Tea Biz
Tea Biz

Episode · 3 weeks ago

Tea Biz News and Insight - September 9, 2022

ABOUT THIS EPISODE

HEAR THE HEADLINES – There’s Ample Tea for Sanctioned Russians: After six months of sanctions, the tea aisles in Russian grocery stores display few European brands, but the shelves are not bare | Kenya’s Tea Industry Suffers Collateral Damage Due to Sanctions | Tata Consumer Products is on the Hunt

| NEWSMAKER – Kevin Gascoyne, partner Camellia Sinensis, Montreal, Canada

| FEATURE INTRO – Tea Biz travels to the newly remodeled Camellia Sinensis tea house in Montreal, Canada, for a conversation with partner Kevin Gascoyne: Our stores have always offered options to smell the tea, he says, but we wanted to capture that special tasting moment and offer the possibility to take it further.

The Evolution of Experiential Retail – The Camellia Sinensis retail store has undergone many physical changes since 2001 when it first opened in a space adjacent to the established teahouse, but this is the most extensive, says partner Kevin Gascoyne, one of four master tea merchants who own the venture. The company wholly reimagined and remodeled its brick-and-mortar flagship after COVID-19 lockdowns forced the teahouse to close. The new design incorporates many time-proven aspects of tea retail – the most important of which is sampling. Gascoyne explains that clients appreciate the opportunity to select their tea sensorially. But he says, “despite continued popularity and regular lineups of clients eager to visit, the changing times meant that those precious moments of magic we created with such love and care barely paid the bills. It required enormous micro-management and many staff to offer such a complete experience to so many people. We are done with the impracticalities of the sit-down visit, but we wanted to capture that special tasting moment and offer the possibility to take it further.”

The T Biz podcast delivers tea news that you need to know, a recap of the week's major headlines, with commentary and cultural trends. Hosted by Dan Bolton. It is the voice of origin for t professionals and enthusiasts worldwide. Think of us as a digital caravan of storytellers, bringing authentic, authoritative and exclusive stories to you weekly from the tea lands. Weekly the t Biz podcast and t Biz blog offer business insights on the news that most impacts the tea industry. Paired with Tea Journey magazine for te enthusiasts, the t Biz portal is a global resource providing nuanced coverage for everyone who loves tea. Hello everyone here. This week's headlines. There's ample tea for sanctioned Russians, Kenya's tea industry suffers collaps toural damage and Tauta consumer products is on the hunt. Plus a conversation with Kevin GASCON on the evolution of experiential retail. GASCON, a partner at Camelias Senensis in Montreal, says our stores have always offered options to smell the tea, but we wanted to capture that special tasting moment and offer the possibility to take it further in our nearly remodeled tea room. More in a minute, but first this important message. What makes a Perfect Cup of Ceylon tea? The Perfect Cup is from the tea businesses that ensure the protection of all the children living within their tea estates. We Salute Kailani Valley, telewackily, Boga, Wanthal Awa, Prana and elliptia tea estates. Support Save the Children Sri Lanka. After six months of sanctions, the Te Aisles and Russian grocery stores display a few European brands, but the shelves are not bare. A Moscow based senior executive at one of Russia's top domestic tea brands told tibiz quote the Russian economic situation is generally stable, particularly the TE segment. He says consumers are getting enough tea at lower prices compared to May through July. In the UK, food inflation in July accelerated to nine point three according to the sun. In August the price of food increased to ten point five percent, the most significant jump since two thousand and eight US food inflation hit ten point nine percent in joy, the highest since May. Nine seventy nine. In contrast, in Russia, the ruble trades at pre war exchange rates and food prices are down eleven point three since the first of the year thanks to government subsidies. Tea is a mature sector, considered a household stable, as more than nine of Russians drink mainly black teas at home. According to the Moscow tea executive quote, Russia's tea market is very consolidated. Four players hold of the market. This is because the big food companies solved their sourcing problems quite efficiently. We noticed, for example, that a remi has increased its market presence, taking share from smaller competitors. End Quote Sev of Russian consumption and his tea bags quote. We can switch from one origin to another...

...quite easily, he explains. We manage blends and signed forward contracts to keep the costs low. We have almost stopped purchasing from Sri Lanka, switching to a Psalm and Kenya. Prices for O P A grades haven't risen so high as T G F O P S and F P O P s. He said. However, shortages of European brands of Orthodox process leaf and broken leaf grades have increased in price quote for loose leaf Orthodox teas. Of course it's a tough time, he says. We try to manage it by decreasing promotional sales to lower demand and supermarkets. However, he said that, due to the slowing economy, consumers only by premium T S on PROMOS and won't pay full price. Teas for blending originate in Sri Lanka, India and Kenya. Russian tea blenders have unlimited access to Chinese tea, but the demand for green tea is limited, comprising only two point two percent of the market. Shipments from India and UAE exceed pre war levels. On the other hand, the sales value and volume of tea imports from Kenya and Sri Lanka have declined. Ceylon imports are down sharply. Sri Lanka's Orthodox tea still finds Russian buyers, but tea exports overall filled by fifteen million kilos to a hundred and forty eight million kilos for the first six months, compared to twenty twenty one. India bypassed EU and U S sanctions, so in ports from Russia have soared by three hundred and sixty mainly due to purchases of discounted oil. Wild Tea exports to Russia and Ukraine halted in March. T shipments to Russia experienced a significant jump through June as India resolved payment restrictions, trading rupees for rubles. Russia and the C I s neighbors are now the largest buyers of Indian tea, purchasing twenty million kilos of the ninety seven million kilos India exported during the six months of the year. Purchases were mainly a psalm CTC. Availability and logistics proved formidable obstacles, as tea production drop from hundred eighty million kilos to a hundred and fifty two million kilos in India due to erratic weather. Orders from Ukraine are flat, but the fifteen million Kilo's Russia purchased during the first half of the year means that Russia will likely exceed last year's total business inside Chinese exports to Russia are down fifty cent since the invasion, while Russian media reports the trade between Russia and China will reach an estimated hundred and sixty five to a hundred and seventy billion dollars this year, breaking a record hundred and fifty billion in twe China is aggressively expanding tea exports, valued at two point one billion last year, up twenty eight point six percent compared to there's little demand for Russian teas in China. China imported only a hundred and sixty seven million dollars worth of tea last year, mainly from Japan. But given the mass...

...capacity and rapid growth of black tea that China now produces in three may displace Kenya as Russia's third largest tea trading partner. Kenya's tea industry is suffering severe collateral damage. Sanctions are a blunt instrument that have caused Kenya's tea sector millions of dollars. Countries that abide by European and American sanctions pay a high price for compliance. Kenya earns one point three billion annually in sales of agricultural products. Kenya's decision to publicly condemn the invasion of Ukraine immediately halted trade in tea, coffee and cut flowers, valued at a hundred million dollars. Food, including tea, is exempt from sanctions. A teen coffee are traded in US dollars leading to complex and costly issues settling payments. Next, fuel prices seared, along with the price of a central fertilizer. The war sent inflation to a fifty eight month high. Grain prices spiked due to the high cost of replacing wheat grown in the Ukrainian prairie. Sanctions blocked the hundred and forty six million dollars worth of Russian exports bound for Kenya. In March. Tea prices at the mumbas auctions spiked briefly at a round two dollars and fifty cents per kilo, began sliding and are now hovering around two dollars per kilo, which is at or below the cost of production. A global recession has reduced demand. Meanwhile, the cost of transporting a forty foot container of tea tripled to ten thousand five hundred dollars, according to business daily Africa. Insurance premiums spiked. Restrictions on shipping to Black Sea ports to reach blenders and Kazagistan, Kastan Uzbekistan and Azerbaijan added weeks to schedules. The logistics of shipping a container sometimes exceeded the price paid for the tea within resourceful Russians continue to buy Kenyan tea, but volume is down fifteen percent from January through May. Shipments to individual C I s countries have dropped by as much as seventy two percent, and earnings from Russian tea purchases are down by five million compared to one. During a recent earnings called TATA consumer products, owners of Tadah Tedley, jocals and vitax t brands, announced that it is ready to spend the sizeable profits that harvested during the pandemic. Propelled by solid profits and a three increase in share prices during the last five years, T C P L C o o Krishna Kamar told India's business press that more acquisitions are a question of when, not if. He explained that inorganic growth is key to the company's strategy. Quote. The brand has to matter, the distribution should be common. There has to be a very good reason that we are the owners. In quote. Krishna Kamar told MINT TCPL is expected to generate one point six billion in sales, recording a thirty eight ptally net profit on sales at two point seven million...

...outlets. In addition, the company hopes to expand its distribution to four million outlets. CEO Sinil de Susa, since he is seeking opportunities beyond beverages, which currently contribute about seventy of consolidated revenue. Foods currently generate twenty five of revenue and are seen as the path to growth. The Susan told the financial press that his immediate goal is to simplify, synergize and scale. One example is combining the company's tea and coffee extraction businesses and then looking for similar ventures to create a single manufacturing vertical. The Susan estimates that the structuring from forty three to twenty five legal entities in forty countries can be completed by June twenty twenty three. The ideal would be three to five legal anti ties globally, he said. Or vender and Therema and Bengaluru reports on this week's two auction prices. India tea price report for the weekend in third September. Twenty twenty two. August has been a busy month here in India. Are Fairly reports indicator healthy increase in tea e sports. Between January and June this year, India's state sports grew from eighty six point four six million kilos in twenty twenty one to ninety six point eight nine million kilos, and this despite the decrease in imports from Russia. And this increases attributed to Sri Lanka's markets, who looked at India for the Orthodox supply. You in particular, has been significant, importing fifteen point eight six million kilos, which is up from six point seven six million kilos last year, and it earns imports have been up from ten million to eleven point four million killers with the imperiod. This is also meant that India has increased for production of Orthodox City as expected to see an annual increase of ten to fifteen percent of Orthodoxy, and in August, Orthodox leave production was up by nine percent for the same period last year, but there is seven percent increase in prices. However, in the terra indars region of North Bengal and in south India, heavy and unseasonal rainfall have led to a decrease in production. Through August. Seventy eight percent of the offering was sold via auctions in north India, the prices averaging a two hundred nine piece per kilo. The jeeling continues to see low sail volumes at options, with only seven sold and average prices of three D and fifty six through piece per kilo. In other newst Taiwan has taken steps to engage with India. Viat, the Taiwanese representative, Bashan, was quoted in Indian media as saying the community culture between the two countries can facilitated bilateral cultural times. And now word from our sponsor. Q trade understands that a successful tea blend goes beyond the creative fusion of appearance, Aroma and flavor. Our Multi Award winning product development team is passionate about converting natural ingredients into sensory experiences that customers crave. Every recipe is formulated with a commercial backbone of dependable quality sourcing. With a pricing structure that supports a safe, regulated, profitable and scalable blend. Q trade meets every brand's retail, food service and e commerce need. For more information, visit our website, que trade, tease dot com. Te Biz this week travels to the newly remodeled Camelia Sinensas Tea House in Montreal, Canada for a conversation with partner Kevin gascoon. Our stores have always offered option to smell...

...the tea, he says, but we wanted to capture that special tasting moment and offer the possibility to take it further. The Camellia sinensis retail store has undergone many physical changes since two thousand and one, when it first opened in a space adjacent to the established tea room, but this is the most extensive, says partner Kevin GASCON, one of four master tea merchants who are partners in the venture. The company's brick and mortar flagship is completely reimagined and remodeled after covid nineteen lockdowns forced the tea house to close. The new design incorporates many time proven aspects of tea retail, the most important of which is sampling. GASCON explains that client's appreciate the opportunity to select their tea sensorially. But he says, quote, despite continued popularity and regular lineups of clients eager to visit, the changing times meant that those precious moments of magic we created with such love and care barely paid the bills. It required enormous micromanagement and many staff to offer such a complete experience to so many people. We are done with the impracticalities of the sit down visit, but we wanted to capture that special tasting moment and offer the possibility to take it further. End Quote. Hey, thanks, Kevin, for taking the time to share your retail insights with our listeners. Well, you're most welcome. I'm happy to be here with you. Will you describe how t retail has changed since March? Well, yes, I mean things changed quite a bit during the pandemic. We started off with this very nervous lockdown at the very, very beginning. We had a bit of hoarding, so we had a little bit of increased sales at that point. We had two operations going at that time. We had our tea shops, where we sell tea over the counter, that operate on grocery store license, so they stayed open. They stayed open all the way through the pandemic, and then we also had the tea house where we serve tea in a more restaurant situation, and that we had to close obviously that it just didn't fit with any of the protocols. The tea shops saw this initial increase due to the hoarding and the worrying of people that they wouldn't have what they needed for the future when in an unsure situation, and after that things got a little quiet. Even during that time, people didn't stop drinking tea. If anything, they were at home and really felt like drinking tea. They felt like exploring and most people were in a sort of state of semi lockdown where they would go for a walk once a day where they would pick up necessities, and we became one of those stops on the way and, having stayed open all the way through the pandemic, we had this nice feeling of community, of people coming to visit because we were one of the only places open and one of the only places that remained constant during the whole thing. The shop income didn't change too much. If anything, that was an increase because people were trying things to drink at home rather than drinking the tea that they have in the office and just putting up with whatever the office has or popping out to a little cafe next door and drinking it whatever the...

...little cafe has. They were at home, so they had this decision. We're able to buy what they needed and obviously a large part of our business also went online. We took all those staff and we took them to a warehouse. Welling helped out with the increasing web sales, having diverse channels this and also having a website that was set up for large volume, larger volume than what we're doing. We were lucky enough. It sounds like the Covid lockdowns provided an opportunity for you to analyze both the teahouse and tea shop retail from a new perspective. I think a big parts of the reason that a new setup is working partly is because we already had a very big based community, and the community was built on this dynamic relationship we had developed through one having a tea house where he had educated many people on how to drink tea and also infused them with this idea of tea culture, showing them the tea ware and the way to taste rather than drink. We'd also always had an educational element where they put thousands and thousands of people from the area and from far away through classes. So the level of tea savvy people in this little city and up in Quebec City is surprisingly high. So all these people have become a large client base. We were very loyal to the visit and the visit has become something that we've established as something pleasant to do. They come in, they talk about the tea. We also have to have to remember that we have a stock that is continually changing. We the dynamic catalog that follows the seasons, so the list on the counter is printed once a week. It's it's continually changing. So there's a certain amount of that that you can get from the Internet and have. That's a type of flat purchase when you look at the picture, look at the review, you look at the description and then you make a decision to buy. But there are also elements in this purchase that rely on sensorial smelling the tea. Now we're offering tasting the tea, but also this exchange with the enthusiasts who are behind the counter who can explain and talk about it's something that you can't really put across on the Internet and something that we have so many people that have got into this tradition of visiting the tea shop that that gives us a good base to start with and it also keeps that word of mouth trickle out for a constant sort of new clients. So the visit to the shop where something actually happens, where you increase your excitement for the product, where you discover the product in a way that you can't you can't necessarily do that on the Internet. Makes a big difference and people are looking for activities to do and they're looking for human connection and they're looking for something that gives them a little outing here or there. A twenty minute visit to the shop, looking at the new tea where talking with the people behind the counter, discovering a new t that we take home and continues the story is a great way to it makes a great, big difference. So you have to be thinking about providing these of alternative...

...ways and you have to make it into an event so when they're visiting it's a our story is tucked down a little street, on the side street, so it's a destination where people go. Then they do it. They do this activity of going to the t shop. Let's talk about key performance indicators. In Post covid retail, food traffic and downtown brick and mortar locations declined steeply. Retail consultants estimate that in Montreal the number of visitors has fallen by seventy four percent since March. Foot traffic has since increased for six as of April, but overall foot traffic is down fifty five centence. That he's like Montreal. What is the realistic average number of daily visits to a one thousand square foot store and how has that changed? We saw this a little bit early in when the recession hit. Is that there is a strange group of businesses, namely wine, fancy foods, some fancy food stores and fancy tea, that fit into this strange little category that are kind of luxury essentials and during these times are for many people. Staying at home and buying a few more fancy ingredients and a nice bottle of wine and a nice packet of tea are advantages for some companies. So for us we sort of fit into this little category of the luxury essentials. Yes, we're in essential for most people, but during the times of hardship they're happy to have the same or even something a little bit better if they have to stay at home. So I think even though foot traffic and so on in general population and in general businesses has been this picture that you've described, I think for us there are strangely some advantages. If you look at the sales figures for alcohol boards of the different provinces around Canada. Most of them have very good sales during the pandemic. So I think we're kind of that little, very small group of of vendors that have actually had some advantage during the how much does the average customers spend during a typical visit? I would say probably anywhere between forty and four fifty dollars. It's quite variable. Obviously there's not every kind. It's coming in and spending that I would say the bridge is probably somewhere around comparing the same tease do average store transactions differ from e commerce? Commerce is usually a bit more I think maybe the same client buying on the Internet would buy every three or four weeks, whereas we're more likely to have somebody that comes in once a week. When they're doing it a certain routine, you know, while they're either at work and they like to go every Tuesday lunchtime, or they're up at the market. We have a little shop up at the market, so they're up at the market and they have the shopping list of things they buy every week and the people they visit every week. So we're on that list. Both types of clients. So I'll see them. We'll see them at the same time, the same day every week rather than once a month if they bought on the Internet. Also on the Internet when you're paying...

...the shipping fee. I mean we have a sixty dollar free shipping, so they'll probably a little more to get into the free shippings. How many daily customer visits does it take to keep the doors open te shops like yours? Well, that is very much independent and rent is the big killer. You've probably noticed that there are many cities that don't have tea stores. They just just put into the equation. Selling tea is a second city activity. So if you look at in Canada, Toronto, if you go to the states and you go to New York or go to London or Paris, there are very few street level tea shops of the style of tea that we sell. They're all selling value edition with extremely expensive packaging, fancy packaging. Although selling tea in fancy packaging and a very high premium on the sort of almost gift e level, it's very difficult to pay the rent with the with the tea, with a tea company like the one we have, and we've looked at a lot of people. I mean we have so many clients buying on the Internet. In Toronto. We went down there and had a look at the rents, but our operation wouldn't work in a in a major city like Toronto, where the rents are so high, certainly not in New York. Very difficult to run a tea company of the third on a New York rent. You have to sell so much tea. If we look at large tea chains, what they do is they buy tea at a much lower price with a much lower margin, so that they can make enough money to pay those rents. Because I think the reality is that a company like us can only really survive in a small city like Montreal, whether rents are that's still very affordable. Intrigued by what you've heard in today's podcast, would you like to learn more from our global network of t Baz journalists and T experts? Remember to visit the T bz website from more comprehensive coverage. That's www t hyphen biz bi z alcohol. Thanks for listening. Farewell. Till next week.

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