1. Thirsty Thoughts Tea Annual Market Quantification December 2011

2. Tea market context 2 BMI’s quantification of the tea market is analysed by the following four categories: Black tea Iced tea Rooibos Speciality tea The mainstay of the market is black tea. The sheer volume of this category dominates the tea market, as is evidenced by the 58.3% share it commands of the overall market volumes. Traditionally the black tea market has been fairly static, and thus has lost share to alternative tea categories. Rooibos and iced represent the second tier of the market volumes. Speciality tea maintains a niche positioning with small volumes and good growth. The raw materials required for black tea are imported, whereas rooibos is cultivated in South Africa and category volumes are highly dependent on the crop for the year.

3. 2010 Category Breakdown 3 Note: Iced tea dehydrated for comparison sake with other dry beverages

4. 2010 Category Distribution 4

5. Annual Growth Rates 5 The cyclical trend shown in the chart is driven predominantly by black tea, given the sheer volume of the category and the market dynamics at play with it.

6. Black tea cyclical 6 The black tea category continues to dominate the tea market overall, maintaining a 58.3% share of the market for 2010. The performance of the category has been somewhat volatile with a clear cyclical two- year trend being observed since 2005. The growth of 3.4% seen for the base year follows a 2.5% decline in 2009. It is believed that this trend may be a function of the raw material imports required to produce the black tea volumes consumed locally and, with this being a dollar traded commodity, the category sales and volumes are directly related to the Rand/Dollar exchange rate. The slight strengthening of the Rand to the US Dollar from 2009 to 2010 may have contributed to increased imports and thus the increase in volumes. It is believed that black tea represents a natural consumer entry point to hot beverage consumption, and that there is a level of traffic from black tea to mixed instant coffee as disposable income grows and consumer palates seek more sophisticated offerings. The outlook for black tea is conservative. Limited increases of 2.3% and 1.8% are anticipated for 2011 and 2012 respectively.

7. Iced tea growth tapers off 7 The 2010 year saw the second consecutive single digit growth (3.9%) for iced tea throughout the recorded historical volumes for the category. All annual increases before this point had been double digit, with the annual growth rate averaging out at 42.9% overall. Iced tea is a relatively new category compared to the likes of fruit juice and other more established categories. Given this dynamic, it is understandable that iced tea would show higher than average growth year on year as the category grew in top-of-mind awareness and popularity. The extreme slowdown in growth seen during the past two years, is evidence that iced tea is settling into a more “normal” rate of growth per annum. In addition, 2009 marked the depths of the global recession and the economic slow down put a cap on consumer spending. Manufacturers and importers were forced to keep a low profile and maintained business rather than trying to grow volumes. The equally slow growth in iced tea consumption in 2010 represented a continuation in the trend set during the previous year. The category saw only a 3.9% for the period and, while this may be a healthy growth rate for many competing beverage categories, it is far from the tremendous growth seen historically.

8. Iced tea growth tapers off (Cont.) 8 The outlook for the category remains positive but conservative. Iced tea volumes are expected to yield a 6.7% growth for 2011 and 2.5% per annum for the medium term overall. While iced tea volumes grew by 3.9% during 2010, category value growth was higher. It is believed that this value growth incorporates inflationary increases and input costs which have also increased from fuel to raw materials and even packaging costs.

9. Rooibos gains global popularity 9 Rooibos makes up 31.6% of the total tea market volume, and 25.1% of the total market value. The share of the category relative to other tea products has increased steadily in recent years. Displaying the highest growth rate of all tea categories, rooibos experienced 13.8% growth from 2009 to 2010. This growth is driven primarily from a supply perspective, with the market volume for the year being dependent on the crop yield. With the growth in popularity of rooibos, both in South Africa and internationally, local growers have worked hard to meet the increasing demand. Evidence of this is seen in the good growth for the base year. The majority of the base year volume growth was channelled into the export trade, with a tremendous increase of 39.9% seen in this sector for 2010. Retail volumes saw a slight decline with this possibly due the preferential channelling of volumes onto global markets. Limited growth is expected for rooibos in 2011 and 2012 as market volumes reach parity with consumer demand.

10. Speciality tea small but strong 10 While speciality tea makes up only 2.5% of the total tea market volume, it achieves a far higher proportion (10.6%) of the total market value. This relatively high value category commands premium pricing with top end variants on offer. Of all the tea formats, the speciality tea category has shown the strongest consistent year on year growth since 2004, with double digit increases each year. The base year was no different, with a 18.8% increase in volumes for 2010. It is believed that category growth has been fuelled both from a supply and demand perspective. From the supply side, there has been a steady supply of new variants to encourage consumer interest in the category, while on the demand side consumers are actively seeking out food and beverage options that offer health and wellness benefits. It is believed that the interplay of these two market dynamics has underpinned the steady growth seen by this niche category. The outlook for the category remains positive with a 17.8% increase expected for 2011. This growth rate is expected to taper off somewhat during 2012.

11. Thirsty Thoughts Tea For more information, contact: Jan Wegelin Research Manager Tel: (011) 615 7000 Mobile: 082 938 0744 www.bmi.co.za