.
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Christine Folch, PhD, in conversation with Tea Biz’s Jessica Natale Woollard
Colonization and the commercialization of caffeinated beverages: A conversation with Christine Folch
From the start of the colonial period in the Americas in the 16th century, commercialization attempts were made to position these three ilex beverages — yerba matte, yaupon and guayusa — as caffeinated drinks that could compete on the world stage with coffee and tea, which were just entering the market.
Yaupon | Aiton, Emory University Herbarium(GEO), 898baf6d-30de-4d36-8794-b9f0e5d21ae4
These attempts failed for various social, cultural and economic reasons, which Christine Folch discussed in fascinating detail in her talk at the 2022 Global Tea Institute colloquium in January.
She continues the conversation with Tea Biz’s Jessica Natale Woollard.
Watch the video, featuring Folch’s talk at the Global Tea Initiative Colloquium, hosted by the University of California, Davis, on Jan. 13, 2022. Folch’s presentation begins at 04:37:00.
Jessica: In your talk at the Global Tea colloquium, you share the curious story of yaupon and how it was consumed as a form of protesting British rule. You explain how the beverage remained popular during the US Civil War, particularly in the south, and discuss the reason consumer identity issues impeded its popularity.
How has consumer identity shifted, now in 2022, to give yaupon another chance to enter the caffeinated beverage industry?
Christine: When I first tasted yaupon, the first thing I noticed was, it was really yummy.
The other thing that I noticed quite immediately is where I got it, which was the shrubbery right outside of my window. I made it myself, toasted it, and tried it, and I thought, this stuff is so good. And it’s yard decor.
It raises this really important question: why is it that we in the United States don’t drink something that is quite delicious and grows with little tending right outside of our homes, if we’re in the southern part of the United States?
I think that beverages and food come socially encumbered; they come with social implications. The identities of the people who were fans of this beverage, in the 19th century and beforehand, were marginalized identities for various reasons. The primary consumers were Indigenous people. And as we know about the complicated history of North America, there’s this sort of tension about a rejection around Indigeneity, which can be incredibly violent and has been historically.
So, yaupon was consumed by “wrong people” in in the 19th century.
Mr. Scarborough (owner of a “yaupon factory”) stands next to his yaupon processing equipment. Hatteras, Outer Banks (NC), 1905. Photographer: H.H. Brimley. Courtesy of NC Archives
The question becomes, what has changed?
And I think what has changed is that we see other values percolating to the surface. It’s the realization that the communities we thought were marginalized and therefore their consumption was like less desirable, actually those communities have heritage; those communities actually know a lot about land; those communities actually are the source of incredible creativity.
There’s a new openness to that consumption.
Jessica: If our readers are lucky enough to find a café, shop or experience where they can try yaupon and guayusa, is there anything they should know before tasting them for the first time?
Christine: Expect to be surprised by how yummy it actually is.
I’m drinking yaupon right now, and I don’t have any sugar in it. It’s a really pleasant drink that it is less bitter than black tea.
I think you’re going to taste it, and you’ll say, it’s not something I’ve had before, but that’s not bad. I’d like to try some more.
You can get yaupon in the United States by ordering directly from a number of yaupon companies.
The word yaupon comes the Catawba for “small tree.” Even the name itself holds so much about the history of this land.
Schultes, Richard Evans. 1972 “Ilex Guayusa from 500 A.D. to the Present” In Henry Wassen, A Medicine-man’s Implements and Plants in a Tiahuanacoid Tomb in Highland Bolivia, 1972, Göteborg.
Jessica: Where do you recommend someone take their first sip of the lesser-known ilex beverages, yaupon or guayusa?
Christine: Around your kitchen table with your friends and a good mug.
The thing about these beverages is that they are social; they’re meant to be consumed with other people so. Have a taste test with your roommates; see which one you like.
That’s how I think you should have it.
This interview has been edited and condensed.
More from Christine Folch
An Ilex Counterpoint — Christine reflects on why yaupon never achieved the popularity of yerba mate for Comparative Studies in Society and History.
The Global Tea Initiative Colloquium was hosted by the University of California, Davis on Jan. 13, 2022.Click here to see a video of the full day’s program.
This year’s topic is Tea and Beyond: Bridging Science and Culture, Time and Space. Tea Biz brings you a recap of the keynote address on “The Popularization of Food as Medicine and Its Impact on Tea” presented by Dr. Nada Milosavljevic. Nada Milosavljevic, a Harvard-trained physician and faculty member at Harvard Medical School. Dr. Milosavljevic is the founder of the integrative health program at Massachusetts General Hospital and worked for a decade as its director.
Dr. Nada’s passion for holistic, innovative wellness and preventative healthcare led her to found Sage Tonic, which produces teas and tisanes formulated from evidence-based clinical studies.
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Dr. Nada in conversation with Tea Biz’s Jessica Natale WoollardSage Tonic happiness tea. Photo provided by Sage Tonic
Tea, Herbs as Medicine: A Conversation with Dr. Nada
Dr. Nada Milosavljevic is a board-certified, Harvard-trained physician and a faculty member at Harvard Medical School. In addition to conventional medicine, she practices Integrative Medicine for cognitive and behavioral conditions. Nada has specialty certifications in Regenerative and Functional Medicine, Medical Acupuncture, Ayurvedic Medicine, and Chinese Herbs. Her training involves the use of evidence-based treatments that include: acupuncture, bio-identical hormone therapies, herbs, nutritional supplements, clinical-grade aromatherapy, as well as light and sound therapy.
Jessica Natale Woollard: Your keynote at the Global Tea Initiative colloquium on January 13 will address trends of seeing food—including tea—as medicine. Can you give the Tea Biz community a preview of what you’ll be covering in your talk?
Dr. Nada Milosavljevic: My topic is the popularization of food as medicine, but also looking at that through the lens of tea.
Everyone at one point has heard of the concept of food as medicine; it’s become quite popular. My talk will give some of the historical underpinnings that show the idea of food as medicine has been around for millennia in many different ways, from many different cultures.
Now with modern medicine, we’re really seeing some of the ways that food, and tea is no exception, can have certain health applications. I’ll be highlighting that information and further defining it, so people can appreciate where the field is going — because it’s growing, and it’s growing rapidly.
Jessica: The teas you sell through Sage Tonic are categorized by their benefits, for example, helping with relaxation, sleep, energy, and focus.
At what point in your medical profession did you discover the benefits of tea and begin to research the role tea plays in preventative healthcare?
Nada: That journey for me began almost 14 years ago. It was about 2007, and, in working with patients—they ranged from teens to young adults to adults—I realized that some of the medications that we use, which are beneficial and can save lives, have certain side effects. I found out that there were a number of natural compounds, tea being one, that can play a role as a preventive or as something that can be used as an adjunctive therapy and serve a healthful purpose.
That’s really where a lot of my research began, looking into not just tea, but other herbs as well, and the synergistic and additive effect they can have for optimal health. Certainly from a preventive standpoint, if someone wants to start using something even earlier, they can put themselves on a healthy trajectory.
Sage Tonic Happiness tea. Photo provided by Sage Tonic.
Sage Tonic essential oil towelette for relaxation. Photo provided by Sage Tonic.
Jessica: In the research, you’ve conducted into the benefits of tea, herbs, and spices, did any results surprise you?
Nada: Yes, they did in fact. There were a number of herbs and certainly a number of compounds that were not elucidated to me previously as to what their health benefits were. I saw they could play a role in human health; they could play a role in preventive health, and they could play a role for humans at many different chronological points throughout our lives.
An herb class, called adaptogens, is one of the things I’ll be talking about at the Global Tea Initiative Colloquium next week. It’s an herb class that can really play a role in anxiety and stress reduction. It can have a constitutionally normalizing effect on the body and even be helpful with focus and sleep, many of the things that many of us have faced in many different ways, given what we’ve all been dealing with the last, almost two years now, with the pandemic.
That herb class was something I was not as familiar with back then, and they do have a wonderful application for health.
What is exciting to me, and what was certainly exciting 14 years ago when I began this work, is to see research into health benefits grow. There are literally hundreds of compounds in teas, and even compounds that have yet to be fully researched and categorized.
I think there are a lot of other exciting things yet to come.
Hear more from Dr. Nada
You can hear more from Dr. Nada on the power of tea as medicine in her keynote address at the Global Tea Initiative Colloquium online. Click here to see a video of the full day’s program.
This interview has been edited and condensed.
Wholistic Health for Adolescents by Dr. Nada Milosavljevic
Holistic Health for Adolescents
Stress. Fatigue. Depression. Sleeping problems. Issues with focus and concentration. Headaches. Substance abuse. These are all common problems that teenagers deal with. We have long been acquainted with the conventional treatments of therapy and prescription medications. It turns out there are also many complementary and alternative therapies available that have evidence-based track records of success. This book presents therapies based around the five senses—including acupressure, aromatherapy, yoga, sound/music therapy—to help teens with their mental health. $21.95 | 288 pages | 2017 | Published by Norton Professional Books
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
There are few entry barriers to tea. It does not demand heavy infrastructure. But the complaint from smallholders selling raw leaf to large-scale tea producers operating multiple factories is that for the past decade, farmgate prices are not commensurate with costs. Now the economics of the tea trade is gradually shifting from oversupply to scarcity. At the same time, some quiet work underway in India is yielding encouraging results that lower the cost of tea production, improve quality, and ease a shortage of labor. The most powerful driver for change is revenue. Prices globally, on average, increased by $0.21 cents per kilo during 2021, according to Trading Economics. Abhijeet Hazarika, IT analyst @TeaSigma and former head of process innovation at Tata Global Beverages, observed that “Tea is not a very high profit yielding commodity and will not be so in the foreseeable future until some tech breakthrough happens.” The frugal innovations described in this series, combined with higher prices may herald that breakthrough.
Caption: Shekib Ahmed at Koliabur Tea Estate in Assam
Hear the interview (Part 2)
Abhijeet Hazarika and Shekib Ahmed on frugal innovations that scale
Tea bushes ready for a plucking round at Koliabur Tea Estate, Assam, India
Embracing Simple Technology with Scalable Impact
By Aravinda Anantharaman
Frugal innovations utilize simple technology to address some of the most vexing challenges facing the tea industry. It’s an umbrella term for innovations that do not require much capital, carry a low financial risk and can be done safely with high reliability. Abhijeet Hazarika, former head of process innovation at Tata Global Beverages, describes several innovations that have moved from the drawing board to become successful pilots at partner estates. In Part 1, Aravinda Anantharaman looked at frugal innovation in buying and selling tea. In Part 2, she explores the application of frugal innovations in the tea garden.
Shekib Ahmed of Koliabur Tea Estate in Assam talks about experimenting with frugal innovations in the field, but it’s in the factory, he says, that these simple technologies show the biggest impact.
“With data,” says Ahmed, “I have an objective source of attention to detail. I don’t have to depend on someone who has been working in the industry for 40 years, who uses his expertise and muscle memory to guide us. I have objective data. And that really helps me change the conversation in the factory. I’m not talking of vague concepts. I’m talking about numbers. I’m saying, this is the parameter that we want, and we must keep it within this threshold. It makes it scientific.
“What happens is that even the youngest boy or girl who’s joining as an executive, he or she can pick it up very quickly. She doesn’t have to be there for 20 years. Now, we have a young lady in one of our factories in Dubba. She’s running a 12-hour shift by herself and it’s just data. She has the data. She knows that we must stay within these parameters for the quality to be good.
“She’s in her 30s. Normally, guys running factories at that level, are in their late 50s and 60s, because you need to have that much experience. But if we can objectify data, we can have younger blood come in quickly. They are also not operating blind. I’m not just telling them, make good tea. I’m telling them this machine should be running from this much to this much. The sensor will inform you whether you are in that range. In our shared platforms, we have a cloud-based platform where we share the data, and we keep verifying it. There are many little things in production where we were operating blind and now, we have a certain level of clarity so that really helps us improve.”
Ahmed meters temperatures in the factory. Incidentally, this was developed by a young boy at a cost that Hazarika only will say, “is laughable”. Three machines are ready, and one of them is at Ahmed’s factory. Attention to detail, which was once subjective, has now become scientific and objective, says Ahmed. He likens processing tea to cooking, and how by tweaking the temperatures and the RPM of machines, the quality of tea changes exponentially. These innovations are sensor-based, that are already in use in other industries. Ahmed reminds me that the color sorters in orthodox tea production were derived from rice sorters.
Saurav Berlia with visitors at LR Group’s Dooars estate.
And finally, innovation in the field
During our conversation, Hazarika discusses people, welfare, and productivity. Speaking on low productivity, he says, it’s not because people are shying away from work but because of the nature of the work.
Hazarika says “There are times when I stand in the gardens in August, and it is so hot that I could not stand more than 45 minutes to an hour before I felt unwell. But these people do it day in day out. It’s difficult and I don’t think anybody talks about this. So much hype about the romance of the woman carrying the bags, how many realize what goes on in that case, it’s like a furnace!”
We talk about harvesters. Most of the harvesting machines, he explains, are handheld machines and they tend to be noisy and heavy to carry. Therefore, men are assigned the machines. Not only is it tiring but it’s hard to keep one’s hands steady with them. This means that the quality of the plucking is not very good. Terrain poses another challenge for harvesters even in Assam’s valleys, where it is an uneven terrain. This challenge is amplified in the hills. Hazarika talks about harvesters not as a means to increase quantity but to aid quality.
He is looking at two major deliverables. One, the quality of the finely plucked should be at least 5x better than what is plucked by current machines and at least 2x better than what has been plucked by hand. Two, pest controls. The cost of pest and disease control is significant, especially where there are large areas to monitor, which is the case with estates that span many hectares. Pests can spread within two to three days offering a very small window to arrest their spread. An early warning system, says Shekib, can make an enormous difference. However, this seems to be a mammoth task — perhaps the most challenging space to build innovation — because, for every pest, Hazarika says, a year’s worth of data needs to be collected to feed the algorithms.
Nowhere does the conversation turn to machines replacing people. Instead, the conversation repeatedly brings up utilizing labor effectively to increase output but with better quality.
“I think the tea industry supply chain is completely out of sync with the way modern supply chains work. There is no concept of made-to-order.”
– Abhijeet Hazarika
From ‘make to stock’ to ‘make to order’
Ultimately, it comes down to the perennial problem of oversupply and reduced demand, and the mad scramble for markets. Indian tea producers do not make to order but make to stock, their priority is to sell. And the circle that begins with variability in the quality of tea closes with variability in price realization. Made-to-order brings other advantages, as it is collaborative and brings both technical and technological inputs as part of the process.
“I think the tea industry supply chain is completely out of sync with the way modern supply chains work,” says Hazarika. “There is no concept of made-to-order. They will say forward contracts are made to order. I beg to disagree because, when you say I will take a tea from you, I mean I will take a tea off a particular quality from you. The guy who’s making the tea, in many cases, is not even aware of what you want. So, the buyer has permission to reject it.”
“One of the most important aspects of made-to-order is to leverage the unique aspects of an estate of the factory that has consumer value. Somebody might make tea that makes good color which is preferred in Maharashtra or some may make tea with a sweet after taste which the Gujaratis like. We need to be able to treat every garden as unique and not as a commodity.”
While this is a familiar story, of not treating tea as a commodity, Hazarika offers a roadmap of sorts that is possible with frugal innovation. Once you have quality specifications, a producer can do real-time monitoring during manufacturing. All the resources are focused on producing only what meets the specs. This in turn optimizes the cost of production and increases the likelihood of the customer buying it because it’s been made to their specs.
Which brings the conversation to buyers because the change has to begin with them. If the large tea buyers are procuring 1,000 mn kilos of tea a year, assuming an average estate produces 1 mn kilos of tea, that’s 1,400 estates that can cater to one single buyer. Change can begin with one single buyer.
Frugal Innovators from left, Ratan Ghosh, Bappa Dutta, Mr. Sakil, Nayan Sarkar, SN Singh, Jamil Aktar, Prasenjit Mandal, and Sohag Mandal. Photo courtesy LR Group.
Saurav Berlia talks about how he is piloting the make-to-order model. He has partnered with a buyer who has agreed to buy his tea at a higher-than-average price. In return, Berlia assures the buyer will receive:
– quality (achieved by managing the parameters while processing in the factory)
– consistency (ensured by recording data such as temperature, moisture levels)
– safety (being done by educating growers on chemical usage and monitoring it)
There may not be certifications here, but data is being recorded digitally and analyzed. For those who have wondered about the alternative to expensive certifications, this may well be it. Because the proof is there for anyone to see.
Ahmed talks about how the conversations are changing, becoming more specific. It’s helping him build a young team who are learning, not averse to technology, and who are razor-focused on quality. Innovation, he says, is no longer just for multinationals but for everyone.
“The only way I can do something better than the much larger tea garden groups is if I can execute innovation quickly and if I can execute quality improvement better and in the most cost way,” says Ahmed. And that can only happen with teamwork.
The larger outcome is more significant. Frugal innovation will change the way the industry is run. It will no longer be about waiting for an executive to invest 30-40 years in the factory to be relied upon to run it. Frugal innovation can bring effective processes into play in a way that someone young can be trained early on. This is important in a state like Assam where migration is extremely high and the intellectually able who leave don’t return.
The work on frugal innovation is being made possible by harnessing vast industry experience, a wide network, and an active collaboration with academia. Support and partnerships have come from major tea buyers. The possibilities where tech can play are vast and are seen by both Ahmed and Berlia as the way forward.
“Come in with an open mind,” advises Ahmed. It requires a willingness to try piloting the various options. And because these innovations are frugal by design, it’s affordable even for small growers and small gardens. Berlia confesses that he didn’t buy into it readily but the potential to earn a better price for the tea was a strong pull. Within a month, he says, he could tell it was working and he’s since been advocating it.
For an industry that’s been grappling with multiple challenges, frugal innovation is a low-risk and impactful option, spearheaded by an industry veteran with an eye for innovation. For every successful experiment, there are many that fail, but these are essential to the process that begins with the question, “What if…?”
Koliabur Tea Estate extracts labMicrowave monitoring qualityImage capture of tea in multiple visual wavelengths for data processing.Koliabur simplified tea sorting system
There are few entry barriers to tea. It does not demand heavy infrastructure. But the complaint from smallholders selling raw leaf to large-scale tea producers operating multiple factories is that for the past decade, farmgate prices are not commensurate with costs. Now the economics of the tea trade is gradually shifting from oversupply to scarcity. At the same time, some quiet work underway in India is yielding encouraging results that lower the cost of tea production, improve quality, and ease a shortage of labor. The most powerful driver for change is revenue. Prices globally, on average, increased by $0.21 cents per kilo during 2021, according to Trading Economics. Abhijeet Hazarika, IT analyst @TeaSigma and former head of process innovation at Tata Global Beverages, observed that “Tea is not a very high profit yielding commodity and will not be so in the foreseeable future until some tech breakthrough happens.” The frugal innovations described in this series, combined with higher prices may herald that breakthrough.
Caption: A quality assessment station. Improving quality is critical to the success of growers.
Hear the interview (part 1)
Abhijeet Hazarika on promising new Frugal Innovations
Scanning tea fields at different wavelengths to assess plant conditions. Using cameras to monitor crop conditions, in order to identify threats from disease and pests at an early stage, enables a more targeted (and effective) use of pesticides, lifting productivity and profits. Photo courtesy of Shekib Ahmed.
Bringing Technology into the Tea Value Chain
By Aravinda Anantharaman
Abhijeet Hazarika talks about technology in terms of “frugal innovation”.
What is frugal innovation? His checklist includes:
1. Low capital expenditure because the industry cannot bear additional high expense
2. Low complexity, taking into the view that skill levels on the tea estate, with people who are not very conversant with technology
3. Low upkeep cost, because tea estates have limited infrastructure. Innovations that required high maintenance have a short shelf life and soon land in the junk pile
4. Clean and safe because this is non-negotiable, and buyers ask for it, especially export buyers
5. Highly reliable, because the whole idea of innovation is to improve efficiencies
6. Impact, because the scale of impact must justify adoption of innovation
The ideas he shares are not limited to large estates but have taken cognizance of the small growers. Frugal innovation also correlates with low risk which makes it an attractive proposition. And yet, there have been few takers for it.
In Part 1, we look at how implementing frugal innovations can impact the purchase of leaf and the sale of tea.
Innovation in the procurement of leaf
Saurav Berlia is the third generation in his family’s tea business. The LR Group (Berlia Foods) has been involved in all aspects of tea, from gardens and factories to broking, packing and exports. His company produces more than 20 million kilos annually, supplying to buyers including the top three in India. Berlia decided to pilot some of Hazarika’s projects in frugal innovation.
The group procures about 500 kilos of tea every day from small growers. This process involves calling every small grower each morning for an estimate of the tea they expect to pluck. The small growers sell their leaves, but they won’t know the price they will be paid for it until the next day. They will also not receive feedback on the quality of their leaves.
Berlia is piloting an app that his growers could connect to. With this, the call every morning is made redundant. The grower’s login to the app to understand the market requirements in the morning and offer the estimated quantity of leaves right there. What’s more, because they have an insight into the market requirements, they can set their own prices. Berlia’s staff can accept the price or negotiate before they buy the leaf. Once the transaction is confirmed, the grower gets a message with the weight of the green leaf to be supplied and the price they will be paid for it.
A three-month pilot has shown a positive response and a few of the growers are very happy. However, Berlia admits that he met with resistance at both ends — growers were resistant to the new-fangled app that demanded their inputs and attention. At his factory, Berlia’s staff were convinced it wouldn’t work. They preferred the status quo. He says patience accompanied by training addressed some of this resistance. With each unit having about 50-100 growers as partners, the app can potentially transform how transactions are conducted, to everyone’s benefit.
“Technology has become much more affordable today than what it was 5-10 years ago because processing power has made it affordable. Devices are more affordable. Technology has become simpler.”
– Shekib Ahmed
Using data effectively
Another early adopter of tech is Shekib Ahmed who runs the Koliabur Tea Estate near Silghat in Assam. The 1,600-acre estate next to the Kaziranga National Park with 900 acres under tea. Low hill ranges form part of the terrain here. The garden produces exceptional single-origin CTC tea.
Ahmed chose to partner with Hazarika because of a shared desire to integrate technology in tea farming. Listen to as Ahmed talks about the two key points that attracted him to this.
“Technology has become much more affordable today than what it was 5-10 years ago because processing power has made it affordable,” says Ahmed. “Devices are more affordable. Technology has become simpler. He (Abhijeet) was reminiscing how, when he was working with data, the cost of data analytics was astronomical. But now with cloud computing and everything, it’s become a lot more affordable for companies of our size to give it a shot. That was the first part.”
“The second part was how he focused so much on frugal innovation, things that are affordable for companies of our size to try to tweak and to learn. And one of the biggest benefits of working with Abhijeet is that when we’re doing three to four projects, two or three may not give the results that we want today. They may give it later or they may not work out. However, the side benefits of all the ideas and discussions, just the access to these bright minds like Abhijeet, like the scientists really opens up a lot of little innovations, which are very groundbreaking in the sense that it’s really helped me improve quality in the last one and a half years,” said Ahmed.
He adopted a simple system of data analytics for tea from the tea auction system. There’s a lot of data that comes from the tea board of India, but this is raw data. Ahmed talks about the resistance to change even here when he says the Indian tea industry is where the steel industry was 30-40 years ago. Innovation was very, very slow and the industry was loathed to move past its way of working.
Ahmed’s tea is sent to the auction every week. Data analytics helped him understand how his tea was performing but also what quality the market was seeking. Just to jump the gun a bit, in using data analytics to offer tea that the market wants, Koliabur and Dubba, both of Ahmed’s estates saw a jump of 15-25% in auction prices this year. From being in the Top 20 in the ranks, they are now in the Top 10, which, given that there are 800 gardens in Assam, is no small feat. But he is quick to add that it’s not data alone that has contributed to this.
For innovation to fully work, it must be leveraged across the value chain.
Listen next week to Part 2 when we take a look at frugal innovation in the fields and in the factory.
Determining raw leaf densityDrying in a vacuum ovenFloor fermentation Using a microwave to determine withering parameters
