TEA AS A PROFIT CENTERTEA AS A PROFIT CENTER

Joe SimranyJoe SimranyTea Association of the USA, Inc.Tea Association of the USA, Inc.

George Vukasin, Jr.George Vukasin, Jr.Peerless Coffee CompanyPeerless Coffee Company

Why Tea?Why Tea?

• Outside of Water, Tea is the most Outside of Water, Tea is the most consumed beverage in the worldconsumed beverage in the world

• It is one of the fastest growing It is one of the fastest growing beverages in the United States driven beverages in the United States driven by:by:– The promise of health benefitsThe promise of health benefits– The allure of Specialty TeaThe allure of Specialty Tea– The Convenience & Availability of RTD TeaThe Convenience & Availability of RTD Tea– The Prospects for high ProfitabilityThe Prospects for high Profitability

Powerful Consumer Trends are Powerful Consumer Trends are Contributing to the Popularity Contributing to the Popularity of Teaof Tea• Concern for HealthConcern for Health

– A strong motivator for over 35 years and gaining importance A strong motivator for over 35 years and gaining importance with each succeeding yearwith each succeeding year

– Prompted by:Prompted by:• Greater Consumer EducationGreater Consumer Education• Fear & Expense of Conventional MedicineFear & Expense of Conventional Medicine

• Awareness and Allure of all things ExoticAwareness and Allure of all things Exotic– A trend that has also been in place for many years and has A trend that has also been in place for many years and has

been responsible for spikes in Popularity of:been responsible for spikes in Popularity of:• Specialty Coffee/Tea, Wine, Bottled Water, Vinegar, Mustard, Beer, Specialty Coffee/Tea, Wine, Bottled Water, Vinegar, Mustard, Beer,

Cheese, Cigars, Spirits, & numerous other foods.Cheese, Cigars, Spirits, & numerous other foods.

• Consumer Need for Speed of Preparation & ConsumptionConsumer Need for Speed of Preparation & Consumption– This has resulted in more foods consumed away from homeThis has resulted in more foods consumed away from home– Smaller Portions and Prepared FoodsSmaller Portions and Prepared Foods

• High Cost of nearly Everything prompts Search for High Cost of nearly Everything prompts Search for AffordabilityAffordability

Long Term Growth PredictedLong Term Growth Predicted

• The Consumer Trends in Place are long The Consumer Trends in Place are long term in Nature and will likely continue to term in Nature and will likely continue to Contribute to the Increasing Popularity of Contribute to the Increasing Popularity of TeaTea

• The number of Scientific Research Studies The number of Scientific Research Studies Attesting to the Health Benefits of Tea Attesting to the Health Benefits of Tea have increased from 3 per year (globally) have increased from 3 per year (globally) back in 1990 to an average of 900 a year back in 1990 to an average of 900 a year for each of the last 3 years!for each of the last 3 years!

Long Term Growth PredictedLong Term Growth Predicted

• Consumers are becoming Increasingly Consumers are becoming Increasingly Aware of the role that they play in Aware of the role that they play in Determining their Future HealthDetermining their Future Health

• Consequently they are constantly searching Consequently they are constantly searching for ways to improve their diets and/or for ways to improve their diets and/or lifestyleslifestyles

• Tea is one of the simplest and best tasting Tea is one of the simplest and best tasting ways to accomplish thatways to accomplish that

• Many Consumers are Seeking to reduce Many Consumers are Seeking to reduce Caffeine in their diets and Tea is a way to Caffeine in their diets and Tea is a way to accomplish without sacrificing the accomplish without sacrificing the stimulation that they Cravestimulation that they Crave

Long Term Growth PredictedLong Term Growth Predicted

• Consumers Lives Continue to become more Consumers Lives Continue to become more Complicated/Stressful as a result of Exposure Complicated/Stressful as a result of Exposure to an Increasing number of Options brought to an Increasing number of Options brought on by:on by:– EducationEducation– High Cost of Living/Second/Third JobsHigh Cost of Living/Second/Third Jobs– Discretional Income/SpendingDiscretional Income/Spending– AwarenessAwareness– Concern for Children Concern for Children – Other Family MattersOther Family Matters– The EconomyThe Economy

Long Term Growth PredictedLong Term Growth Predicted

• As a Result, Tea will Continue as a As a Result, Tea will Continue as a Means of De-stressing an otherwise Means of De-stressing an otherwise complicated lifestylecomplicated lifestyle

Long Term Growth PredictedLong Term Growth Predicted

• The Appeal of Tea as a Specialty Product is only in The Appeal of Tea as a Specialty Product is only in its Infancy and will be encouraged by:its Infancy and will be encouraged by:– The Tremendous number of Specialty Teas that exist, that The Tremendous number of Specialty Teas that exist, that

actually number in the thousandsactually number in the thousands– The increasing number of Specialty Tea Rooms and Coffee The increasing number of Specialty Tea Rooms and Coffee

Houses that are offering Upscale TeasHouses that are offering Upscale Teas

– Over the last ten years the number of Tea rooms has Over the last ten years the number of Tea rooms has increased from about 200 to 2,400increased from about 200 to 2,400

• Specialty Tea will follow a development path Specialty Tea will follow a development path similar to that of the Wine industry and will soon similar to that of the Wine industry and will soon commonly be available by the Estate in which it is commonly be available by the Estate in which it is growngrown

Tea is ProfitableTea is Profitable

• A Little bit of Tea goes a Very Long WayA Little bit of Tea goes a Very Long Way– For every pound of Tea 200 servings may be For every pound of Tea 200 servings may be

preparedprepared– Even the most expensive tea is affordable to Even the most expensive tea is affordable to

most consumers on a per serving basismost consumers on a per serving basis– Specialty Tea is an Affordable LuxurySpecialty Tea is an Affordable Luxury

• Tea Sales Respond exceptionally well to Tea Sales Respond exceptionally well to creative Promotioncreative Promotion– It is “easy” to convert a consumer from buying It is “easy” to convert a consumer from buying

by the cup to buying by the potby the cup to buying by the pot

Size of the Tea Market in Size of the Tea Market in U.S.U.S.• 1990 $Value by 1990 $Value by

TypeType

• Trad. $0.87 BillionTrad. $0.87 Billion

• RTD 0.20 “RTD 0.20 “

• Fd Srv 0.50 “Fd Srv 0.50 “

• Special 0.27Special 0.27

• Total $1.84 BillionTotal $1.84 Billion

– Green $20 MillionGreen $20 Million

• 2007 $Value by 2007 $Value by TypeType

• Trad. $1.95Trad. $1.95

• RTD 2.80RTD 2.80

• Fd Srv 1.0Fd Srv 1.0

• Special 1.1Special 1.1

• Total $6.85 BillionTotal $6.85 Billion

– Green $200+ MillionGreen $200+ Million

Change in Tea Consumption Change in Tea Consumption by Revenue & Segmentby Revenue & Segment

-0.50

0.50

1.50

2.50

1990 2007

Traditional

RTD

Foodservice

Specialty

Foodservice TrendsFoodservice Trends

• Tea is more difficult to Tea is more difficult to prepare than coffee & is prepare than coffee & is often served incorrectlyoften served incorrectly

• Operators are starting to Operators are starting to do a better job with tea do a better job with tea because of the profit because of the profit potential & consumer potential & consumer demanddemand

• Some high end Some high end restaurants are restaurants are employing Tea employing Tea SommeliersSommeliers

Developments to WatchDevelopments to Watch

• Foodservice TeaFoodservice Tea– Improved preparation Improved preparation

& variety& variety– Improved consumer Improved consumer

demand driven by demand driven by concern for healthconcern for health

– Resurgence of loose Resurgence of loose tea tea

– Increased operator Increased operator merchandisingmerchandising

Developments to WatchDevelopments to Watch

• Specialty TeaSpecialty Tea– Rapid expansion of Rapid expansion of

tea outletstea outlets– Emergence of 1 or 2 Emergence of 1 or 2

National operatorsNational operators– Increased Producing Increased Producing

Country involvement Country involvement in marketingin marketing

– Greater availability Greater availability of Estate Teasof Estate Teas

Prospects for Future Prospects for Future GrowthGrowth

• Traditional Tea is expected to stabilize and to begin Traditional Tea is expected to stabilize and to begin to realize annual growth in the 2-3% rangeto realize annual growth in the 2-3% range

• RTD Tea will continue to experience robust growth RTD Tea will continue to experience robust growth in the range of 15-20% annuallyin the range of 15-20% annually

• Foodservice Tea will experience a resurgence with Foodservice Tea will experience a resurgence with annual growth in the low to middle single digits annual growth in the low to middle single digits

• Specialty Tea will remain one of the fastest growing Specialty Tea will remain one of the fastest growing segments with annual increases in the 8-10% rangesegments with annual increases in the 8-10% range

Recommendations to Increase Recommendations to Increase Tea Consumption Domestically Tea Consumption Domestically & Internationally& Internationally

• Tea & Health remains a very powerful Tea & Health remains a very powerful tool to increase tea consumption. tool to increase tea consumption. Consumers are becoming increasingly Consumers are becoming increasingly educated about the role they play in educated about the role they play in the determination of their own health the determination of their own health and adding tea to their lifestyle is a and adding tea to their lifestyle is a near perfect way to help ensure they near perfect way to help ensure they are doing the right thing.are doing the right thing.

Are You Taking Advantage of Are You Taking Advantage of This Growth Opportunity?This Growth Opportunity?

• Consumer Demand is UpConsumer Demand is Up

• Long Term Trends are PositiveLong Term Trends are Positive

• Profitability is ExcellentProfitability is Excellent

• Compatible with Current OperationsCompatible with Current Operations

• Responds Well to Creative PromotionsResponds Well to Creative Promotions

• Diversity of Supply Ensures Continued Diversity of Supply Ensures Continued Consumer Interest & Uniqueness of EffortsConsumer Interest & Uniqueness of Efforts

• To Ignore is to LoseTo Ignore is to Lose

Thank You!Thank You!

• QuestionsQuestions