1. Reading the Tea Leaves: Growing Sales & Profits with Tea A Panel Discussion & Presentation by: Joe Simrany – Moderator, Tea Assoc. of the USA William Bowron Jr- Red Diamond Inc. Eliot Jordon- Peet’s Coffee & Tea George Vukasin Jr.- Peerless Coffee & Tea

2. 2 Objectives of this Session Brief update on the State of the Tea Industry Current consumer trends Future trends & forecasts Integrating tea into a coffee environment Questions from the audience

3. 3 Tea Imports into the USA in 2008 The USA imported nearly 240 million pounds of tea in 2007 Full year 2008 figures are just in and indicate over 257 million pounds or nearly 117 million Kg were imported in 2008 This makes the USA the seventh largest consumer of tea after China, India, Russian Federation, Turkey, Japan, and the United Kingdom

4. 4 Tea Imports – USA Kg(000) YEARBLACKGREENTOTAL% CHG. 200284,1569,29593,451 200382,13212,05494,186+1.0 200487,71711,76799,484+5.6 200585,92714,139100,065+1.0 200689,09818,474107,572+7.5 200791,15418,237108,733+1.1 200899,90516,845116,607+7.4

5. 5 Tea Imports into the USA (Kilos) Three Year Rolling Average 2005-20072006-2008% Inc/ dec Black Tea88,727,80093,387,1005.2 Green Tea16,950,40017,852,3005.3 Total Tea105,678,200111,239,4005.3

6. 6 Size of the Tea Market in U.S. 1990 $Value by Type Trad. $0.87 Billion RTD 0.20 “ Fd Srv 0.50 “ Special 0.27 Total $1.84 Billion –Green $20 Million 2008 $Value by Type Trad. $2.00 Billion RTD 2.95 Fd Srv 1.02 Special 1.16 Total $7.13 Billion –Green $1.5 Billion

7. 7 Change in Tea Consumption by Revenue & Segment

8. 8 Tea Sales ($) Forecast to Double over Next 5 Years A reputable market research firm (Packaged Facts) has forecast that the Dollar value of tea in the United States will move from over $7 Billion in 2008 to nearly $15 billion by the end of 2012! Green Tea is growing at a much higher rate than Black Tea; up over 200% in Kgs. Over the last ten years

9. 9 Traditional Tea Trends Historically this has been the largest tea segment at $2 billion Price points have been stagnant for years & typically sell for under $3 per package which is a significant consumer appeal in a tough economy Tendency has been to smaller packages (under 100 count) to overcome price issue Packers are beginning to use a health message to sell. Advertising effort is minimal but increasing

10. 10 Consumer Issues Driving Traditional Tea Growing number of scientific studies suggesting tea plays a role in the inhibition of many chronic human diseases Widespread acceptance by the scientific and medical communities that tea is a healthy beverage Widespread awareness by the media that tea is proven to be a healthy beverage Tea enjoys positive imagery regarding its contributions to health versus other beverages Traditional tea pricing is very appealing

11. 11 Developments to Watch Traditional Tea –Smaller pack sizes –Packaging & process innovation –Health claims –Increased consumer marketing –Blending of traditional tea with specialty tea

12. 12 RTD Tea Trends RTD within a span of 10 years has gone from virtually nothing to the single largest tea segment It is responsible for appealing to a much wider audience than traditional tea Many powerful marketing alliances have been formed with soft drink & water companies Prospects for future growth are excellent TEA

13. 13 Consumer Issues Driving RTD Tea RTD tea appeals to the individuality of consumers RTD teas continue to appeal to the demand for convenience and availability Other beverage options are seen as being less healthy than tea Concern with obesity is driving many consumers to tea

14. 14 Developments to Watch RTD Tea –Continued flavor exploration from existing & new suppliers –Functional teas linked to health –Specialty Tea entries –Marketing directed against bottled water

15. 15 Foodservice Trends Tea is more difficult to prepare than coffee & is often served incorrectly Equipment manufacturers are beginning to address the issue by developing faster processing methods Operators are starting to do a better job with tea because of the profit potential & consumer demand Some high end restaurants are employing Tea Sommeliers

16. 16 Consumer & Trade Issues Driving Foodservice Tea High profitability potential attracts entrepreneurs Increasing preparation options encourages greater foodservice utilization Trend towards natural foods favors tea in general and organic tea specifically Emerging Tea “Salons” are making Specialty Tea more available

17. 17 Developments to Watch Foodservice Tea –Improved preparation & variety –Improved consumer demand driven by concern for health –Resurgence of loose tea –Increased operator merchandising –Greater awareness of profit potential

18. 18 Specialty Tea Trends Fastest growing segment in the industry Ten fold increase in the number of tea rooms from 200 to 2400 Most coffee houses now offering specialty tea Tremendous profit potential attracting entrepreneurs and stimulating producing country interest

19. 19 Consumer & Trade Issues driving Specialty Tea Trends Promise of high profitability is drawing thousands of entrepreneurs to sell various forms of tea The number of tea rooms has grown from 200 to 2200 over the last 10 years in America Thousands of Coffee Houses have added Specialty Tea Affordability to consumers

20. 20 Developments to Watch Specialty Tea –Rapid expansion of tea outlets –Emergence of 1 or 2 National operators –Increased Producing Country involvement in marketing (Tata & Tea Boards) –Greater availability of Estate Teas

21. 21 Prospects for Future Growth Traditional Tea is expected to realize annual growth in the 2-3% range although a prolonged recession could drive higher growth RTD Tea will continue to experience robust growth in the range of 5-10% annually Foodservice Tea will experience annual growth in the low to middle single digits Long term, Specialty Tea will become the fastest growing segment with annual increases in the 10-20% range

22. 22 Calm-A-Sutra Contest

23. 23 Integrating Tea into a Coffee Environment Panel Discussion Questions from the audience Further information please visit www.teausa.org