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Modern Process Equipment

Specialty Tea Trends

BY RANDY ALTMAN

The worldwide low prices for tea are finally forcing modernization among the specialty tea producers. Premium tea is a niche market and a wonderful beverage, but often remarkably inefficient from a business perspective. This inefficiency has diverse causes, many revolving around almost unchanged multi-generational family business practice. Family feuds span generations, and ultimately lower the regional image for all involved. However, as profits become scarce, emotions take a back seat to the more rational realm of group-based financial survival.

The outside world looks at specialty-production regions as relatively uniform entities, Darjeeling the most famous. Internal factions unfortunately abound, and some differences have rational business causes, beyond merely family hatreds. Different goals are associated with size of company, and some estate owners are financially troubled while others are wealthy. Other factors exist, including amount of land owned, number of estates controlled, and number of labor-force. A distinct type of specialty ownership is the large corporation, sometimes a genuine Multi-National Corporation.

Sri Lanka specialty tea has similar factors, but differ from Darjeeling because of the unique history and terrain of the little island. Ceylon estates have a deep factional division based on the elevation of the tea grown. To simplify, you have the three categories of high, medium and low growth. Sri Lanka also follows the tradition of extensive estate operation by management “agent” companies. The owner-operated estates may have divergent self-interest from estates run by management agencies or joint-ventures.

China Mist's American Folk Art tea packaging
Whatever the region, specialty estates have minutely precise individualized claims. These claims, often accurate, can be the estate’s public-relations “talking point” for the unique attributes of the specialty output. But, these myriad “claims to fame” are universal in business promotion. The distinctiveness of individual specialty estates does not account for the factional disputes that plague premium tea businesses. Asia tends to follow the family-business model, but in specialty tea this really hits home hard.

Some of the young college-educated men who run estates confide to me with poignancy they do not want to be farmers at all, but family pressures dictate their entire working lives. Such personal factors perpetuate difficulty in coordination for the mutual advantage of all in the same region, especially advertising campaigns. The situation has been deteriorating because of unprecedented levels of dissatisfaction with farming among top college graduate males (women are effectively excluded). Now, there is light at the end of the tunnel.

For the first time in history, the Darjeeling Planters Association is considering creating a joint wholesaling entity, hoping to push region-as-brand identity and raise prices. Darjeeling is in trouble, if only because the typical tea bush is excessively old. Replanting is under performed, because the short-term income is too low to allow expenditure for bushes that will not produce income until they reach maturity. However, new global lifestyle trends are changing consumer behavior so that willingness to pay higher price for fine tea is more likely.

No, this lifestyle trend is not the much-discussed healthfulness orientation. The newest macro-trend is post September 11, and is manifested by the radical decline in middle-class to upper-class families traveling by air. Far fewer expensive vacations are taken. The new trend is “stay at home,” with discretionary expenditures increasingly allocated for home-based enjoyment. The exact demographics who are willing to pay for premium tea (air-traveling vacationers) now have more discretionary spending and more time at home to appreciate beverage attributes.

The latest lifestyle development is home-centered safe relaxation, exemplified by the many millions of new DVD sales. Specialty tea is low-cost by comparison and a potential fixture in the home-as-safe-haven. And, the “exotic image” aspect of specialty tea appeals precisely to these affluent millions of consumers who normally travel but now stay home.

Regional specialty tea organizations are beginning to act on their own to reach consumers and protect the product, without help from bureaucratized Tea Boards. Regional associations may themselves initiate lawsuits over trademark and copyright. Export globalization is rapidly accelerating, too rapid for standard government-bureaucratic delay. Tea executives now coordinate activity to uphold regional rights.

Within nations-of-origin, the main “right” to protect and promote is region-specific branding, with associated trademark and copyright, including slogans and logo. Specialty companies compete for retail buyers in the West, but must now strategize together, pool what power they possess, and finally act aggressively not against each other, but against obstacles to selling tea. In the affluent nations, the marketing of specialty tea is changing more quickly than the producer regions’ actual product. Tazo, owned by Starbucks, recently reorganized its professional staff for quicker market response. Steve Cohen is manager, communications and social responsibility, and Amy Yukas is product manager, ready-to-drink.

Tazo is sold in thousands of venues, including every Starbucks, for direct channels to the affluent consumer. Tazo also sells to brokers who warehouse the tea, often for retail to Natural Foods stores, a venue with an elite demographic combining discretionary income and health focus. Tazo plans expansion toward regular grocery stores and to the gift-basket market, indicating that larger volumes of specialty tea can sell, if the proper strategizing takes place.

Tazo routinely uses pioneering blends in their premium tea. The Earl Grey lists three interesting locations, Nilgiri, Assam and Ceylon. Tazo carefully blends fine teas with Darjeeling, a region too-often ignored for blending. Darjeeling executives must learn to expand into the superpremium blend market. Tazo uses high-quality CO2 process for decaf tea, including decaf green tea, a newly expanding specialty market.

One fast-growing company that proves consumers will spend money for good product is New Chapter, Inc. Their powerful slogan is, “At last, the perfect combination - Great taste and instant results.” This succinctly involves two factors that entice purchase, convenience and pleasure. New Chapter is mostly in the supplement business, thus well-versed about health as a promotion vehicle. New Chapter’s significance is the price structure. A four ounce bottle retails for $14.99, with the label stating, “Makes 24 cups of delicious tea.“ This price-per-cup for home beverage demonstrates that consumers in the West will pay the “dear” prices the producers seek.

The whole price system for producers fluctuates, hence the overly trendy idea to establish a Futures Exchange. My research indicates a Futures mechanism for a graded leaf commodity will likely lack sufficient independent tight oversight and telecommunications infrastructure. The chairman of the Colombo Tea Traders Association, Mahen Dayananda, questions rapidly instituting radical change. Dayananda embodies advanced multi-national corporate authority, from Sri Lanka to Singapore to Europe.



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