Global Tea Industry

Lenore Weich

January 11, 2003

Table of Contents
What is Tea? Tea Market Overview 3

8
13 16 21 24

Tea Consumers
Tea Producers

A World of Tea
Bibliography

WHAT IS TEA?

Tea Definition
Tea
a beverage produced by steeping in freshly boiled water the young leaves and leaf buds of the tea plant, Camellia sinensis. Two principal varieties are used, the small-leaved China plant (C. sinensis sinensis) and the large-leaved Assam plant (C. sinensis assamica)1

Major Tea Categories2

for example Black: Green: Instant: Herbal: Flavored Assam, Darjeeling, Ceylon Bancha, Gyokuru, Oolong Granulated Black Tea Chamomile, Mint Earl Grey

Preparation Methods Infused (Hot) Iced (Cold) Instant* Ready to Drink*

Specialty Digestive/Medical
*Manufactured

Processing Tea Leaves3

all tea leaves

PLUCKING

WITHERING
Black, Oolong, Pouchong

ROLLING

Fermentation is the critical stage except for green tea

FERMENTATION
Processing Time

Green Tea

Oolong Pouchong Black

DRYING

Source: Encyclopedia Britannica

PACKAGING, etc

Alternatives to Tea4
U.S. Beverage Per Capita Consumption (gal)
250 Others 200 150 100 50 0 1995 1996 1997 1998 1999 2000 Distilled Spirits Wine Tea Fruit Beverages Bottled Water Coffee Beer Milk Carbonated Soft Drinks

While total per capita beverage consumption remained flat, per capita tea consumption declined 8% from 1995-2000 In contrast, Bottled water consumption grew 50% over the same period
Equitable global data not uncovered
Source: Food Processing

2001 World Tea Production5

Data in thousands of metric tons

USSR: 10 Turkey: 130 China: 670 Japan: 100

Bangladesh: 60 Vietnam: 30 India: 840 Indonesia: 180 Kenya: 290 Sri Lanka: 290 South America: 70 Others: 240

Total: 2.9 million metric Tons!

Source: Tea Basics

TEA MARKET

Global Tea Sales, by region, 1993-19976

Global Tea Sales, 1993-1997
12,000

$USD (Millions)

10,000 8,000 6,000 4,000 2,000 0 1993 1994 1995 1996 1997

Latin America Australasia Africa Middle East Eastern Europe North America Japan Asia Western Europe

14% Growth Rate of Global Tea Market Size from 1993-1997 17% Growth Rate of the North American Tea Market Market Size
Source: Euromonitor

Global Tea Consumption, by Type

Volume Growth Rates 1993/1997
Black Green 32% 18%
Green Tea 20% Black Tea 73% Instant Tea 1% Herbal 5% Specialty 1% Flavored 0%

World Tea Consumption by Type, 1997

Herbal
Instant Flavored* Specialty* GLOBAL

51%
24% 16% 26% 32%

* Growth rate 1995-97

Volume consumed growing faster than Value of market

The green tea market has been growing more slowly than the black tea market in recent years, with the result that green tea represents a declining proportion of demand for leaf tea as a whole.
Source: Euromonitor

Top Tea Consuming Countries, 19978

900 800 700
Metric Tons (000)

600 500 400 300 200 100 0

India 0 14 50 713 China 21.1 23.2 245 42.7 Russia 0 9.5 17.8 134.7 UK 0 1.6 0.02 146.2 Turkey 12.26 1.9 0.04 127.1 Egypt 0 4.1 9.3 115.1 Indonesia 44.6 5.3 43.7 30 US 0 7.4 0.93 81.7 Japan 21 0 38.7 10.7

Other Herbal Green Tea Black Tea

India consumes the most black tea by volume; China consumes the most green tea
Source: Euromonitor

Market Growth Projections (US)9

800
Market Size (000 Metric Tons)

700 600 500 400 300 200 100 0 1997 2001 29.2

34.7

36.9

41

Other hot beverages Tea Coffee

2002

2006

1997 2001 Growth: 2001 2006 Projected Growth

Source: Euromonitor

19% 18%

US Market growth stagnant, perhaps decliningmature market

Global growth data not found

TEA CONSUMERS

Tea - Global Consumer Profile10

United Kingdom United States Japan

Second to Coffee Black, Sugar/Lemon Ready to Drink popular Pockets of Specialty/Organic

A drink for any time of day Black, with milk/sugar Tea bag predominant Loose leaf considered old

Tradition-driven Green Ready-to-drink emerging

China India
Staple Beverage Green Predominant

Latin America

A drink for the ill

Staple Beverage Loose leaf predominant Black, with Sugar/Lemon

Source: Euromonitor

Tea Consumer Facts11,12

On an average day, 62% of US women drank tea, compared with 59.5% for ground coffee and just 24.2% for instant coffee.
Consumption of all hot drinks is lowest in the West, due partly to the increased popularity of healthy diets in the region and warmer climates for most of the population. Tea tends to be perceived as a premium beverage, with consumption highest among the wealthiest consumers with an income of above US$75,000. Tea has been gaining increasing acceptance among US consumers, who have turned to the sector as a lower caffeine alternative to coffee. The proliferation of herbal and medicinal teas has also played a major role in tea sale increases recently. A continuation of these trends is expected to drive volume growth
12. Source: HOT DRINKS IN THE USA (JULY 2002), Euromonitor

Tea is increasingly acquiring a more sophisticated image in Europe and North America.
13. Source: INTERNATIONAL MARKET REVIEW: WORLD MARKET FOR TEA (NOVEMBER 1998), Euromonitor

TEA PRODUCERS

Tea Supply ChainMacro View

Cultivate, Process

Growers Distributors
Import/ Export

Manufacturers
Package, Market, Retail Distribution

Retailers
Sell

Consumers
Drink

Tea Competitive Landscape13

The tea market is fragmented and region-specific, with multiple companies comprising 49% market share Unilever is the largest manufacturer of tea world-wide with 26% market share Tea Global Market Share, 1997
Company Country of Origin

Unilever
Tata Tea Cay-Kur Shemto Tetley Beijing Tea Administration Sara Lee

Netherlands/ UK
India Turkey Egypt UK China US
Mai 2% Beijing Tea Sara Lee Admin 2% 2% Others 49%

Unilever 26%

Tata Tea 9% Cay-Kur 4% Shemto 3% Tetley 3%

Mai
Source: Euromonitor

Russia

Unilever Profile14,15
General
One of the top global consumer product companies in the world Unilever Global Presence 2001 Revenue Distribution
North America 21% Asia/ Pacific 17% Latin America 6% Africa & Middle East 4%

Dually operated by two holding companies (for tax reasons): Unilever PLC (UK) and Unilever N.V. (the Netherlands)
2001 Revenue: $45.9B

Europe 52%

279,000 Employees
Besides Lipton (tea), manufactures Dove, Sunlight, Country Crock, Hellmans, Lever 2000, Degree, Surf, others Organized Geographically, then by food and non-food Currently working to consolidate brands
52-week low: $28.82 (Jul 02) Market Cap Gross/Net Margins Current Ratio Debt/Equity 52-week high: $39.64 (Nov 02) $27B 49%/4.8% 1.61 3.58
Source: Hoovers, Yahoo Finance

UnileverTea Facts17
Global tea brands include Lipton, PG Tips (UK) Brooke Bond (India)

Small portion of Unilevers brand portfolio (between 5-9%)

Overall Lipton brand grew 6% in 2001 Japan market for ready-to-drink tea grew strongly

Lipton Cold Brew rolled out in the US

Central Asia market declined due to competition with Indian tea Ready-to-drink product expansion to Europe quoted successful Green tea launch continues in North America and Europe Recent marketing campaign Paint the World Yellow continues to raise awareness of Lipton Brand
Source: Unilever 2001 Annual Report

A WORLD OF TEA

Recent Facts
The tea tradition is sustaining the established markets, but there is increasing competition from soft drinks16 Euromonitor Industry Alliances both in the ready to drink sub sector of tea Unilever joint venture with Pepsico to market/distribute Brisk in the Americas17 Coke and Nestle joined forces to market Nestea18

Ready-to- Drink Teas Gaining Momentum in the US: According to Beverage Digest, the categorys volume increased 1.8%, year to year, to 637 million gallons. Retail sales of ready-to-drink teas advanced 3.8% to $3.31 billion in 2001 from $3.19 billion in 2000.19 --Standard and Poor

Tea linked to many health benefits Rehydration less caffeine powerful antioxidants

Current Marketing Strategies:20 Tetleymarket tea as healthy, to attract younger drinkers PG Tips (Unilever) responds with Slice of Life and Tea Moments to consolidate teas role in our lives

Future Trends
Tea is predicted to be the fastest growing sector in volume terms over the forecast period, gaining 11.1% between 2002 and 2006, to reach a level of 41 thousand metric tons in 2006.21 Euromonitor

Products like iced chai and bubble tea in the US promise to add further variety and vitality to tea selling.22 --Restaurant Business

Bubble tea is tea with Tapioca bubbles and optional flavoring added

BIBLIOGRAPHY

Bibliography (1/2)
Encyclopedia Britannica, Tea. Tea Basics; Rasmussen, Rhinehart; 1999. Encyclopedia Britannica, Tea Production "Beverages Were Healthier in 2001," Food Processing, August 2002 Tea Basics; Rasmussen, Rhinehart; 1999. INTERNATIONAL MARKET REVIEW: WORLD MARKET FOR TEA (NOVEMBER 1998) Euromonitor 7. Ibid. 8. Ibid. 9. HOT DRINKS IN THE USA (JULY 2002), Euromonitor 10. INTERNATIONAL MARKET REVIEW: WORLD MARKET FOR TEA (NOVEMBER 1998) Euromonitor 11. HOT DRINKS IN THE USA (JULY 2002), Euromonitor 1. 2. 3. 4. 5. 6.

Bibliography (2/2)
12. INTERNATIONAL MARKET REVIEW: WORLD MARKET FOR TEA (NOVEMBER 1998) Euromonitor 13. Ibid. 14. Hoovers Online Profile: Unilever, accessed Jan 2003 15. Yahoo Finance Online Profile, accessed January 2003 16. INTERNATIONAL MARKET REVIEW: WORLD MARKET FOR TEA (NOVEMBER 1998) Euromonitor 17. Unilever 2001 Annual Report 18. European Report, Sept 29, 2001 p344 COCA-COLA-NESTL? DEAL PRODUCES NO STORM IN COMMISSION'S ICED TEA CUP 19. Standard and Poor, Food and Non-Alcoholic Beverages Industry Survey, Dec 2002 20. Marketing, Oct 31, 2002 p13 BRAND HEALTH CHECK: Tetley - How can Tetley sell the virtues of drinking tea? 21. INTERNATIONAL MARKET REVIEW: WORLD MARKET FOR TEA (NOVEMBER 1998) Euromonitor 22. Restaurant Business, SPECIAL-TEAS, Feb 15, 1999, JAMES SCARPA.