Competition in the Market Place Comparison of Coffee Tea in the Global Beverage Market Judith Ganes Chase President J by joj13098

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									Competition in the Market Place

 Comparison of Coffee, Tea in the Global Beverage
               Judith Ganes-Chase
            J Ganes Consulting, LLC
 Competitor Beverages Flourishing
• Soft drink consumption is still huge despite some resistance
  due to association with obesity and diabetes resulting in a
  decline in usage.
• New products and markets for functional drinks:
   – Water has become a flavored, vitamin infused beverage
   – Sports drinks marketed to athletes
   – Energy drinks offer massive amounts of sugar and caffeine,
     along with guarana, ginseng, taurine, and many others
   – Small “energy shots” offer concentrated caffeine and other
     chemicals to provide instant boosts of energy
  Global Beverage Market
Change in volume

                         2004/05   2005/06   2006/07   2007/08
Coffee                     -0.5%      1.6%      1.0%      1.6%
Bottled Water               7.2%      7.1%      6.1%      5.6%
Sports Beverages           25.2%     10.6%      5.6%      1.5%
Tea                         2.2%      3.9%      3.3%      4.8%
Carbonated Soft Drinks      1.0%      4.2%      1.3%      3.3%
Coffee Use Still Growing Though
              millions of 60 kg bags
 Producer Coffee Demand Growing
• More and more cafes are being opened in producing
  countries, promoting coffee consumption domestically.
• These campaigns have been met with success in Brazil, India,
  Colombia, El Salvador and elsewhere.
• Consumption in producing countries and emerging markets
  expected to continue to see faster growth than more
  traditional markets overall, despite the weaker economy.
  However, as the recession drags on some countries are
  particularly vulnerable to a slow down. The actual loss in bags
  is limited.
• Educational programs and emphasis on health benefits
  helping to maintain demand.
 Water No Longer Just Water
• Flavored and enhanced water is a growing market, adding to
  the huge demand for bottled water.
• These beverages are again marketed to health conscious
  consumers. Many products include not only flavoring but also
  vitamins and minerals, leading to the phrase “enhanced
• Many of these water products also contain sugar, which
  places a fine line between these enhanced waters and other
  types of beverages.
 Sports Drinks Promise Multiple Benefits

• Sports drinks target the active lifestyle consumer, promising
  hydration along with a myriad of flavors.
• Behind North America, Asia Pacific is the second largest consumer
  of sports drinks, with over 70% of this volume generated by Japan
  and China alone.
• Recent products are moving toward a sport-energy drink hybrid,
  capitalizing on the demand for energy drinks. These may include
  the same ingredients as traditional energy drinks, but also many
  natural components focused toward a healthy body.
• These beverages continue to add multiple benefits to the consumer,
  packing various vitamins and minerals into every drink.
  Tea Remains a Global Player
• Tea is still widely consumed. In fact, second to water, it is the
  world’s most consumed drink.
• United Kingdom is still the largest consumer, with 165 million
  cups consumed daily, compared to 70 million cups of coffee.
    – Tea consumption estimated to have increased by 3% in 2009, after
      decades of stagnation and decline.
• New bottled teas market toward those looking for an
  alternative to soft drinks.
• Green and white teas are focused toward health conscious
  consumers, offering antioxidants and nutrients not found in
  other bottled beverages.

Source: UK Tea Council
  Tea Gains Footing as a Healthy Drink

• Tea becoming viewed as a smart and natural healthy drink
• Many scientists are researching the various health benefits of
  tea, including reducing the risks of cancer.
• Specialty teas are a quickly expanding subset of global tea
  consumption. Sales of specialty teas now outpace regular tea
  in countries like Canada.
• The United States has seen a huge growth of the tea industry
  in the last 20 years. In the US, approximately 85% of tea is
  consumed as iced tea, a competitor more to sodas and waters
  than generally hot drinks such as coffee.

Source: Tea Association of Canada, Tea Association of the United States
 Health Benefits Drive Marketing
• New RTD products emphasize teas’ antioxidant content and
  the benefits of flavonoids.
• Snapple recently retooled its formulas and redesigned
  product labels to promote the healthiness of its tea blends.
• Green tea used to flavor and “enhance” appeal of other
  beverages, like the new and popular Canada Dry Green Tea
  Ginger Ale.
• White, red and chai teas also drawing attention.
   – In 2009 NESTEA introduced NESTEA Red Tea, made from the leaves of
     the South African Rooibos plant.
 Tea Sales Increase Despite Economy

• Prices have surged as consumption growth has outpaced the
  increase in production by 3.4%.
• In some developing markets like Russia, demand has shifted
  from more fashionable, expensive drinks to traditional, lower-
  quality tea.
• In developed countries, gourmet tea has been an “affordable
  luxury” and sales have remained strong.
   – 2,600 specialty tearooms in the U.S. and growing.
  U.S. Tea Consumption Growing
Estimated Wholesale Value of the US Tea Industry (billions of dollars)

                                               1990             2008
Traditional Market                                    $0.87              $1.95
R-T-D Market                                          $0.20              $2.80
Foodservice Segment                                   $0.50               $1.0
Specialty Segment                                     $0.27               $1.1

Source: Tea Association of the United States

U.S. Tea sales expected to grow 20% by 2013 – Business
Monitor International
  U.S. Tea Market
Sales Composition

                     2007    2008    2009    2010    2011    2012
RTD canned/bottled   47.3%   46.8%   46.0%   46.2%   46.9%   48.2%
Bagged/loose         28.5%   29.1%   29.8%   29.5%   28.8%   27.5%
Instant              12.3%   11.9%   12.1%   11.9%   11.7%   11.2%
RTD refrigerated     11.8%   12.2%   12.1%   12.3%   12.7%   13.1%
Total Market Value
                     $2.49 $2.49 $2.43 $2.46 $2.53 $2.67

Source: Mintel
  U.S. Tea Market
Sales Growth Forecasts

                   2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
canned/bottled      22.6%    -1.3%   -3.9%   1.4%    4.5%    8.6%
Bagged/loose        -0.1%     1.8%   -0.1%   0.3%    0.4%    0.8%
Instant              2.3%    -3.6%   -1.0%   0.0%    0.7%    1.7%
RTD refrigerated    15.7%     2.4%   -2.3%   2.7%    5.6%    9.4%
Aggregate           11.8%    -0.2%   -2.3%   1.1%    3.0%    5.7%

Source: Mintel
 Convenience is King
• With time becoming a limiting factor in today’s society, coffee
  must adapt to this same lifestyle.
• Instant, or soluble, coffee is a good start to compete with
  these new easily accessible beverages.
• Starbucks is trying to capture this market with introduction of
  VIA Ready Brew Instant Coffee.
• One of every three cups of coffee consumed in the world is
  instant coffee. The instant coffee market has potential to be
  transformed away from traditional small glass jars and tins.
• Liquid coffee also makes the product more convenient to put
  in more retail locations with ease of use.
 Home Brewing Innovation
• Home brewing has become a growing industry, especially due
  to recent economic conditions.
• Some home coffee pots imitate the single cup feeling by
  having many different flavors of coffee in single-serve brew
  capsules or pods. These usually brew in less than one minute
  per cup, faster than waiting in line at the local café.
   – Dozens of coffee and tea options for each system.
• Pyramid teabags and powdered teas enjoying a resurgence.
 Are Energy Drinks a Threat?
• In many contexts, energy drinks compete more with soda
  than traditionally hot beverages like coffee and tea.
• Invoke a macho, hardcore lifestyle, appealing to a younger
  demographic not typically associated with coffee drinking.
   – The National Coffee Association of USA found that the average age of
     specialty coffee drinkers is 43.
• Frequently (and controversially) used as mixers in alcoholic
  beverages in a way coffee and tea aren’t.
• Youth still drinking coffee.
   – Young adults who drank coffee consumed 3.2 cups per day in 2008 as
     compared to 2.5 in 2005.
 Energy Shots More of an Issue
• Energy shots’ appeal comes from their simplicity and
  convenience – they are a quick boost in a small package.
• Unlike most other energy drinks, they are most popular with
  mature consumers who need a caffeine fix to help them
  handle their busy schedules and stay awake during the day.
• Energy shots could very well be a preferable alternative to
  coffee in such settings.
• Many shots are even marketed as containing “as much
  caffeine as a cup of coffee.”
   – 7-hour shots have as much caffeine as a “large” cup of coffee.
  U.S. Consumption Demographics
Tea usage by age, February 2009
                   All    18-24   25-34   35-44   45-54   55-64   65+
Hot Tea             68%     62%    65%     63%     70%     77%    71%
Fresh Iced Tea      68%     62%    70%     65%     72%     77%    63%
Bottled Iced Tea    52%     61%    61%     55%     55%     51%    31%
Canned Iced Tea     43%     53%    53%     45%     45%     42%    22%
iced tea            42%     48%    49%     41%     39%     42%    32%
“smoothie”          17%     29%    26%     16%     16%     12%      6%

Source: Mintel
  U.S. Consumption Demographics
Incidence of drinking RTD iced tea among teens, 2004-08
                   2004           2006            2008
                   45%            48%             51%

Source: Mintel
  U.S. Consumption Demographics
Coffee consumption compared to last year, by age, September 2009
                   All   18-24    25-34   35-44    45-54    55-64   65+
More coffee than
last year          17%      37%     29%      22%     11%       9%     5%
Less coffee than
last year          21%      34%     23%      17%     22%      23%    16%
About the same
as last year       61%      28%     48%      62%     67%      68%    79%

Source: Mintel
   Coffee and Tea Prices
                               Cents per kg/pound

Source: IMF Primary Commodity Prices
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