Tea Biz
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Tea Biz News and Insight - November 4, 2022


HEAR THE HEADLINES – Pricing Tea in a Slogging Economy | Indicators suggest a recession is imminent | The International Tea Academy “Leafies” are Awarded | Sales of Herbal Infusions are Expected to Double this Decade

| NEWSMAKER – Professor Sylvain Charlebois, senior director of the Agri-Food Analytics Lab at Dalhousie University in Halifax, Nova Scotia

| FEATURE INTRO – Canadian Economist Sylvain Charlebois sees a lot of positives for the tea industry but cautioned that inflation is an economic disease that will linger. Supply chain challenges remain. The macro-dynamics around commodities are getting more complicated, he said, “The fall is not going to be an easy one."

High Inflation is an Economic Disease – "When you look at global issues. When you look at where the market is going, I see a lot of positives for your product in particular," Professor Sylvain Charlebois told attendees at the North American Tea Conference in September. Two immediate challenges confront the industry, inflation and the global supply chain. "So let's talk about inflation. Inflation is an economic disease. In this case, it's self-inflicted," he said. "Inflation is a big problem, but we have to deal with inflation. When people go to the grocery store, they are absolutely spooked because they know everything is more expensive everywhere. In the grocery store, it's even worse. Much worse. Consumers are trying to recalibrate their budgets just to make sure they have a roof on the top of their heads and to feed themselves, so that portion of their budget is increasing by the day. And we know the fed is going to increase its benchmark," he said. "So, in the tea business, I would ask myself, OK, are we going back to 3.5% inflation? The answer is: not in the near future."

The T biz Podcast delivers te 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. Weekly, the t biz Podcast and t biz Blog offer business insights on the news that most impacts the tea industry. Paired with t Journey magazine for tea enthusiasts, the T biz portal is a global resource providing nuanced coverage for everyone who loves tea. Hello everyone here. This week's headlines Pricing tea in a slogging economy indicators suggests a recession is eminent. The International Tea Academies awarded its Leafies last week. Sales of herbal infusions are expected to double this decade plus. Canadian economist Sylvain Charlevois, senior director at the Agri Food Analytics Lab at Daljosie University, sees a lot of positives for the tea industry, but caution that inflation is an economic disease that will linger. Supply chain challenges remain. The microdynamics around commodities are getting more complicated, he said. Quote the fall is not going to be an easy one. More of 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, Tellwackily Boga Wanthalawa Prana and ellipt t Estates support Saved the Children Sri Lanka. Bloomberg analyst Alison Schrager writes that quote, if there has been one thing consistently true of the past two years, it is that what everyone consistently predicted has turned out to be wrong. That's because we're an uncharted territory. We have never before turned the economy off then turned it back on again, as we did in the pandemic end quote. Carmen Allison, vice president of Thought Leadership at Nielsen i Q in Toronto, describes the unusual combination of slow growth and job gains set against rising interest rates and sharply higher inflation as a consumer recession. Quote. We're all trained to understand that you need to executive quarters of GDP contractions for a country to be officially in a recession. But we also know that by the time that actually happens, a lot of the economy is already in a recession. He explains, I think consumers react first because it is a domino effect. We start pulling back on some things and it impacts the overall GDP. So just looking at consumers spending, specifically consumer package goods, we can go back in time to look at what is normal behavior for consumers. How much are they spending, are they shifting to private label versus national brands. We then score these attributes and leading indicators and ask them what they are thinking and how they are feeling. He said that most feel that we were already in a recession. Quote, but there's a huge polarization right now among consumers. It's...

...the haves and the have nots end quote. A quarter of consumers twenty six point four percent do not view inflation as a concern, while twenty seven point nine percent of Canadian households are experiencing greater than eighteen inflation. People are really making drastic changes overall, said Allison. When asked if they have changed how they shop for groceries, say they buy only what I need. Forty four percent say they eat leftovers. More and thirty six percent say they stop buying certain products when prices go up, it changes consumer behavior. This is called price elasticity, the volumetric impact of price changes. Quote. Back in two o eight, when we went into our last recession, we promoted our way through it. Promotions were seven and as the recession continued rose to and higher. As an industry, we train consumers to buy on promotion, but we didn't have that level of inflation we have now, So the name of the game is very different, he said. Alison caution, quote, we have to appeal to consumers needs for value. Tea is a value play, right, It's cheaper to drink tea than coffee, So remind them of that value and how much they can save drinking tea back at home. Yes, you can take the price up, but if you're being more strategic, take that price up on the larger sizes and do it in a way that helps you to be more profitable end quote. He said. E Commerce is another factor. The commerce counts for around sixteen than a CpG sales. In some categories it accounts for more than thirty percent of sales. So that's a different scenario today than he explained. It. In the past when researching e commerce behavior quote, we find people tended to be less emotionally driven. They are online for more for the convenience of it. Now that's changing. People are going online for deals and they are not staying loyal to the physical brick and mortar stores end quote. What I see right now is that a lot of consumers aren't feeling good about this stuff, and they don't think we're going to solve any of these issues in the near future. He said, I think a lot of these concerns are going to stick with us well into the next year and beyond. Business Inside. To learn more specific details about pricing tea and recession from Carmen Allison's present at the North American Tea Conference, visit www t hyphen biz that's b i z dot com. A dozen teas were awarded golden medals at the leaf Eas Awards ceremony October at the fabled Fortnum and Mason store in London. Organized by the UK Tea Academy, the cocktail event drew winners from many tea lands. Five teas from Japan earned gold medals and two were awarded each to Taiwan and Sri Lanka Growers. Gold winners La Fouria in El Salvador and Mango te in Mayan Mar were from less well known tea producing regions. O No Kaja Benefuki Second Flush was named Best in Show. Ties were quote highly commended. Grower Evil Lee at t Hawaii received the Gay Award for...

...her environmental stewardship, and Indie Quehana at the te Studio in the Nilgre's India was recognized for his lifetime achievements in tea. The panel of nine judges evaluated only loose lafe tea with no artificial ingredients and no tea bags. Judges evaluated three hundred teas and thirty three categories. Competitors paid fifty pounds per tea to enter Fortnuman Mason will feature some of the teas for sale at its rare te counter. See the complete list of winners at UK te Academy dot c O dot UK. Ten years sales projections value the global market for herbal infusions at nearly double current estimates. Market research firm Future Markets Insights projects a combined annual growth rate c a g R of seven point one percent between twenty twenty two and twenty thirty two. F m I estimates the global market for herbal infusions, mainly bottled, was three point seven billion in twenty twenty two, rising to seven point three four billion in twenty thirty two, a ninety eight percent increase. Globally, t sales are about fifty times greater than infusions. The largest markets for both herbal infusions and tea are Asian. China is a hundred billion dollar tea market. India and China combine consume sixty one percent of the world's tea. The rate of growth is accelerating from an average of five point five percent during the years twenty sixteen to twenty one, and according to f m I, herbals are popular with young, health conscious consumers who are mindful that of adults are overweight worldwide and more than thirt r obests according to the World Health Organization. The top herbals are peppermint, camemele, ginger, lemongrass, and roy boots. Fruits and florals such as hibiscus or popular in Europe. The UK is the top consumer of herbal infusions, followed by Germany, France and Poland. According to f m I, black and green tea or the go to base for herbal blends. Ginger tops the list of common ingredients. Others include gin seeing jasmine, moroccan mint and gin macha rice. The full report can be found at Future market Insights dot com. Are Vinda and are a Man in Bengaluru reports on this week's two yorks and prices. India Tea price report for the weekending October twenty eight, twenty twenty two. The Tea Board of India has reported a sixteen point five percent intreies in deep production for September as compared to twenty twenty one and this increase has been seen across all the tea regions as Bengal production was fifty two point nine four million kilos is against forty six point three to million kilos last year. Assamts to a hundred nine million kilos is against ninety two million kilos in twenty twenty one, and South India recorded twenty three point eight million kilos as against twenty point six one million killos in twenty twenty one. In auctions forty three, so good demand in both North and South India and Gohati in the stun in eliver was active for leaf and major blenders were Actor for dust. Media reports say that between April and October there has been a good response from South Arabia and other countries in the Middle East. Premium CTC from Gharati and average prices for the...

...spirit have been up by seventeen to piece twenty four compared to twenty one. Colcatas a good demand for all tea grades. Major blenders by actor for CTC leaf and dust, with least and CIS countries by actor for orthodox tea. South India too, so good demand for all tea grades. CTC grades sold well. In Coaching saw a good uptake of all tea grades. Prices THO were similar to the previous week. Also in the Nail Gharas, the price of green leaf has been fixed at sixteen to piece twenty one for November and Now a word from our sponsor. Hello. I'm Bogdon, a passionate tea drinker and the inventor of the ultimate tea machine, The Brewmaker. One preparation is key to making fine teeth, sequential steepings delivered the best taste possible and unlocked the true value of whole leaf teas and botanicals. Brew automates that process without using any pots or capsules. The simple to operate smart from control device stores steeping profiles to consistently make great tea at the push of a bottom. Brew also reduces time, waste and energy. That's because I engineered the brew to remember control settings for temperature, brewing time, and quantity. Using my patented process lets you stack steep simply and conveniently. Canadian economists Sylvain Charlotte Boix dese over to keynote a the North American Tea Conference and spoke afterwards with T BZ. Here are a few excerpts from his presentation. So, I'm an economist, I'm not a t expert. So I do study food, but I do study a lot of different food. Uh, tea is a first for me. I actually enjoyed tea, but T to me has always been a fascinating industry. And when we look at global issues, when you look at where the market is going, I see a lot of positive sport your product in particular. And I'm being I'm very objective. I don't own a company, I don't want a tea company. I'm not invested in the tea at all. I'm just looking at the TV's so let's talk about inflation. Inflation obviously is an economic disease. If I end point well with that turn was pointed by was a Freeman many many years ago, and I actually agree with them, uh in this In this case it's self inflicted. But we have to deal with inflation. Inflection is a big problem, and a lot of people are referring to ninet one, early nine nineties, at early nineteen eighties. The difference between then and now is that now inflation is lingering. In Canada. For the thirteen month in a row, we've seen food inflation exceed the general inflation rate. So when people go to the grocery store, they are absolutely spooked because they know everything is more expensive everywhere, but in the at the grocery store, it's even worse, much worse. If you're wondering what's going on. In the US, it's very similar. I think there was one exception in July, and that's but in the last twelve months most of the time the food inflation rate and was in Florida for six months in winter. I saw it. I saw it happen. The food inflation rate has exceeded the inflation rate. So in other words, especially with what's going on with interest rates. Every single consumer are trying to read calibrate their...

...budgets just because they have to make sure they have a roof on the top of their head and they have to feed themselves. So that portion of the budget is increasing by the day. And we know the FED is actually going to increase its benchmark. So in a team business, I would ask myself, Okay, are we gonna go back to three five? The answer is not in a near future. No. We actually think it's gonna take at least three or four years to get there. It's gonna take some time to actually go back to where we were before COVID where And that's gonna actually change the way you see the market. Are people gonna go out or stay in? And I think the staying in is gonna actually become more and more interesting. So people are ordering more food online. People love to go through shopping the pajamas in their kitchen over the counter. It's all done and it's delivered within two hours. We were lucky to get our food within two days before COVID. We were happy dancing. Now we're upset if it come doesn't come in within two hours. So the industry has picked up the base and people are noticing and expectations are changing. In some parts of the of the country. We now have companies delivering food within fifteen minutes. Ninja is an example fifteen minutes. So expectations are absolutely changing. It's incredible and it's happening fast. Supply challenges, I think a lot of our speakers have actually talked about that it's a lingering Nisia force to move anything around the world on water and online. It's causing way more than two and a half years ago, but it scottily less now than six months ago. So things are improving, slow leaked, and I think what this is my own opinion. I actually think, well, if COVID really didn't help, what has been under appreciated by the public and to a service by the government by governments is that to change rules every couple of days became a huge burden of food industry. Predictability is an asset that that was under appreciated by governments and now we're paying for it. The macro dynamic around the commodities is going to get a little bit more complicated in the fall and in the winter as well. And finally, of course kN a change in the carbon tax and all that stuff. Before you know, before there was a common market. Essentially, company has just looked at the world like a table and water. You put water on the table. Water always went to the lowest place as possible. And so companies designed a global supply chain and went to the cheapest place to package, went to the cheapest place to buy this to do that. That's how we design global supply chains over the last seventy years since the end of the industry resole revolution. That's how it works. Not even Moore, that model is making less and less sense with a carbon market. Whether you like it or not, whether you like the covering or not, I don't think it's gonna go away, and companies are gonna have to deal with it. So my guess is about how you service different markets around the world is going to change based on the policies that we actually see related to climate change issues. And t is a global market. You are not immuned to this. It's going to impact you absolutely, and and I think you gotta have to think about that as you as you grow your business. So that's basically what I have for now...

...as my opening act. Thank you, so I am for sharing your insights. I just have a couple of additional questions. Over supply is a concern in the tea industry in many tea lands, neuterizing costs of labor, the price of fertilizer, and the cost of transport. Farm gate prices are at or below the cost of production. At the government level. For an exchange, earnings are a priority. Small growers, who now produce the majority of the world's tea often increase the amount of leaves they harvest, lowering quality. Will you talk about supply and demand from your vantage? I think in many crops often production is not synchronized with demand. So instead of doing a thing a supply management paradyn, they should actually look more for a demand chain management paradigm. Understanding the market how fragmented it should be to raise the bar because you have I mean, what's the premium product inc? Can we define that? What does that mean? And now people what's the value add what's the value proposition? And why people would pay more for tea persons? Yeah, there are different reasons why people are paying more, but but is it recognized by the masses. But that's why there's going to be growth in teath. It's gonna be growth in teath, and it's happening. What is going on with the young generations that didn't happen with the other ones that that would be curious enough certification organicche you know label where they're willing to pay for that, the third party grade. So uh because in bananas, that's what we see with fair trade. The fair trade is actually playing a bigger role. Now let's talk about demand. Well, I mean, first of all, I think we need to look at the fundamentals. Price that's a big one. Now T is relatively cheap, but it's going up in price, and inflation is impacting how people buy choices as well. In my view, interest rates are going up everywhere North America, and so most households are recalibrating how they spend money, uh, including on beverages and tea. So that's an unknown right now. I think the other issue I think that is um and we'll talk about this this afternoon is uh the work from home phenomena. We saw that during COVID uh T sales skyrocketed. UH in the market was more domesticated was hit and this but this is the big question mark. I think everyone in foods should ask themselves how will the market look like the workforce look like when more people. We actually expect that the workforce in North America will spend at least one day a week minimum one day a week at home working and as soon as your home more often your relationship which who's completely changes um, including the choice of beverage that you'll take, when you drink it, how you prepare it, how much time you spend. Uh. I think he has an advantage over other beverages when it comes to a more domesticated market in my view, because you can actually there's some there's some design that is required, the experience and flavor in a restaurant, it can come you know, at the end of the meal, it can go for people can go off...

...or t but it's not the same thing. At home. You can actually treat yourself. You can actually make it more almost an advance, whether its friends or on your own. So I actually think that it is a bit of an advantage for Tea to see a more domesticated marketplace. That's just my opinion. Intrigued by what you've heard in today's podcast, would you like to learn more from our global network of t BZ journalists and T experts. Remember to visit the T biz website from more comprehensive coverage. That's w w w t pyphon biz b i Z alcohol. Thanks for listening, Farewell till next week as.

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