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Tea gets ready to make (yet another) comeback.

It seems that tea is always on the verge of a comeback. Reviewing an article quoting Food & Wine Magazine the now defunct Los Angeles Herald Examiner started an article on May 21, 1987 as follows, "Not long ago, Food & Wine Magazine predicted that iced tea will be the Perrier of 1987." And later in the same article, "We are entering, I think, the Age of Tea here in America."

Indeed, in reviewing the status of the tea market on an annual basis for this publication, I find that I have annually (more or less) predicted the resurgence of tea "here in America."

Well, this is no time to discontinue the annual article on tea with all of its traditional revivalist cheer. Especially this year, when, along with a general feeling of ebullient optimism, there are a few facts to support the premise. (If you overlook the rather disturbing 11% decrease in tea imports in 1990.)

But that brings us to the basis of this report. The sales of bagged teas by major packers is a mature business conducted by some fine companies with well established brands. It's also a business that hasn't changed much in the past few decades (expect for the general erosion it has been suffering) and it is for that reason that it is largely overlooked within the context of this article. What we're looking at here is the specialty tea market, which has been gaining non-tea-drinkers and regular tea drinkers for several years now. That market includes, by necessity, herbal teas, in addition to fine teas derived from the Camelia sinensis plant.

It may be worth noting that there may be a deep rooted basis for the gradual evolution of the U.S. specialty tea market. A slow shift has been occuring over the last 20-30 years away from the 10-cups-of-coffee-a-day lifestyle that is familiar to many of us. Many prognosticators characterize this as a shift from an industrial economy to a service economy. It is more than that however, because that shift is part of a sea of change in our culture away from processing things (manufacturing) to the processing of ideas and information. Ten cups of coffee is certainly helpful in industrial settings, but it may not be the best thing for people who need to sit down and think about something. Tea, both by tradition and its pharmacological effect, may be a drink that is more conducive to the new work environment and culture we live in; particularly the better quality teas which are substantially lower in caffeine. (So, for that matter, is specialty coffee.) One cup of strong, good coffee is worth ten cups of the old, overheadted, understrength OCS stuff any day.

The specialty tea market today may be where the specialty coffee market was 20 years ago. While the traditional mass-market products are at a standstill or losing ground to soft drinks, the specialty products are surging forward. Herbal teas imports to the U.S., for example, increased from 2,559 tons in 1989 to 3,221 tons in 1990, according to a May 1991 USDA report.

The Increases, Where They Are...

While imports of commercial grade teas are down, one U.S. specialty importer, G.S. Haly, reports their sales are up 25% from last year and that they are having difficulty keeping stocks in inventory.

Foodservice is where a lot of tea gets sold, and lately that sector has been introducing people to tea, new flavors and ways of brewing and serving it, and that is helping the retail trade also.

The cyclical nature of the tea business is shifting, according to several sources, with some of the annual quiet times getting filled in with sales, one dealer reports, "We used to have cycles, now there isn't more than 10% dip in the annual season and the biggest factor seems to be income tax time. Christmas is still a big season, and is good for more than a 10% increase, but the dips we used to see throughout the year seem to be fading away. It's kind of a drag because we used to have a vacation once in a while and now its busy all year.

Despite its growth, however, specialty tea is still a small percentage of the market, probably less than 5% not including herbal teas. "You have to remember," noted Mike Spillane of G.S. Haly," that while the increases in specialty are fantastic to see, they don't amount to more than one shipment to Lipton."

Meanwhile, things are tough for the broker in the mass market. It's gotten very competitive and some of the tea importers have merged and/or consolidated. A few of those who've retired or who have been laid off are now working out of their homes...but the big packers seem to want an even smaller trade, and in fact, one major packer sent a letter out to some of its suppliers telling them there were too many importers.

Liquid Tea

While never a success for the coffee industry, liquid tea seems to be developing a niche of its own. Athena Enterprises, of Napa Valley, California has a liquid tea that they are bottling and selling as a speedy route to a tall glass of iced tea. Grocery stores like Safeway in Northern California are carrying the product and reportedly doing well. Spillane comments, "This liquid iced tea things used to be mainly for the military and airlines, but now it's becoming a mass market thing."

With the specialty coffee industry approaching adolescence, many firms are looking for opportunities of broadening their lines and offering more products to their customers. Many companies feel that they can apply the same concern for quality to successfully selling specialty tea. In addition, the number of specialty tea. In addition, the number of specialty coffee outlets with the capability of adding tea to their lines now numbers in the thousands. "Coffee stores feel they know enough to diversify into other areas," according to Spillane of G.S. Haly, and they want to better service their existing customer base with products that they know about...and that means specailty tea for a lot of people."

Some specialty coffee companies have even appointed separate tea buyers to handle that aspect of their business.

In addition to allowing retail coffee dealers to increase sales to their existing customers, the specialty tea business also given them a way to compete with other coffee retailers who may not offer tea. "The chains of coffee retailers are giving the mom & pops some trouble and specialty tea is one way the smaller retailers can fight off the bigger operations. Another small indication of this trend is that many specialty boutiques are including tea in corporate gift baskets.

In 1980, papaya and passion fruit flavored teas were a novelty; in 10 years they have become almost mainstream foodservice offerings. So hotly contested is the franchise that several Hawaiian companies are rumored to be suing each other over their names, concepts and formulas. Major foodservice distributors are distributing these flavored teas from coast to coast, and several dealers have been contacted by Japanese importers requesting "American Tea." Cafe au Lait, owner of the Paradise trademark, reports fast growth of their tropical fruit flavored teas despite much slower growth in their distribution of specialty coffee through foodservice.

According to some, herbal flavored teas are next. Tea provides color to these blends and the herbs provide flavor and a health cachet. A few underfunded or star-crossed projects started in the 80's, but over the next few years one of these products should take off.

Decaf tea, while not as significant a factor to tea as the category is to coffee, is also a growing subset of an otherwise moribund market, and the [CO.sub.2] decaffeination process seems to provide the consumer with the freedom from concern about chemical processes which they are looking for.

We return to Mike spillane for some comments on the quality of various tea crops this year, "I haven't been overwhelmed with the quality of the tea that I've been getting recently, I think tastes are changing in the Darjeelings. The Japanese have changed the taste of Oolong; those teas are getting much lighter. The big brokers have options on the best teas (the German brokers and a few Japanese companies) and they sometimes buy all of a particular crop. When quality is scarce during a particular season, then the best of it, that is all of it, can go to these companies. It's not that I couldn't buy some of these teas, but when a tea would end up at $100.00 a pound on the retail level it takes a lot of the fun out of it for me."

The Japanese market, as Spillane mentions, has been influencing tea processors to produce teas which are ligher in body, closer to green tea in character, and this has caused the competition to heat up for the fuller bodied Oolongs and Darjeelings among the European brokers.

One encouraging note from producing countries is that India, Sri Lanka and China seem to be taking the long term future of tea more seriously in that they are reinvesting some tea revenue in the better quality tea gargens. India, in particular, has made a commitment of bringing back the Darjeeling gardens and reversing their decline in production. Tea is very labor intensive, a healthy tea business means lots of jobs, and these countries aren't looking for ways to reduce the labor input at this point (despite the technological advances in processing that have been made for the lower quality teas).

Tea Builds On Its Healthy Rep.

While not necessarily deserved (or undeserved), tea has always been perceived as a relatively healthy beverage. Adding some strength to this thinly founded belief were several articles in the national press this year documenting the health effects of green tea. One tea distributor reports, "The Miami School of Medicine study that was written up in the New York Times was a big boost and there should be some long lasting effects from that. Health Food Stores were coming out of the woodwork looking to buy green tea from us."

...and Ecologically Friendly

Some retailers have been pointing out to their customers that of all the beverages, cup for cup, tea is the least packaged. A pound of tea in one paper bag can yield 200 cups of tea. Speaking of packaging, though, brings up a venerable victim of this same concern: the tea chest. According to the USDA, tea is now being shipped from many countries in paper or jute instead of the emblematic tea chests, which are now considered a waste of wood and trees by many tea producing countries.

Additionally, tea producing countries worldwide are looking for pest resistant hybrids and other alternatives to the use of pesticides, fertilizers and herbicides. The consensus is that with the health perceptions which already exist about tea, the non-use of chemicals will be essential to retaining and building market share.

1990, according to the USDA, was a record year for tea production with a total crop of over 2.56 million tons. India, Sri Lanka and Kenya led this charge and it was despite continued crop shortfalls in China and what used to be known as the Soviet Union.

China, perhaps needing to make up for its crop shortfall, is pricing its tea very aggressively. The Russians, despite a greater need for tea this year, have, for political reasons, not been exerting as much influence over the market this year and this, according to traders, has cuased prices to be significantly less stable. This year India has lowered the ceiling below which it will sell tea.

Tea consumption was down in countries besides the U.S. Iraq and Iran both imported significantly less tea last year and the Soviet Union became the world's largest tea importer.

Ireland remained the leader in per capita consumption with 3.1 kgs per year with England at 2.8 kgs per year. Surprisingly, India's per capita consumption is relatively low at .6 kg/yer and the U.S. is not far behind at .35 kg/yr.

Significantly, India is contemplating the importation of low quality teas from Sri Lanka to free up more of its better quality teas for the export market.

Argentina, perceiving a greater interest in quality, is investigating how to upgrade their production, but in the meantime simply increased its production from 16 million pounds last year to 18 million this year.

For More Predictions ...

Obviously a dynamic market, tea is changing, but until next year, the tea leaves in the bottom of your cup might be the best source of consistent information.....
COPYRIGHT 1991 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:trends in the tea market
Author:Castle, Tim
Publication:Tea & Coffee Trade Journal
Date:Oct 1, 1991
Previous Article:Coffee-an appetite depressant.
Next Article:Flavored teas-the next growth segment?

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