Inspired by The Charleston Tea Garden in South Carolina, Jason McDonald decided to plant fields of tea amid the timber on his 289-acre farm in Lincoln County Mississippi where a combination of high heat, humidity, acidic soil, and ample rainfall is ideally suited to tea.
In 2012 McDonald planted a test plot and made his first tea in 2015. In 2018 the tea garden produced sufficient quantities to begin selling to the public. McDonald has since diligently researched every aspect of the industry, enlisting horticultural, sustainability, manufacturing, and machine professionals to develop harvesting and automated tea processing techniques and the utilization of equipment at small-scale operations.
“We are striving to modernize an ancient industry with innovation and bring it much closer to home,” he says. The Great Mississippi Tea Company is pioneering modern cultivation, tea science, employment standards, and small-scale mechanization of the harvest for producers in developed countries where the high cost of labor and land has discouraged growers.
Caption: Gasoline-powered harvester “plucks” tea selectively, leaving immature shoots and sustenance leaves on the plucking table.
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Grower Jason McDonald on the economics of small scale mechanization
Jason McDonald operates a model tea farm in Brookhaven, Miss.
The Economics of Small-Scale Mechanization
Great Mississippi Tea Company founder/CEO Jason McDonald discusses the economics of mechanical harvesting following a two-year trial of mechanized selective harvesting equipment. There are currently seven acres under tea at his garden with plans to expand to 14 acres. McDonald reports that hand plucking, at $15 per hour costs $43.81 per pound, about $96 per kilo. Using a selective two-person harvester McDonald increased yield and lowered the cost per pound to $6.14, about $13.50 per kilo. McDonald has generously agreed to share his harvest data, labor and production costs.See links below to download.
Dan Bolton: Can specialty tea growers who focus on quality over quantity rely on mechanical harvesters to deliver leaves suitable for making high-value tea?
Jason McDonald: Well, I think they can. But we’re going to have to rethink the idea of quality. Commodity leaf can be anything from dust to fanning’s to broken leaf, and then you’ve got the really high end, you know, one leaf, one bud that’s going to command higher prices. I think that the economics are going to favor our specialty mid-grade teas. Those are the ones that pay the bills, and that type of market is really suited for selective harvesters. I think that a selective harvester would be wasted on a CTC (cut, tear, curl) plantation, it also would be wasted attempting to achieve the precision of hand plucking in China. But for the rest of the mid-level specialty teas the specialized selective harvester has worked wonders for us and kept quality up. We recently entered the Australian Tea Masters Golden Leaf Awards and two of the teas that we produced using the Williames harvester scored high enough for a gold medal.
Our yellow tea was the overall winner for yellow tea, which means that in a blind tasting we scored over 90%. In the hands of a skilled processor who is able to adapt, quality can actually increase and the harvester can also bring the cost of producing the tea down so that it’s affordable for more people.
Dan: During the past two years, you’ve conducted field trials with a selective mechanical harvester to produce 250 to 350 kilos of made tea. Will you share with listeners what you have discovered?
Jason: When we were doing hand plucking, we were on a seven-day rotation and we just couldn’t keep up. It wasn’t about hiring enough people or paying people. We could make it economically feasible to hire people — but when it gets to 110 degrees Fahrenheit in our field in the summer, people just don’t show up, so we were losing yield. We were only getting about 100 pounds of the raw leaf by hand plucking (about 45 kilos a year).
After using the machine the first year we had almost a 500% increase, and then we had another about 150% increase in year two.
Our yield blew up because we could keep ahead of the bushes growing. Labor availability plays into the equation too, in an area where you can’t get labor into the fields, a machine with two people using it increased our yield 500%.
Great Mississippi Tea Company Plucking table before a nine-day round with Williames Selective Harvester
Plucking table at 39.5 inches after a round using the 1.5 meter gasoline powered two-person selective harvester
After using the machine the first year we had almost a 500% increase, and then we had another about 150% increase in year two. Our yield blew up because we could keep ahead of the bushes growing.
– Jason McDonald
Dan: Will you compare for listeners the cost of manual harvest compared to the cost of operating mechanical harvesters and how it affects your final pricing? I’m curious not only about the cost of harvesting but to prune and skiff, feed, and maintain the seven acres current under tea. Ultimately, what wholesale/retail price is required to recover that expense?
Jason: It cost roughly $43.81 pound, just for plucking which is about $96 a kilo. Generally, there’s about another $25 to $30 per pound cost for labor in the field. So you’re looking at about $75 a pound or $165 a kilo, just to be able to produce our tea if you’re doing handmade.
Our retail price is generally between $180 and $240 a pound. So that’s about $396 a kilo, at retail.
Wholesale is about 30% less. We’re moving everything we can produce at this point through our retail market, so there’s really no incentive for us to wholesale it at these prices. Down the line, when we have lots more coming in, we’re gonna have to figure out wholesale.
So breakeven is $86 a pound, ($199 a kilo) doing it by hand. You can make money off that even if you’ve only got five or 10 kilos, I guess. But do you really want to spend day-in and day-out working at something that will possibly make $2,000 or $3,000 a year?
The Williames Selective Tea Plucker allowed us to reduce the cost of plucking from $43.81 pound to $6.14 a pound, that’s roughly $13.50 per kilo.
All you would need to do is make 400 pounds of tea a year and that would cover the cost of the machine which is about $15,000. So, if you’re producing 400 pounds of tea you’ve got a machine paid for, and the machine doesn’t quit working at that time.
There’s also the cost of running it, but I think we used less than a gallon of gas the entire summer and you still have to pay someone to walk with the machine. In the US we pay $15 an hour which is a living wage, it’s actually twice the minimum wage in the United States.
When you’re hand plucking, you’re sorting in the field but with machine harvesting, you’ve got the cost of running the machine, and then you’ve got the cost of sorting tea in the factory.
There are pieces that are either too small or too large, and you’d have to sort that out. Sorting required an additional 40 minutes of labor to process 10 kilos but that helps in our situation because when it’s really hot outside people would rather be indoors in the air conditioning sorting than sorting in the field.
I’m talking to investors now about a fully automated whole leaf black tea processing line out of China that’s all run off of an iPad.
Automating the whole thing to create a wholesale line of black tea could further reduce the cost down to almost $7 a pound for us here in the United States.
Dan: And what kind of volume would you have?
Jason: If you wanted to run 24 hours a day, it would be 50 kilos a day. That’s enough capacity to take care of our eventual 14 acres.
We have to do this. If you can make a profit here with the labor cost and energy costs, and the level of regulation in the United States, you should be able to do it anywhere in the world.
The Tea Board of India last week proposed legislation that will minimize its regulatory role in favor of promotion and development. The proposed legislation, with Parliament’s approval, re-defines the board as a facilitator, a transition welcomed as “progressive” by industry leaders.
In a formal 12-page public notice, the board “proposes to delete those archaic provisions [of The Tea Act, 1953] which have lost relevance in today’s context and introduce new objectives/ functions/ powers of the board so that the board can act as a facilitator for optimizing the development, promotion, and research in the tea industry and help in improving production, export, and quality of Indian tea.”
The announcement invites public comments on the Tea Promotion and Development Act, 2022 through January 21.
Caption: The proposed Tea Promotion and Development Act of 2022 will impact the tea industry from the ground up.
Tea smallholders, defined in the tea act as those cultivating 10 hectares or less, plucking an Assam garden
India Drafts Tea Act to Redirect Tea Board Mission
By Roopak Goswami
India Tea Board Chairman PK Bezboruah explains that “The old Act was based on facts which had become fallacies over the decades: that tea was a predominant export of India, that people needed planting permits to plant tea, that the government had accurate estimates of green leaf production in a specific block.”
Successful enactment of the Tea Promotion and Development Act, 2022 will repeal The Tea Act of 1953.
He cited “many steps that could be taken by the Tea Promotion and Development Board, including the revamping of auctions, removal of substandard teas from the system; setting a floor price and establishing quality standards for raw leaf, a ban on unethical manufacturing policies, ensuring compliance of Indian tea with international norms for MRLs [Maximum Residue Levels] and the identification of restrictive trade practices by some participants in the tea value chain.”
The government has been mulling these changes for some time but the pandemic delayed implementation. Bezboruah said that as a regulator, the Tea Board has been perceived by some as an enforcer or adversary and has been accused in the media of indulging in unprofessional behavior from time to time. “The new Act will redefine and remove some of the bottlenecks that have stood in the way of the sector’s competitiveness,” he said.
The draft spells out several objectives including “fair and remunerative prices for growers,” the promotion of tea exports, promoting the sale and consumption of tea through e-commerce platforms, promoting tea quality, promoting branding and product diversification, value addition and packaging. The board is specifically charged with supporting and encouraging small tea growers, an objective that includes implementing new technology. Oversight involves safeguarding the interests of tea plantation workers and raising awareness among the general public about the tea industry in India.
Growers will no longer be required to obtain a permit to grow tea. Traders will no longer be required to obtain a license (only to register). The board will no longer have the power to unseat inept management and take over garden operations. The new act seeks to narrow not eliminate the board’s regulatory role at a time when aggressive regulation of existing provisions has become a priority.
Ringtong Tea Estate owner of Sanjay Choudhury told the Telegraph that abandoning enforcement of the Tea (Distribution and Export) Control Order, 2005, could cause ‘‘irreparable loss’’ to the already struggling industry. The control order enabled the board in November to step up efforts to verify tea quality inspections in an effort to stem the influx of substandard teas. In December the board used a provision of the same control order to require that labels indicate country of origin and the presence in blends of tea not grown in India.
Bezboruah said that “registration of new units and regular inspection of existing ones to check for quality breaches must go on, and we must quickly evolve evaluation techniques that do not depend on human assessment. The government must also place all tea manufacturing units on the negative list for a subsidy, as presently plantations are, to avoid entrepreneurs from setting up new units to avail of subsidy.”
The central government’s vision is to see the board as a facilitator acting in the interest of industry stakeholders to restore the reputation of Indian tea as the best in the world.
Bidyananda Barkakoty adviser North Eastern Association says association members appreciate the intent of the government to include small tea growers.
“If tea board wants to be a real facilitator than a regulator then some of the proposed amendments need further amendments. We are not fully satisfied with the proposed amendments. We will submit our views in detail on January 20,” Barkakoty said.
Bijoy Gopal Chakraborty, president of the Confederation of IndianSmall Tea Growers Association said the industry has long supported revisions to the tea act. “One sincerely hopes that the new Tea Act will break the stagnancy of tea prices, boost domestic consumption in a larger way and enhance the export market,” he said.
“It is good to see that in the present bill small tea growers has been well defined,” he added. A small grower is one whose estate is not more than 10 hectares.
Bezboruah recommends the operational head of the board be redesignated CEO to give adequate recognition to the post. A full-time CEO would be able to help the board professionally, he said. In the present structure, the Board is run by the Deputy Chairman. As currently structured, the deputy chairman responsible for operations is perceived by stakeholders as playing second fiddle to the chair, he said.
Language in the draft emphasized the importance of achieving fair prices.
Mrigendra Jalan adviser to Bharatiya Cha Parishad said, “The proposed Tea Act 2022 has unshackled the tea industry from the vice-like grip which did not allow new plantation areas and putting up tea manufacturing units. Also with other amendments proposed it is expected that industry will get a supportive role from the Tea Board rather than the role of an inspector which the Tea Board has been playing in its present form.”
“The question is whether the new Tea Act will help in ensuring that a large number of workers working in the unorganized sector get at least a minimum wage thereby narrowing the huge wage disparity that is existing today between the organized and unorganized sector,” said Jalan.
Tea Promotion and Development Board Structure
The chairperson of the Tea Board of India will be named by the central government. In the future, career administrators are less likely to hold the post following the success in naming Bezboruah who is the first tea planter to hold the post. The act creates a chief financial officer, a director of tea development and the position of chief executive. The board will number no more than 20. Two members of Parliament serve, one named by the Council of States and a second by the House of the People. In addition, ten members representing stakeholders, labor, research institutes and authorities hold seats along with representatives of the governments from states where tea is grown. Two members nominated by the central government represent ministries, often commerce or agriculture. Appointees, except political appointees, must have at least 15 years of experience “in matters relating to the tea industry, governance, law, development, economics, finance, management, public affairs or administration.”
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
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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
Nigel Melican is a career research scientist, founder of Teacraft consulting, and President of the European Speciality Tea Association. He has monitored advances in harvesting technology for more than 40 years from crude hand shears and reciprocating blades to the latest generation “selective” harvesters capable of discerning and plucking (not shearing) shoots that consist of two leaves and a bud. Virtually all crops are being mechanically harvested now, explains Melican. Fewer laborers require that mechanization plug the gap. Given the cost and shortage of labor and growth in demand, “There’s no other way that you can make commodity tea commercially viable,” he says.
Caption: Nigel Melican in his office in Cloonerra, Strokestown, Republic of Ireland
Hear the interview
Teacraft Founder Nigel Melican on mechanical harvesting of tea.
Globally a majority of large scale tea farms are mechanically harvested. Photo courtesy Kenya Tea Directorate.
Tea Mechanization Must be Well Managed
Nigel Melican founded the technology consultancy Teacraft Group 25 years ago to serve all sectors of the tea industry, supplying equipment and machinery world-wide and offering training, and specialist contract research and development. Teacraft, headquartered in the Republic of Ireland, specializes in the more traditional orthodox tea manufacture process and particularly in artisanal and hand-made tea making.
Dan Bolton: Nigel, why is mechanized tea harvesting here to stay?
Nigel Melican: I’ve looked at tea harvesting, mechanical harvesting for the last 40 years, I’ve been in tea primarily because I was parachuted into a mechanically harvested tea estate in Papua New Guinea in 1980. It was one of the very few in the world at that time. I knew nothing about tea at that time. I assumed all tea was mechanically harvested.
Having completed that assignment they said to stop in Sri Lanka on your return leg and see some real tea being harvested. I couldn’t really understand what they meant. In Sri Lanka I realized that tea was not a mechanically harvested crop like wheat, for instance.
So, I think now that mechanical harvesting is certainly here to stay. There’s no other way that that you can make tea commercially viable anymore. In virtually all agriculture crops are mechanically harvested: wheat, corn, cotton, even grapes are being mechanically harvested.
The machinery isn’t brought in to displace hand labor. It’s coming in because of labor shortages due to urban drift, in the main. Leaf collectors want their children to be doctors and teachers and accountants, they don’t want them to go into field labor. And rightly so, they aspire for better for their children.
There is a growing lack of labor and mechanization is coming in to plug that gap. Rural dwellers are fewer now as 55% of the world’s population live in cities. There was a tipping point in 2000 with an estimated four billion people now residing in urban areas. Today 95% of the world’s population lives on 10% of the land.
Tea mechanization recognizes all of those drivers.
Without mechanization, you just can’t scale production. So, the simple choice is mechanization or empty tea cups. That is, in a nutshell, why mechanical harvesting is here to stay.
– Nigel Melican
Another thing about mechanization is that annual global tea production is 6.3 million metric tons a year. That’s doubled in 20 years from when it was just three million metric tons. Without mechanization, you just can’t get that sort of scale of production, certainly not of commodity tea.
So, the simple choice is mechanization or empty teacups.
That is, in a nutshell, why mechanical harvesting is here to stay.
Dan: Japanese growers invented the first mechanical harvester in 1910 and today some rely entirely on robotics to operate harvesting equipment. In Africa, in contrast, the introduction of mechanical harvesters in 2006 led to union opposition and uprisings in 2010 as workers burned machines. A dozen years later tea workers continue to resist mechanization in Kenyan’s courts but labor lawsuits seeking to ban mechanization ultimately failed on appeal. Is this resistance a reflection of labor-management issues? Can’t workers see they will be paid more as machine operators for doing less physical labor?
Nigel: I’ve worked in Africa for many, many years, and coming from developed Western society it is sometimes difficult to understand the African way of thinking about life.
And I think going with that is resistance to change. If you read history, you can see it in the UK during the Industrial Revolution, the Luddites burning looms is exactly the same sort of attitudes that mechanization is destroying the traditional way of living. So, I think a lot of it has to do with that sort of culture and way of thinking way of life.
Dan: Does mechanized tea harvesting necessarily mean lower quality tea?
Nigel: With the machines that we have nowadays, it’s difficult to get a level of harvest that you can get from a skilled plucker. Having said that, the overall quality of tea being plucked is going down and has been going down for the last 40 years. The iconic 100% two leaves and a bud pluck is a dream that some planters still have at the back of their mind or sometimes in the front of their mind… and 100% two leaves and the bud plucking is possible, but it’s slow, it’s slow.
And when you were paying only $1 a day, it was achievable. Now pluckers are still poorly paid, but in Sri Lanka, your labor is $5 a day. So, you have to pluck faster, harder, which means a coarser leaf.
Hand plucking is no longer achieving 100% two leaves and the bud, it’s achieving at best about 80% two leaves and the bud and more typically 60%. So, most of the commodity tea is being plucked with about 60% of the day’s harvest as two leaves.
A mechanical reciprocating blade harvesting machine can do about the same as a moderately skilled plucker and reciprocating blade harvesting can be done better than it’s being done now, first by not pushing the machinery so hard and second, by not pushing the people carrying the machinery so hard. We can expect improvements in terms of quality where quality is required by encouraging workers to make a better job of it.
Mechanical harvesting, when properly managed, can achieve the lower level of quality the is expected of a plucker nowadays. Since the mass production of commodity tea bag tea is predicated on volume production, to keep their companies running producers have to be going for the cheapest tea possible, at the highest volume. Mechanical harvesting is a route to doing that.
When you are a volume producer you have to cut corners and one of the corners that is cut is quality. Virtually all the commodity tea goes to supermarkets that have a fixed price policy, they don’t like to see prices of their loss-leading commodity range going up. So black tea pricing is pretty inelastic. When you have steadily increased costs of production and very little ability to get an increased price, something has to give. To trim the margin, producers go for volume, and volume means less quality. So that’s what’s happening out there with mechanical harvesting at the moment.
Now, you should be asking ‘well, is it possible to achieve quality with a machine?’
Yes, it’s possible to do better.
Dan: Harkirat (Harki) Sidhu in a previous podcast acknowledges the limitations of reciprocal harvesters but makes the point that machines allow producers to more efficiently allocate labor. There is a 75% savings in person-days using mechanical harvesters, according to Sidhu. The additional hours are sufficient to increase rounds to prevent overgrowth and to better care for the plants while maintaining the equipment. Additional labor hours gained might also enable growers to produce more labor-intensive high-margin specialty teas.
Nigel: Yeah, yeah. He put his finger on it, it’s about improving management. If we think about how mechanization will improve things in the future that’s one of the things which must improve.
You’ll often find people complain that as soon as you bring in machines, the yield goes down. Yeah, of course, it does. Because they bring it in in a wrong way.
The machine does it totally different from the plucker. The plucker chooses the mature shoots and leaves and avoids the immature shoots. The machine goes zoom right across and takes everything. Then you have to wait 21 days for it all to grow up again. Intermittent use of machines to occasionally fill gaps in labor availability inevitably reduces yield. However, the plucking table will equilibrate if you keep on mechanically harvesting as the Japanese producers have found.
If I had an estate, I would be running it on that well-managed basis. But most people managing big estates recognize that conglomerates have simple ways of thinking about things. And if they were going for commodity volume tea, the plantation owners don’t want people messing with speciality tea.
And similarly, people who are committed to speciality tea are often somewhat elitist. I mean, and I say this as the president of the European Speciality Tea Association, that they have a purist view of what speciality tea is. Ultimately, there is a continuum between very poor commodity tea at the bottom and very expensive premium tea at the top.
I would not want to make all my money from one end or the other end. I would try to do both on my estate; to optimize conditions on my best land or highest land or the land which gave the sweetest flavor and manage the rest to yield more everyday tea.
In many parts of China at the spring flush, the families all come back to the farm. People who’ve gone off to work in the computer component factories and Christmas tree ornament factories — they bring them all back and they all harvest the first flush by hand as that is the one which really makes the money, the $1,000 a kilo to $5,000 a kilo tea.
Then the middle flush, which is the green tea that everyone drinks every day, is harvested by machine as is the final autumn flush; this is really rough stuff that’s harvested for black tea, which goes into instant tea, and they flog that to America.
So, they have covered all the bases very cleverly. And anyone who’s been to China will know how clever they are at looking at a problem and working out ways to solve it.
That’s the way that you can manage your tea on an estate, but as I say, most people don’t want to work that way. They want to be all one or the other.
Dan: Harvester manufacturers have been innovating for 100 years. Going forward, what improvements can we expect?
Nigel: The first innovation in mechanical harvesting in my lifetime is the Australian selective mechanical harvester, which is a machine that discriminates between the bud and the immature and the mature shoot, and only plucks the mature shoot and ignores the immature shoots. It simulates plucking, exerting the same pressure between the thumb and finger that a plucker will use.
That is a totally new way of looking at tea harvesting. And it can do it as well as a skilled plucker.
Dan: What’s your capital investment to put a machine like that in the field?
Nigel: Until it gets into real production, it will be expensive. But currently, I think they’re selling at around $15,000 for a one-and-a-half-meter wide machine.
Compared with the two-person harvester used in India or in Africa, it’s going to be about 10 or 15 times more expensive.
This machine can harvest at the quality which exceeds the average plucker. And it can do it almost five times as fast. And with about 1/6 of the labor cost. So even though it’s an expensive investment, it works for speciality tea. Now, I don’t think it’s gonna work as well for commodity tea. Right? A supermarket tea blend doesn’t justify that sort of level of plucking anyway.
The Selective Tea Harvester manufactured by Williames Tea in Victoria, Australia, sells for $14,950 (head only)
The rotating 1.5-meter head “plucks” shoots, omitting sustenance leaves and immature shoots.
Nigel: When I was a child, I remember wheat grew four feet high. And now it’s 18 inches high. Right? Because the plant breeders got in on the act. The combine manufacturers complained that the wheat was lodging in the cutter due to the length of the stalk. So the breeders developed wheat with short straw. Not only was it easier to harvest, but the short straw meant that more of the plant’s energy went into the ear rather than into the stalk, increasing yield by 25%. So, it was a win-win.
I think that the tea bush can be completely restructured. In the future, we’ll be seeing improvements to the plant shape, the plant architecture. This is a slow job with a perennial crop because the breeding cycle for one improvement takes about 20 years for tea plants, whereas with an annual crop there’s only one season. So it’s a much slower job. The architecture of a tea bush is a tall tree and we brought it down to a three-foot bush. So yes, there will be improvements in the machines, there will be improvements in the bush architecture. And there will be improvements in management.
