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by Peter Guyer, Originally published in The American Exporter, October 2009

Tea

Global tea sales increased over 3% in volume and 5% in value in 2005, indicating that higher value tea is being consumed. Total value of the worldwide tea market is over US$20 billion, and is expected to grow over 13% in volume over the next five years. The health and well-being trend continues to benefit sales of fruit and herbal tea, green tea, white tea and rooibus (an herb from South Africa). These teas are growing nearly 10%, indicating a consumer willingness to pay a premium for health benefits.
Growth in tea is being driven by the growing health consciousness among consumers. Studies in the U.S., U.K. and Japan indicate that certain teas contain anti-oxidants, which help prevent cancer, heart disease and other neurological diseases. Because health benefits are being touted in tea, consumers have a different perception about it compared to coffee (although there have been many health claims related to coffee consumption, as well).
In addition, the pace of life has increased and consumers are looking for an “escape” -finding that outlet in tea. This relaxation aspect of tea has brought a more expansive role to tea. Moreover, tea marketers are more innovative and creative, which has created an abundance of new tea products. Also, multi-national companies such as Kraft, Sara Lee and Coca-Cola have operations in most major countries, making it easy to introduce new tea and coffee products worldwide. Therefore, “companies are no longer competing simply in their home markets but also in the global community, sharing cultures, values, trends and new products,” quipped Suzanne Brown of Brown Communications in Atlanta.
The proliferation of coffee shop chains such as Starbucks is building awareness of new tea-based drinks. For instance, green tea macchiato is one of Starbuck’s most popular tea drinks.
People are becoming more aware of health, anti-oxidants, and overall wellness. Most developed countries have an aging population, which makes them more concerned with their health. There is a shift from CSDs and coffee to tea consumption due to consumer’s desire to limit caffeine intake.
Consumers are looking for innovation and unique herbs and beverages. They are going back to ancient culture and traditions and finding their roots in tea. There is also a desire by consumers to ensure their beverages are clean and wholesome throughout the entire supply chain (from coffee bean to cup). Finally, there is trend toward purity, which is tea without the oils, flavors and fannings (tea dust). “As the world gets smaller, people’s concerns will become bigger,” believes Ahmed Rahim, co-founder and CEO of NUMI Organic Tea.
Since consumers are more educated about tea, they are seeking quality in their drinks, says Joane Filler-Varty, Vice President, Hospitality Sales and Development, Mighty LeafTea Company. They are more appreciative about new teas, such as puerh, an ancient Chinese aged tea which is often sold in hard brick form.
Because young adults have entered the tea category with the unique tea products such as macha lattes, the future of the tea industry is promising. The “healthy” aspect of tea and the awareness of sugar and diabetes are causing consumers to switch from carbonated soft drinks to tea- and coffee-based drinks. There is also strong pressure on national governments to reduce health care costs, which has accelerated the movement to replace sugar-based drinks with more traditional and natural beverages, remarked Filler-Varty.
“In the near future, there will be two extremes in the tea industry – a low price, low quality segment and premium price, high quality segment,” said Ahmed Rahim. He believes the former will consist of traditional flavors such as Earl Grey and Chamomile, which the latter will include full-leaf, single origin, organic, and Fair Trade teas.
There is no doubt that tea has and will become a lifestyle for many. For some it has already become a ritual or a ceremony. For others it provides comfort and relaxation, and offers a moment of reflection from the harried and busy lives we lead.

Coffee

Three years ago global coffee sales increased only 1% in volume but nearly 11% in value to US$41 billion. This increase in value reflects the growing preference for specialty, premium coffee. Premium coffee includes not only higher quality beans but also organic, Fair Trade and unique origin coffees. Due to the increased demand for coffee, the market is expected to grow 14% in volume throughout this decade to US$47 billion, despite the fact that the global recession has impacted sales at the premium end of the market.
In the 1980’s and ’90’s there was an explosion of new coffee shops opening and serving specialty beverages. The number of coffee stores is approaching saturation in many developed countries. However, the past couple years has been characterized by a reduction in chain coffee stores in developed markets, most notably the U.S. and U.K. The number ofindependent coffee shops has remained flat while corporate chain stores such as Starbucks are closing stores and have a net loss in the number of shops.
Although coffee shops are suffering, growth in specialty coffee has come from three main areas: 1) home consumption, and 2) new venues such as Quick Service Restaurants (QSRs), and 3) new products aimed toward young people. The growth of coffee at home is derived from the huge number of home coffee-making machines now available to consumers. Single serve and pod coffee makers such as Senseo and Kruerig are present at most department stores. High end coffees with internationally recognized brand names such as Illy are available in all major grocery stores. Finally, challenged by aging populations and market maturity, coffee and tea marketers have focused on increasing consumption among younger consumers.
Secondly, specialty coffee beverages such as cappuccino and lattes are available in more locations and sales channels than ever before. “QSRs are now adding specialty coffee beverages to their menus in a big way,” said Michael Szyliowicz, head chocolatier of Mont Blanc Gourmet. McDonald’s has launched a range of specialty coffee beverages aimed directly at Starbucks’ customers.
Finally, simply the novelty of coffee in rapidly growing developing markets such as Russia, India and China will lead to growth in coffee volumes. The rising number ofmiddle class consumers who aspire to try new coffee and tea beverages will impact the value side ofthe coffee industry positively.
In future today’s trends in the global coffee market will be accelerated. More new specialty coffee beverages will be developed and marketed, and there will be more venues selling these products. For example, McDonald’s is now marketing espresso beverages and smoothies. Seattle’s Best Coffee is being tested in Subway sandwich shops. Other venues such as offices and schools will offer more specialty coffee beverages. Concern over the environment and sustainability will continue to be an issue with consumers, and hence marketers will exploit this trend. Finally, the planned expansion ofchain coffee shops in large tea-drinking markets (India, Russia, China) will contribute significantly to growth in specialty coffee awareness and consumption.
Overall, both the tea and coffee markets, as well as the major players in these categories, will enjoy robust growth. Both beverages continue to have increasing awareness in large, developing markets as well as higher consumption in developed countries.
PeterM. Guyer, Athena Marketing International athenaintl.com. Tel. (206) 749-9255.