1. THE OVERALL TEA SUPPLY CHAIN & ITS COST STRUCTURE The Starting Point – Historical Tea Supply A look at the UK Tea Market Breakdown of the Packer’s Cost Structure A comparison of Retail & Auction Prices A few Concluding Comments =========================================== Reminders  This is average data This averages all Packers Data This looks at Average Auction Prices April 2006 Data mainly for 2004 & 2005

2. THE OVERALL TEA SUPPLY CHAIN & ITS COST STRUCTURE The Starting Point – Historical Tea Supply A look at the UK Tea Market Breakdown of the Packer’s Cost Structure A comparison of Retail & Auction Prices A few Concluding Comments Reminders  This is average data This averages all Packers Data This looks at Average Auction Prices Data mainly for 2004 & 2005

3. Tea Price has fallen 3% pa in Real Terms 1957-2004 Note: Prices are based on London Auction Prices to 1998 and then for Mombassa auction price. (for Best PF1, Kenyan)

4. World Supply has continued to run ahead of Demand Source: ITC and LMC International

5. THE OVERALL TEA SUPPLY CHAIN & ITS COST STRUCTURE The Starting Point – Historical Tea Supply A look at the UK Tea Market Breakdown of the Packer’s Cost Structure A comparison of Retail & Auction Prices A few Concluding Comments Reminders  This is average data This averages all Packers Data This looks at Average Auction Prices Data mainly for 2004 & 2005

6. UK Definitions & assumptions Retail prices exclude the impact of promotions. Packers: Unilever - PG tips Premier Foods- Typhoo Tata-Tetley- Tetley ABF- Twinings Fairtrade- Clipper, Café Direct Taylors- Yorkshire Retailers: Tesco, Sainsbury, Asda, M&S Fair Trade premium €0.50 per kg (£0.34)

7. 2005 UK Tea Sales by Volume Source: LMC International The market is dominated by TEABAGS +/- 90%

8. Packer’s Average In-Store Prices £ per kg

9. UK Retail Prices are very steady in constant money terms Source: LMC International

10. THE OVERALL TEA SUPPLY CHAIN & ITS COST STRUCTURE The Starting Point – Historical Tea Supply A look at the UK Tea Market Breakdown of the Packer’s Cost Structure A comparison of Retail & Auction Prices A few Concluding Comments Reminders  This is average data This averages all Packers Data This looks at Average Auction Prices Data mainly for 2004 & 2005

11. The Make-up of the Retail Price

12. Packers Average Cost Structure 2004 (€m) 148

13. Margins (Profit as % of Sales )

14. THE OVERALL TEA SUPPLY CHAIN & ITS COST STRUCTURE The Starting Point – Historical Tea Supply A look at the UK Market Breakdown of the Packer’s Cost Structure A comparison of Retail & Auction Prices A few Concluding Comments Reminders  This is average data This averages all Packers Data This looks at Average Auction Prices Data mainly for 2004 & 2005

15. 2005 - Average Auction prices by segment £ per kg Source: LMC International

16. 2005 Average Prices Auction as a % of retail price Source: LMC International Econom y Products

17. Auction Prices versus Retail* Prices in 2005 £ per kg * Net of promotions Source: LMC International 8.69 8.12 7.06 4.64 4.33

18. THE OVERALL TEA SUPPLY CHAIN & ITS COST STRUCTURE The Starting Point – Historical Tea Supply A look at the UK Market Breakdown of the Packer’s Cost Structure A comparison of Retail & Auction Prices A few Concluding Comments Reminders  This is average data This averages all Packers Data This looks at Average Auction Prices Data mainly for 2004 & 2005

19. Tea Value Chains £ per kg Upgrading to Speciality should be the future driver for change. Reduce plain teas.

20. Main reasons for Differences in Packer’s In-Store Prices Advertising & Promotion costs Packaging costs Differing Supply Chain Efficiencies Economies of scale Market power with Supermarkets Margin Strategy (Volume/Value)

21. CUSTOMERS WAREHOUSE PACKERS FACTORIES ARRIVAL PORT SUPERMARKET STORES UNLOAD INSPECT SAMPLE QC CHECK DOCUMENTS CLEAR CUSTOMS CERTIFICATION (WAREHOUSING) RECEIVE REPAIR (?) (RE-)PALLETISE SAMPLE STORE TASTE CREATE BLENDS PICK PALLETS BLENDING PM PURCHASE TEA MACHINES PACKING OPS CODING DESPATCH STORE UNLOADING UNPACK STACK ON SHELVES PROMOTIONAL DISPLAYS TRANSACTION SYSTEM SALES DATA ANALYSIS RE-ORDERING RECORD & RECEIVE QC CHECK STORE RE-PACK (?) PICK PALLETS (?) DISTRIBUTION ROUTE PLANNING DESPATCH FINANCE & MATERIALS CHARGES FINANCE CHARGES IT COSTS WASTE FINANCE CHARGES TRANSPORT TO PACKERS TRANSPORT TO CUSTOMERS RETAIL TEA SUPPLY CHAIN: UK Port - to - Supermarket Shelf TRANSPORT TO THE STORES PORT HANDLING CHARGES QA COSTS & TEA LOSSES TASTING EXPERTISE TRANSPORT COSTS HIGH LABOUR COSTS

22. CUSTOMERS WAREHOUSE PACKERS FACTORIES ARRIVAL PORT SUPERMARKET STORES UNLOAD INSPECT SAMPLE QC CHECK DOCUMENTS CLEAR CUSTOMS CERTIFICATION (WAREHOUSING) RECEIVE REPAIR (?) (RE-)PALLETISE SAMPLE STORE TASTE CREATE BLENDS PICK PALLETS BLENDING PM PURCHASE TEA MACHINES PACKING OPS CODING DESPATCH STORE UNLOADING UNPACK STACK ON SHELVES PROMOTIONAL DISPLAYS TRANSACTION SYSTEM SALES DATA ANALYSIS RE-ORDERING RECORD & RECEIVE QC CHECK STORE RE-PACK (?) PICK PALLETS (?) DISTRIBUTION ROUTE PLANNING DESPATCH FINANCE & MATERIALS CHARGES FINANCE CHARGES IT COSTS WASTE FINANCE CHARGES TRANSPORT TO PACKERS TRANSPORT TO CUSTOMERS RETAIL TEA SUPPLY CHAIN: UK Port – to - Supermarket Shelf TRANSPORT TO THE STORES PORT HANDLING CHARGES QA COSTS & TEA LOSSES TASTING EXPERTISE TRANSPORT COSTS HIGH LABOUR COSTS THE SUPERMARKETS ARE SQUEEZING THE PACKERS MARGINS VERY HARD

23. BUYERS WAREHOUSE 1. ESTAT E PRODUCERS WAREHOUSE MANUFACTURE EXPORTING MANUFACTURE SAMPLE QC CHECK PACK MARK PALLETISE STORE PICK PALLETS DESPATCH RECEIVE REPAIR PALLETISE SAMPLE STORE PICK PALLETS DESPATCH INSPECTIONS CERTIFICATES CLEAR CUSTOMS PORT LEVY THC ORIGIN B/L ISSUE LOAD SAIL INSURE TO FOB CESSES ASSOC CHARGE RECEIVE REPAIR PALLETISE SAMPLE QC CHECK STORE RE-PACK MARK FUMIGATE PICK PALLETS CONTAINERISE DESPATCH AUCTION CHARGES FINANCE CHARGES AUCTION CHARGES FINANCE CHARGES BUYING CHARGES TRANSPORT LOTS TRANSPORT LOTS RAW TEA SUPPLY CHAIN: Manufacture – Auction - FOB TRANSPORT CONTAINER

24. BUYERS WAREHOUSE 1. ESTAT E PRODUCERS WAREHOUSE MANUFACTURE EXPORTING MANUFACTURE SAMPLE QC CHECK PACK MARK PALLETISE STORE PICK PALLETS DESPATCH RECEIVE REPAIR PALLETISE SAMPLE STORE PICK PALLETS DESPATCH INSPECTIONS CERTIFICATES CLEAR CUSTOMS PORT LEVY THC ORIGIN B/L ISSUE LOAD SAIL INSURE TO FOB CESSES ASSOC CHARGE RECEIVE REPAIR PALLETISE SAMPLE QC CHECK STORE RE-PACK MARK FUMIGATE PICK PALLETS CONTAINERISE DESPATCH AUCTION CHARGES FINANCE CHARGES AUCTION CHARGES FINANCE CHARGES BUYING CHARGES TRANSPORT LOTS TRANSPORT LOTS RAW TEA SUPPLY CHAIN: Manufacture – Auction - FOB TRANSPORT CONTAINER THE PACKERS ARE SQUEEZING THE TEA PRODUCERS TO BECOME MORE EFFICIENT

25. 1. ESTAT E PRODUCERS WAREHOUSE MANUFACTURE EXPORTING MANUFACTURE SAMPLE QC CHECK PACK MARK PALLETISE STORE PICK PALLETS DESPATCH RECEIVE REPAIR PALLETISE SAMPLE QC CHECK STORE FUMIGATE PICK PALLETS CONTAINERISE DESPATCH INSPECTIONS CERTIFICATES CLEAR CUSTOMS PORT LEVY THC ORIGIN B/L ISSUE LOAD SAIL INSURE TO FOB CESSES ASSOC CHARGE FINANCE CHARGES SELLING CHARGES TRANSPORT LOTS RAW TEA SUPPLY CHAIN: Manufacture - Private Sale - FOB TRANSPORT CONTAINER MAINLY BY TAKING COST OUT OF THE SUPPLY CHAIN

26. Main Conclusions Packers margins are low (4-8%) Retailers margins on branded are also low (5%) Retailers final margins are higher on their own label (20%) Depending on product type & components, 40- 60% of the Retail price is Packers costs Really only Tea Estates make money out of Fair Trade. Fairtrade remains niche & is outside the Auction Market Mechanism.

27. THE OVERALL TEA SUPPLY CHAIN & ITS COST STRUCTURE Reminders  This is average data This averages all Packers Data This looks at Average Auction Prices Data mainly for 2004 & 2005 THE END April 2006