Without explanation, Iran’s Ministry of Agriculture has stopped registering contracts with Indian suppliers to export tea, rice, and other commodities. Registration is required before Indian goods can be offloaded in Iran.
Beginning in late November, Indian tea traders and traders exporting basmati rice noticed unusual delays in the routine registration of shipping contracts. Iranian officials did not announce or explain the delays, which led to speculation that the disruption was tied to ongoing street protests, a widening trade imbalance, or possibly ongoing discussions to resume oil exports from Iran to India.
Masih Keshavarz, speaking for Iran’s Rice Suppliers Commission, told IRIB News, “the ban will be lifted as soon as bilateral trade is balanced out or registers growth.”
The Business Standard reported that a fifth of India’s tea exports are shipped to Iran. Indian exporters told the newspaper, “the disruption in trade has been triggered by anti-hijab protests in Iran. Asa result, Iranian buyers, have been defaulting on payment obligations.”
Negotiations between the two countries to resume oil shipments are ongoing. India halted in 2019 due to EU and US economic sanctions designed to convince Iran to cease work on developing a nuclear arsenal.
Anshuman Kanoria, chairman of the Indian Tea Traders Association, said India’s Commerce Ministry, the Tea Board of India, India’s Foreign Trade office, and the Indian Embassy in Tehran are seeking an explanation. He writes that it is “futile to speculate on unconfirmed guesses.”
Previously registered shipments continue to arrive at Iranian ports.
| China Eases COVID Restrictions
China has eased travel restrictions and will permit people to enter public buildings without showing negative test results (except schools, hospitals, and nursing homes). Residents can travel freely within the country, but international travelers must still endure an eight-day quarantine on arrival. The country remains closed to tourists. The immediate impact of lifting restrictions will be a surge in infections due to a low vaccination rate.
| World Bank Report Reveals Investment Opportunities for Expanding India’s Cold Chain
Cold storage capacity in India has grown steadily. Still, a gap of 3.27 million metric tons for long-term storage of fresh produce remains, according to a World Bank report on investment opportunities presented at a government-hosted conference on developing India’s cooling sector.
The integrated development of the cold supply chain across India is severely lacking. The National Centre for Cold Chain Development (NCCD) estimates that close to $11.75 billion is required to develop the physical infrastructure and transport-related elements, presenting an investment opportunity to modernize the retail end of the cold chain requiring $1.3 to $1.9 billion.
Building out that infrastructure will spur the consumption of chilled ready-to-drink tea and make it practical to sell refrigerated concentrates and store perishable green teas.
| PLUS THIRST has completed its initial assessment of human rights in the global tea sector and is now seeking to understand the root causes. THIRST founder and CEO Sabita Banerji says the non-profit will conduct confidential surveys of tea producers during the New Year. In this episode, she discusses the process with South Asia Correspondent Aravinda Anantharaman.
Emilie’s retail shop and tearoom, founded in 2017, spans 2,500 sq. ft., seats 20, and is co-located with Centered Spirit, a cultural and Holistic Center, housing her husband Alex’s holistic medicine practice. Emilie was born in France and grew up in Paris. A graduate of the Sorbonne in business management with post-graduate degrees in marketing. Fluent in Spanish, Emilie was the marketing director for Lacoste in Mexico City. Emilie curates a selection of brands that share the “French Finish,” a style that showcases French expertise in wine, culinary, essential oils, and perfume for more subtle and smoother tasting blends.
Caption: Emilie Jackson in the shop’s classroom where she teaches customers about tea.
Emilie’s French Teas
By Dan Bolton
Specialty tea retailers in the US and Canada that survived lockdowns are now experiencing a precarious “post-pandemic” “pre-recession” economy marked by steep inflation and rising interest rates. Retailers say that while the pandemic increased demand for better quality tea, in-store traffic has declined as consumers enjoy their tea at home. Home has always been the preferred option for tea drinkers, but before 2020 tea in food service accounted for 20% of global tea revenue. Until office workers return to the world’s cities for daily lunch and afternoon tea breaks the 20% threshold will be difficult for the tea industry to achieve.
To attract customers back to their cafes, tea rooms, and shops, retailers seek to make each location a destination. To encourage in-store purchases retailers teach courses in person and via webinars, promote happy hours, host evening entertainment, conduct food pairings and tea tastings, schedule travelogues with demonstrations on tea making, and offering delivery services, curbside pickup, and even drive-thru.
Dan Bolton:How do you describe teas that define French tea culture?
Emilie Jackson: There’s a difference for me between tea cultivation and tea culture. Tea cultivation is where you actually grow the tea. I explain to our customers where tea comes from and how I pick the partners that I work with. I make sure they know it’s fair trade and that the teas have no pesticide or anything like that. It’s one thing common to all the tea we collect from all around the world.
We suggest that for most of our teas customers first drink it without milk or sugar because you’re gonna miss some of the subtleties, right? So, we have real aficionados and some others who don’t know as much about tea. I say to them maybe you don’t like this particular tea, ‘try another’ I say, there’s a tea for everybody.
What really makes the difference in teas from France is how we finish the blend. We use our wine, culinary, essential oils, and perfume expertise to make the right blend.
France has a long history with wine. When you think about grapes, there are different grapes for different styles of wine. For a long time we were one of the only places who knew how to grow the best wines. Wine makers came to learn and soon there were new regions and new cultivars. Now you get great wines from all over the world. Sometimes in places that you would not even expect. Tea is traveling a similar path. I think tea is experiencing a constant evolution. There’s different regions there’s different soil and climate (and now the impact of climate change) in countries that goes into the tea itself — without even talking about scented tea. You can get some great blends with subtle notes not just because of the terroir but also because of the year it’s been picked. So that’s fascinating and that’s why I like about French style tea blends. When we do a scented tea we never overpower the tea itself you always can taste if it’s a black tea, green, oolong, or white.
Dan:Do you perceive that your customers are trying to refine their taste in tea and buying more expensive tea? Or do you feel people are beginning to trade down because of inflation and concerns about a recession?
It’s a good question. First of all, for us, we’re already a niche market. We were more, you know, high-end products in the specialty tea category. So the people that come to see us, whether they know our brand, or they’ve been to France, experience some of that here. They come here looking for that. So we’re already more niche. So I think, yes, we’ve probably been impacted by the fear of a recession. And we probably are going to experience a greater impact. I hope people can still find small pleasures that they can buy, like a good loose leaf tea. And that’s one thing about our teas: price ranges are higher, but there are small things you can do for yourself that don’t break the bank.
Dan:Is experiential retail the key to customer retention?
Emilie: I’ve been in the retail business for a long time, and experiential is not new. When we created the shop, it was always about sharing our love of travel and our love for different cultures. You can see that I am from another culture. The photos, decor, and items in the shop are from places we have traveled to and the tea gardens we visited. Experiential retail creates an experience, a universe where people can feel transported.
What I’ve seen before andafter COVID is that fewer people are visiting retail shops in general, whether it’s fear of being around people or whether it’s just a change of habit, a lot of people, even the older generation who like to purchase their tea in-store now has learned to do so online. Online shopping has increased. I have people close by who order online and then just pick up the tea. So, in that regard, that’s what has changed.
I have observed that people in the US go out a lot. COVID and everything refocused their attention on home habits. People started during the pandemic to make things at home, including many people who turned to tea because it was comforting. Tea came indoors. So that was good for us so far as packaged sales, but at the same time, making it at home meant fewer trips to the tea room.
So if you look at the tea room itself, of course, that’s going to have an impact, right? So, as far as changing strategy, it’s more about how you deliver your product or put it in the hand of your customers, whether they want that to be in-store or just want to have the product delivered.
I don’t know if it will change my strategy because it’s all about education. And I’ve always wanted to educate people about the different types of tea because there’s so much misinformation out there. Social media has pros and cons. One of the cons of online selling is that there is a lot out there, and the information is not always good. So how, as a consumer, do you find the right information?
Dan:Online sales were a lifeline for many, many smaller tea rooms when they were ordered to close and later as they faced restrictions preventing their previous service level.Your client base stayed loyal, but some appear to have changed their buying habits permanently.
Emilie: First of all, we were kind of, I mean, lucky in some ways; it’s just like when COVID hit, I was just finishing the online store. So, when clients started to ask, Hey, can you, you know, do curbside or anything like that? We were able to do it, you know, it’s a learning curve plus the technology. As far as logistics and everything, people sometimes don’t understand that tea made from Camellia sinensis is mainly grown in Asia, Africa, and India. When it comes to deliveries in the fall and winter, you get even more sales because, in the US, there is a spike when it’s colder. Everybody was ordering online, and all the different services, UPS, DHL, and USPS they didn’t have enough workers.
It’s hard for us because everything else also increased if you think about it, you know, the overhead for just having a brick and mortar shop is very high. People don’t think about that. But that is a lot of the costs incurred, and then shipping has definitely increased. We don’t have the volume in order to decrease the shipping cost when shipping prices go overboard — we’re talking about a quarter or even one-third of the cost of goods. Sometimes when the client is close by, I will deliver it myself.
Dan:Did you pass these costs on to your customers?
Emilie: Well, actually, not that much, not as much as it was suggested I do. But it’s pretty hard, you know, to know at which point the customer can take it.
Dan:Will you discuss the role of retail in educating consumers?
Emilie: It depends on your market, and you know, how you position your brand. I like teaching, it’s my passion, I love learning, so anything that I learn, I always pass it on to the customer.
Most often, I think they enjoy that. Some maybe don’t care, but most like to learn the processes. People are becoming a bit more aware that from the same plant, you get six types of teas. I explain how producers can get a white tea that is aged which makes it even more complicated. I answer many questions about caffeine.
I also compare tea to coffee with people who are more into coffee. They understand the differences between regions and how it affects taste. In the same way, I explain how tea is picked and how that impacts the taste of each tea. At the end of the day, it’s fascinating. That’s what I love about tea you can learn something new every day until you pass away.
The Centered Spirit Cultural and Holistic Center holistic healthcare resource for the local community with several health practitioners that complement each other’s skills along with an apothecary and teaching area.
The Center provides a safe environment for healing, relaxation, and a place to learn about cultures, traditions, and tea rituals around the world. Founders Alex and Emilie Jackson share a passion for the healing traditions of Central America, Mexico, and Europe. Their love for these and other cultures is embedded in every part of the Center, allowing everyone who enters to feel transported, embraced, and at peace.
AVPA’s annual tea competition offers more than a medal. During the past five years, AVPA has elevated the status of tea producers large and small, not only on the global stage but most importantly in their local markets. The deadline to enter the 5th Teas of the World International Contest is Aug. 1, 2022.
Caption: Ksenia Hleap manages AVPA communications and development
Entrants Receive Ongoing Support
Since its founding as a competition to showcase agricultural products, AVPA has expanded its services to include tasting workshops, technical support, and staff training for distributors.
Kesnia Hleap manages communication and development for Paris-based AVPA (Agency for the Valorization of Agricultural Product) a non-governmental, non-profit organization that judges edible oils, chocolate, coffee roasted at origin, and teas. Beyond the great classical origins (China, Japan, India, Sri Lanka …) the tea competition encourages consumers to discover new producers in Africa, Latin America, Southeast Asia and even Europe. A veteran marketer, Ksenia discusses the many benefits of participation.
Dan Bolton: Welcome to the Tea Biz podcast. How does AVPA, and specifically its Teas of the World Contest, benefit the tea industry?
Ksenia Hleap: AVPA exists now for 20 years. We created this contest to help the producers since the very first year. This will be our fifth edition of the tea contest. We have teas from all over the world, not only monovarietal teas [Camellia sinensis] but also herbal teas, infusions, and blends. AVPA enables producers to compete with the best from different countries and to obtain feedback from a very professional French-speaking jury. So, each time they enter and for every tea entered, producers have access to comparative jury scores and feedback. If they win the medal or not, they will have this possibility.
Dan:AVPA seeks to elevate awareness of tea producers globally, not just in France although French gastronomy is the framework by which judgments are made. Will you talk a little bit about AVPA’s recent initiatives such as the effort to increase participation by African producers and efforts to draw attention to European tea producers?
Ksenia: The contest is to inform the producer that we exist and to help recognize their work done. With the AVPA medal, producers receive recognition from an international organization that confirms the excellence of their products and reassures their standing in the competitive environment.
What we are doing after the contest for the producers, if they need our help, is to do help with marketing or strategy decisions. Our jury members are international consultants in the tea industry, tea experts. They can help the producers in Africa or Latin American countries for sure. We are always in touch, we are trying to be in touch with the cooperatives or tea associations in these countries. We explain why it is important to help the producers from PROM Peru for example and the Rooibos Council in South Africa.
The association helps not only tea producers but also coffee and chocolate producers to send the samples for the competition and after the competition to find the distributors.
The medal not only opens new markets – most important, it’s recognition of the producer’s efforts in the local market. It’s recognition for work well done.
Dan: AVPA then provides marketing support to contestants long after the awards ceremony?
Ksenia: AVPA support doesn’t end with the award ceremony. Once the contest ends, the producers are free to reproduce the medal on their packaging. But unfortunately, not every producer understands why they need to do this. So, we have some videos to explain. We scheduled zoom meetings with the winners after the contest and other resources describe at this link “How to use the Medal.”
I am an experienced marketer so I explain to the producers how they can use their medal not only on the packaging but in their communication strategy which is very important. Here is a helpful video on How to Use AVPA Medals.
Medals are a fantastic commercial instrument. For example, if producers need to apply for credit at the bank to buy new machines or funds to finance an expansion, it is very, very helpful to explain that they have a diploma and are recognized in Paris by an international tea contest. It is a reassurance to clientele during ongoing negotiations. It supports support favorable decision-making and improves the producer’s prospects.
Dan:You must love tea; will you share your preferences?
Ksenia: I love tea. Frankly, I prefer different herbal teas because, in my childhood, I used to drink a lot of herbal teas, but now with five years of experience at AVPA my passion is to taste the different teas from different countries. To find out new origins and tastes. I’m always looking for something very original, authentic.
Contest winners are announced in October. Winning brands receive a diploma and may display the award on their packaging.
Agency for the Valorization of Agricultural Products
Monovarietal teas are evaluated by a jury chaired by Carine Baudry an expert in sensory analysis and founder of Quintessence.
How AVPA Elevates Origins
Recognition, professional education programs, and contests build self-esteem and economic success that directs a larger share of the value chain to the country of origin. “This is why we cling to local transformation of agricultural products so that producers benefit from the pursuit of excellence,” says AVPA President Philippe Juglar. Read more…
Tea competitions that “speak” for their respective markets are great for the industry. In the tea lands, skilled growers and tea makers can infinitely adjust their pluck, style, grade, and sort for export – but first, they must understand market preferences. In France AVPA judges companies from around the world for excellence “based on gastronomic rather than standardized refereeing.” Read more…
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
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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…?”