TEA MARKET IN RUSSIAKey characteristics, brands, prospects & trends

For ITA – Indian Tea Festival 29th-1st May, 2011, Abu dhabi

SACHEN VERMA

RUSSIA : IMPORT VOLUME

2008 2009 2010174000

175000

176000

177000

178000

179000

180000

CONSUMPTION VOLUME

• Tea in Russia is hot drink No. 1

• Domestic tea consumption rose in 2009 to 170,000 tons, up by 1.8% from the 2008 level (167,300 tons)

• The reason for growing tea consumption was the crisis, which cut into the buying power of consumers and made them turn away from new, fashionable, exotic, expensive and non-conventional drinks.

Black73%

Black flavoured13%

Green6%

Green flavoured 5% Herbal & Fruit3%

GREEN TEA CONSUMPTION

10000-50000 50000-

250000 250000-999000 1000000+

0%

10%

20%

30%

40%

Tea Sale - City Population wise

AC Nielsen - 2010

Sri Lanka 33%

Vietnam13%India

28%

China13%

Kenya

8%

Indonesia6%

Tea Origin wise Im-ports 2010

Source:Rusteacoffee

Key Brands

• The key tea market players are : Ahmad Tea, Avalon (“Gold Cup”), May, Orimi Trade, Sapsan (Akbar) and Unilever, they accounted for 70% sale in 2010

• The market leader is Orimi Trade, with 32% market share

Tea bags68%Granualated

CTC 2%

Orthodox Leaf 30%

Market Share by Grades (value)

Source: AC Nielsen 2010

Teabags53%

loose tea47%

TEA SHARE BY VOLUME

44%19% 22% 15%

Tea Sale as Per Distribution

ChannelsSource: AC Nielsen

2010

TRENDS

• A little decrease in Black tea consumption against green & herbal teas

• Establishment of the Custom Union (Russia, Belarus, Kazakhstan) will allow Russian companies to increase significantly its influence on the markets of these countries

• Trade Act will reduce the impact of retail operators, but will not stop the growth of tea sales. Tea sales through retail chains will get 60%

• Today in Russia tea consumed 98% of the population, according to market research company Market Analyst & expected to remain same

Saturation

• Market is close to saturation and competitive environment in the market is becoming tougher

• Despite the low sales growth, the Russian tea market is increasing in their monetary value. The reason for this is a permanent reduction in the segment of cheap tea and an increase in high-price segment

• The last few years the demand for tea is practically not growing - the annual increase does not exceed 2 - 3% due to growth in market value

INNOVATIVE MARKETING

Market participants are beginning to focus on narrower segments of consumers: an example of this is the brand of Ahmad tea Contemporary, positioned for the young and active women

Manufacturers upgraded package - Brands launched sachets in the shape of pyramids: Orimi Trade and the May Company released new items in the bags