GLOBAL STATE OF THE INDUSTRY

A REVIEW OF THE TOP TEA TRENDS AND MARKETS

AROUND THE WORLD
HOWARD TELFORD

MAY 2015
ABOUT EUROMONITOR INTERNATIONAL INDUSTRY: SECTOR 2

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DEFINITIONS INDUSTRY: SECTOR 3

Definitions

Other Hot
Coffee
Tea Drinks

Fruit/
Black Green Instant Other
Tea Herbal Tea Tea Tea
Tea

Volume v Brewed Volume

Retail/off-trade; Foodservice/on-trade
Brewed iced tea = packaged tea
CAGR (Compound annual growth rate) over a 5 year period

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WHERE IS TEA TODAY?
OPPORTUNITY AREAS
WHERE ARE WE GOING?
43.1
US$ BILLION
2014 RETAIL
VALUE RSP

7.7%
COMPOUNDED
ANNUAL GROWTH
SINCE 2009

13.3
US$ BILLION
ABSOLUTE
RETAIL VALUE
GROWTH
SINCE 2009
WHERE IS TEA TODAY? INDUSTRY: SECTOR 6

Tea is the second largest global packaged beverages by volume

Global Beverage Market, Total RTD Volume, 2014

350,000

300,000 286
250,000 BILLION LITRES
Millions of Litres

200,000

150,000

100,000

50,000

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WHERE IS TEA TODAY? INDUSTRY: SECTOR 7

Global top ten in retail volume in 2014

Top 10 Volume (Litres) 2014 Growth

China 48,335 mn 5%
Russia 23,929 mn -
India 17,450 mn 4%
Egypt 15,929 mn 1%
Pakistan 12,895 mn 4%
UK 9,852 mn -3%
Indonesia 9,348 mn 5%
Iran 8,887 mn 9%
Japan 6,746 mn 1%
Turkey 6,564 mn 2%
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WHERE IS TEA TODAY? INDUSTRY: SECTOR 8

Global top ten in retail value in 2014

Top 10 Value (Dollars)

China $9,671 mn
Russia $3,954 mn
Japan $3,538 mn
USA $2,390 mn
India $2,065 mn
Germany $2,014 mn
Turkey $1,327 mn
UK $1,283 mn
Pakistan $1,170 mn
Uzbekistan $1,111 mn
© Euromonitor International
 WHERE IS TEA TODAY? INDUSTRY: SECTOR 9

How tea preferences look by market…

Leading Tea Category

By Retail Brewed Volume, 2014
Black Tea
Green Tea
Fruit/Herbal Tea
Other Tea
No Data

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WHERE IS TEA TODAY? INDUSTRY: SECTOR 10

Consumption of black and green tea dominates emerging markets

Retail Brewed Volume 2014

140,000

120,000
Retail RTD Volume ( million litres )

100,000

80,000

60,000

40,000

20,000

0
Black Tea Green Tea Fruit/Herbal Instant Tea Other Tea
Tea
Developed Markets Emerging Markets

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WHERE IS TEA TODAY? INDUSTRY: SECTOR 11

Value versus volume: The song remains the same

Hot Drinks by Volume… ….Hot Drinks by Value

350 90
80
300

Retail RSP (Fixed, Curent) - US$ billion

Total Brewed Volume - billion litres

70
250
Coffee 60 Coffee
200 50
Tea Tea
150 40
Other Hot 30 Other Hot
100 Drinks Drinks
20
50
10
0 0
Volume Value

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WHERE IS TEA TODAY? INDUSTRY: SECTOR 12

What’s changed in the last year?

A slow down in Russia

Russia– Tea Retail Brewed Volume Growth 2009-14

1.2
1
0.8
% growth

0.6
0.4
0.2
0
-0.2 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
(Forecast)
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WHERE IS TEA TODAY? INDUSTRY: SECTOR 13

What’s changed in the last year?

A (sort of) slow down in China

China – Tea Retail Brewed Volume Growth 2009-14

10
8
% growth

6
4
2
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
(Forecast)
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WHERE IS TEA TODAY? INDUSTRY: SECTOR 14

What’s changed in the last year?

India’s ascension into the global value top 5

2009 2014
1 China China
2 Japan Russia
3 Russia Japan
4 USA USA
5 Germany India
6 UK Germany
7 Turkey Turkey
8 India UK

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WHERE IS TEA TODAY? INDUSTRY: SECTOR 15

Consumers are seeking something new

Strong tea growth; but

traditional styles of
consumption are old-fashioned
New tastes, new occasions lead
to new opportunities for value
growth

EMERGING:
Distribution, Local Appeal,
Convenience
DEVELOPED:
Health, Functionality, Variety

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WHERE IS TEA TODAY? INDUSTRY: SECTOR 16

What are the changing consumer drivers?

Our tastes are changing…

Developed market baby boomers, Millenials
Urban growth, growth of global cities
Smaller households
Experimentation with new flavours, formats and use occasions

44 Median age in US, AUS, CA

Global expected population growth
42 2014-19
450,000
40
400,000
Median Age

38 350,000
300,000
36 250,000
200,000
34
150,000
32 100,000
50,000
30 0
1984 1994 2004 2014 2024 Urban Rural
US Australia Canada Population Population
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WHERE IS TEA TODAY? INDUSTRY: SECTOR 17

What are the changing consumer drivers?

…and how we shop is changing

Hard Premium
Discounters Grocery
Own Image Image: Whole Foods Market®

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WHERE IS TEA TODAY? INDUSTRY: SECTOR 18

What are the changing consumer drivers?

 …in developed and emerging markets…

2014 Tea Retail Distribution,

Developed v. Emerging Markets

Developed

Modern v Emerging
Traditional
0% 20% 40% 60% 80% 100%
Modern Grocery
Traditional Grocery
Non-Grocery + Non-Store

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OPPORTUNITY AREAS INDUSTRY: SECTOR 19

Tea’s versatility makes it special

Iced tea blends

Fruit teas

Milk teas/bubble
Flavour Wellness teas

Tea Lattes

Tea and Juice

Blends
Occasion Format
Specialty Teas

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OPPORTUNITY AREAS INDUSTRY: SECTOR 20

When do you snack, drink coffee, or drink tea? US and UK

UK
30
20
10
0

US
25
20
15
10
5
0

Source: Euromonitor Out and About Survey (2012)

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OPPORTUNITY AREAS INDUSTRY: SECTOR 21

When do you snack, drink coffee, or drink tea? Mexico and India

Mexico
30
20
10
0

India
25
20
15
10
5
0

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OPPORTUNITY AREAS INDUSTRY: SECTOR 22

Flavour and function

FLAVOUR
Embrace flavour versatility
Lighter, fruitier hot teas
Indulgent, milkier tea lattes
Non traditional: flavour to win younger consumers
http://fr.special-t.com/

FUNCTION & WELLNESS

Wellness claims drive higher prices (4x) and more category value

http://www.angelica.it/ https://www.dolce-gusto.co.uk/ http://www.tetley.co.uk/

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OPPORTUNITY AREAS INDUSTRY: SECTOR 23

Beyond hot tea? Some of the top brands in soft drinks are tea!

Gold Peak Pure Leaf Wong Lo Kat Fuze Tea

• +22% (2014) • +44% (2014) • +25% (2014) • +30% (2014)
• Doubled in • New growth • Brewed tea is • Latin
size since 2010 driver for China’s #2 soft American
Pepsi/Lipton drinks volume growth
category
Own image Own image Image: Own image
http://www.thirstydudes.com/review/ma
ster-kong-honey-jasmine-iced-tea-3446

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 OPPORTUNITY AREAS INDUSTRY: SECTOR 24

Beyond hot tea? Exploring new use occasions

Versatility: Carrier for functional ingredients

Sparkling, CSD alternative
Super-premium

Hot Tea v Iced Tea Unit

Price Comparison
2.00 Image: www.bevnet.com

1.80
1.60
US$/litre off-trade

1.40
Image: www.bevnet.com
1.20
Hot Tea - UP per
1.00 litre
0.80 Iced Tea - UP per
0.60 litre
0.40
0.20
0.00
North Western
America Europe Image: www.bevnet.com

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OPPORTUNITY AREAS INDUSTRY: SECTOR 25

Format: Where are we with tea pods?

US Tea Pods Share of Category Retail Value

7

6
% of total retail sales

0
2009 2010 2011 2012 2013 2014

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OPPORTUNITY AREAS INDUSTRY: SECTOR 26

Occasion: How we buy tea..

http://www.hhcid.com//

http://www.indesignlive.com/

Own image
Own image

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WHERE ARE WE GOING? INDUSTRY: SECTOR 27

But the future is bright…

Population Entering ‘Consumer Historic and Forecasted Total

Class’ Tea Brewed Volume 2000/2019
90 350,000
Households (% of Total) with an Annual Disposable

80 300,000
250,000
70
Income Over US$15,000 (PPP)

200,000

Mn litres
60
2004 150,000
50 2009 100,000
2014
40 50,000
2019
30 2024 0
20
10 Asia Pacific Middle East and Africa
Western Europe Eastern Europe
0 North America Latin America
China India Australasia

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WHERE ARE WE GOING? INDUSTRY: SECTOR 28

Driving value in global tea in 2019

Top 10 Largest Hot Drinks
Markets by Value 2014 and
Growth 2014-2019
Sales 2014 % CAGR
Country
(US$ million) 2014-2019
China 9,671 4.1

Russia 3,954 0.7

Flavour Wellness Japan 3,538 -0.8

USA 2,390 1.3

Germany 2,065 2.8

India 2,014 7.0

United
-1.4
Kingdom 1,327
Iran 1,283 10.0
Occasion Format Uzbekistan 1,170 2.5

Pakistan 1,111 7.3

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THANK YOU FOR LISTENING
Howard Telford| Senior Industry Analyst - Beverages
Howard.Telford@euromonitor.com
@HowardT_EMI

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