Specialty Coffee Retailer

Specialty Coffee Retailer November 2012

Specialty Coffee Retailer is a publication for owners, managers and employees of retail outlets that sell specialty coffee. Its scope includes best sales practices, supplies, business trends and anything else to assist the small coffee retailer.

Issue link: http://read.dmtmag.com/i/92590

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Page 24 of 43

FROM PACKAGED TO RETAIL It makes sense that loose-leaf tea merchants follow the lead of packaged tea suppliers. Late last year, DavidsTea opened two shops in New York City reported to be grossing nearly $1 million each. By the end of the year, the company will have two shops in Boston, five in New York, three in Chicago and four in the San Francisco Bay Area. A U.S. headquarters is in the works. "Bilateral trade will accelerate, CEO of The Tea Emporium, a five-store Toronto specialty tea merchant. Tea blending, once largely done overseas, is now a $1 billion business in North America, driven by consumer demand for herbal teas. "Canada and the USA are becoming an expertise epicenter, " predicts Shabnam Weber, American Tea Conference. Teavana acquired 49 Teatopia shops in Canada this spring " Weber told attendees of the 3rd North for $29.6 million and has since built several Teavana store fronts with additional mall openings in Vancouver, B.C. and Toronto. The chain is re-branding Teaopia and will operate 300 stores by year end. Tazo, a $1.4 billion division of Starbucks, plans to open its specialty and upscale tea continues to gain in popularity and now holds 60 percent of dollar share in the market, according to Louise Roberge, president of the Tea Association of Canada. Sales of conventional teabags declined 2 percent in 2011, based on research from Nielsen MarketTrack National. Conventional tea continues to lead in tonnage at 76.6 In Canada, where 65 percent of tea drinkers prefer hot tea, percent, but was down 1 percent, while imports of specialty grew 8 percent last year. Canadians consume an average 6.6 cups of tea per week. Heavy tea drinkers consume 15.4 cups, more than two a day. TEA PREFERENCES On any given day, about one half of the American first branded retail store this month, and Unilever (parent to PG Tips, Red Rose and Lipton Yellow Label and the largest tea supplier in the world) is expected to unveil its own retail concept in Europe later this year. (See "Storefront puts Tazo in forefront" on page 20.) On any given day, more than 160 million Americans drink population drinks tea. On a regional basis, the South and Northeast have the greatest concentration of tea drinkers. In 2011, Americans consumed more than 3 billion gallons, making tea the nation's seventh most popular beverage. Sixty- two percent of Americans prefer iced/RTD tea and 28 percent prefer hot tea. About 85 percent of tea consumed in the States is black tea. According to The NPD Group's CREST consumer report, there were 6.5 billion tea servings in foodservice last year. Technomic MenuMonitor estimates hot and iced tea make up 21 percent of non-alcoholic beverage sales (about the same as coffee, at 9.2 percent, and specialty coffee, at 11.5 percent). Eighty-eight percent of tea ordered in American restaurants is iced; only 12 percent is served hot. Canada, with one tenth the population, has 14.8 million tea drinkers, the majority (65 percent) of whom drink hot tea. SMALL BUT GROWING North America's 175 million tea drinkers is a number dwarfed by the one billion tea drinkers in both China and India. Russia imports far more tea by volume, but a growing preference for premium teas make North America a lucrative market. Europe and Japan were the sole bidders for the most expensive of India's teas until the recession. Now American retailers purchase first-flush Darjeeling for $340 per kilo wholesale (packaged it in 2-ounce pouches that sell for $52, earning $915 per kilo or $416 a pound). Canada's large Asian population, many of whom relocated from Hong Kong, are accustomed to paying top dollar for quality tea and now outbid Asians for Japanese Gyokuro and China's prized Longjing. Total U.S. tea sales are estimated at $8.5 billion, according to Packaged Facts, with $2.20 billion spent on grocery tea and $3.5 billion on RTD teas. Canadians spent $327 million on tea in 2011. tea, 14 percent was green tea, and the remaining amount was oolong and white tea, according to the Tea Association of the USA. Last year was the second consecutive year in which U.S. imports (91.6 million pounds) were greater than the UK. Canada imported 16.5 million pounds of tea in 2011. Manuja Peiris, who presides over the International Tea Committee in London, estimates U.S. per capita consumption was 370 grams during the period 2008-08. It rose to 391 grams in 2009-11. "If one looks at the 2011 data alone, U.S. per capita consumption will be 412 grams (14.5 ounces)," he said. Consumption in Turkey, some Middle Eastern countries and Ireland tops 2,000 grams (4.5 pounds). Russia, Poland and New Zealand tea drinkers consume about 1,000 grams per person (2.2 pounds). Per capita consumption of a little less than a pound places U.S. tea drinkers in the lower third of the 72 countries tallied. Packaged Facts in its 5th Edition of Tea and Ready-to-Drink Tea in the U.S. estimates retail sales at $7 billion in 2012, rising 4.8 percent to $9.26 billion by 2016. Other estimates range to $15 billion. "The total tea market size has been grossly underreported" and is actually greater than $27 billion, says Brian R. Keating, founder of Seattle-based Sage Group Networks. In his "Specialty Tea Is 'Hot' Report," the seventh in a series dating to 1993, Keating and researcher Dan McKeon identified several billion dollars in tea commerce they say is commonly missed by other market researchers. Regardless of the current total, all agree that tea sales are growing. Wholesale tea sales totaled $1.84 billion in 1990 and since multiplied fourfold, according to the Tea Association of the USA. Tea's retail value in foodservice has climbed even higher despite the sluggish economy. SCR 25

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