Tipping Point Convinced of tea’s health benefits and willing to experiment with different varieties in seeking superior taste, tea drinkers are visiting an expanding number of retail locations serving and selling packaged specialty tea. Rising affluence and the desire for convenience drive sales of hot and iced teas and have prompted Starbucks, DavidsTea, Argo Tea, Teavana and Unilever to open hundreds of new outlets. Middle class residents in urban India are showing a similar desire for tea at branded shops such as Golden Tips, airport shops like Chamraj (UNITEA) and Manjushree Tea and revitalized tearooms such as Cha Bar at OXFORD book store, Dolly’s Tea shop, Camellia bars, Tea Junctions Kolkata, and independent ventures like Chado Tea India in Mumbai. Premium Switch In the past year sales overall continued to climb due to the move to premium rather than greater volumes of tea. A tea cup of fresh leaf is six grams and a tea bag is closer to 4 grams. There is even less tea in a K-Cup but the difference in price is 3x to 6x. Last year Canadians drank about the same volume of tea and the same number of cups per capita but sales of specialty tea exceeded conventional (total volume is still greater for conventional). This is happening in the U.S. Sales in grocery are slipping as traditional brands lose ground. The industry is currently $8.7 billion but will quickly grow to $15 billion in three years (and some say sooner) despite the economic doldrums.

1. Tipping Point
Investors are spending millions seeking a retail format
that will trigger the tipping point for tea.
Dan Bolton
Editor & Publisher
World Tea News (trade) | Tea Magazine (consumer)
www.WorldTeaNews.com | www.TeaMag.com

2. Tipping Point
Starbucks, founded in 1971, had opened only 11 stores by 1987. In its
first 20 years the company averaged about five new stores a year.
Starbucks posted a $330,000 loss the year Howard Shultz acquired the
company for $3.8 million. Losses by 1989 topped $1.2 million.
And then specialty coffee tipped.
In 1992 sales grew 80%. Starbucks opened 53 U.S. stores that year,
averaging one a week. Fourth quarter earnings rose 172% as profits
climbed 70% on sales of $93 million.
Years after Starbucks’ 1992 IPO, one of the most successful in history,
CEO Howard Schultz publicly attributed his company’s success to the
tipping point phenomenon described as:
“That moment in time when the momentum for change becomes
virtually unstoppable,” according to Malcolm Gladwell, author of The
Tipping Point: How Little Things Can Make a Big Difference.

3. Talking Points
 Big investments are fueling rapid retail growth in North America.
Tea processing (blending & bottling) is now a $1 billion industry.
 Quality tea is in demand. Hot beverage sales climbed 18% in 2012.
 The right retail format will trigger a Tipping Point leading to 1,500
new tea shops (totaling 5,000 of 30,000 specialty beverage retailers)
with a significant rise in sales of premium packaged tea in grocery.
INDIA’S OPPORTUNITY
 As European Union imports slacken America’s economy improves.
Tea enthusiasts there readily pay Rs850 for 100 grams of tea ($17).
 India’s growing domestic market for branded tea which has driven
prices to Rs200 makes it possible for growers to sharpen their skills
to the point where they can sell direct to U.S. and EU retailers paying
Rs1400 to Rs2800 ($25 to $50) per kilo.
 Pay attention to my last slide. It may make you a crorepati!

4. American Tea Drinkers
 Daily 48% consume tea (85% black/14% green/65% teabags). Hot
drinkers prefer herbals, with 60% choosing sweet fruit-flavored tea.1-5
 Eighty five percent drink iced tea, 5.6 billion servings in foodservice.1-3
 Ready-to-drink tea is the fastest growing (11.5%) beverage segment
in the U.S. gaining share against market leading soft drinks and fruit
beverages. In 2011 volume was up 4.8% and growth exceeded
bottled water. Sales of 100% juice are down 4% and sales of fruit
drinks, some now blended with tea, are up 2.1% and now represent
46.4% of the juice market.2 RTD tea sales: $3.5 billion.1
 America is now one of the top three tea import markets in the world,
surpassing Britain in 2010 and growing faster than Russia (CIS).3
 Green tea imports are up 200% in 10 years, now worth $1.5 billion
share of the market (2010).1
 In 2011 India sent 13,510 metric tons to U.S. and 1,960 to Canada.3
1 Tea Association of the USA
2 Beverage Marketing Corp.
3 Nielsen MarketTrack National (CAN) 52 Wks. Ending July 28, 2012
4 International Tea Committee: September 2012 Web Summary, Exports by Origin: India
5 Source: Mintel International Customer Survey, Tea Association of the USA Fact Sheet

5. Market Trends
Total Beverage Sales ($ billions)
U.S. $58,851 - Canada $4,937
Tea Sales ($ billions)
U.S. $8.7 (2011) - $10-$15 (2012)
Households that purchased…
U.S. 60% (28.9% tea / 37.9 specialty tea)
Canada 63% (29.2% tea / 43.9 specialty)
Foodservice
Hot beverages is leading growth
Sales up 18% 2011-12 (See Chart)
Single-serve (3 billion K-Cups sold 2011)
Celestial Seasonings up 162%
Starbucks $1.2 billion (mainly coffee)
Nielsen MarketTrack 52wk July 28, 2012 (Chart)
85.9 84.1 75.8 72.6
14.1
15.9
24.2
27.4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2011 2012
Canada
Hot & Cold
Beverage
Sales
U.S.
Hot & Cold
Beverage
Sales
+18% +18%
HotCold ColdHot
North American Beverage Sales

6. Market Segments & Value
Retail Consumer Packaged Goods ($2 billion)
Dry tea consumed in the home (in 25 to 100 ct. boxes, single-serve and some 100g pouches)
Off-premise RTD tea ($3.5-$4 billion)*
Bottles/cans sold in places where customers aren't staying to eat food (grocery/convenience)
On-premise RTD tea ($4 billion)
Bottles/cans sold in places where customers are staying to eat food (grab’n go)
Fresh-brewed premium ($1.5 billion) (predominately hot)
Specialty beverage retailers offering loose leaf/premium tea bag, hot or hot over ice
Traditional room and modern tea merchant (wet and combination wet/dry)
Coffeehouse, tea-themed restaurant and hotel afternoon or dessert tea service
Restaurant (NDP NUMBER)* (predominately cold)
Conventional tea fresh-brewed pod and concentrate prepared in large quantities typically iced.
Fast-food and fast-casual teabags
Fresh brewed (hot) and convenience iced concentrates for take-away
Fine dining includes both loose leaf and premium teabags.
*NDP has total foodservice servings at 5.6 billion and Nations Restaurant News reports a
number associated with restaurants broken down by category.
*Euromonitor $3.9 billion

7. Next week Tazo, a $1.4 billion (Rs7,483 crore)
Starbucks brand, will open its first stand-alone
tea shop in Seattle. The store will offer packet
tea, herbals and teaware with a unique blending
bar for customers to mix their own teas.
This overwrap says “Calm” but Tazo’s
entry into the U.S. market will energize
the segment to open 1,500 new shops.
Late this year in the EU Unilever/Lipton will
unveil its own concept for branded tea retail.
Big Brand Tea Retail has finally arrived…
Big Brand Retail

8. Lipton’s first U.S. Tea House opened 15 years ago
in Pasadena, Calif. with 52 loose leaf tins, innovative
tea lattes, chai and scones that are now standard.
Unilever abandoned the concept in 1999.
The store never reached its revenue goals, says
Peter Goggi, who was Lipton’s Director of Tea Buying at the time.
What is different today? Consumer spending has leaped from
$1.7 billion (1999) to at least $10 billion (Rs54,000 crore)
Last year American Tea Room, a store very similar to Lipton
located a short distance away, earned $1.5 million (Rs8 crore).
Teavana this year will earn $231 million (Rs1,238 crore) from
302 shops with 51 in Canada and 16 in Mexico and 1 in Kuwait.
Since 2007 DavidsTea has built 100 stores with 14 in the U.S.
What’s Different This Time?

9. Timeline
2012 – Tazo rebrands and introduces custom tea to customers in new retail store
following 43% sales gains in foodservice and grocery to earn $1.4 billion in 2011.
2012 – The $2.7 billion Lipton brand falters in RTD losing to AriZona and sees slack
sales in grocery where premium teas are taking shelf space.
2012 – Tea emerges with the strongest health claim among healthy beverages.
-------------------------------------------------------------------------------------------------------
2011 – Teavana IPO shows that tea merchants, previously seen as drowsy
earners, can top $1000 per sq. ft. with 63% gross margins in small format mall
shops.
2007 – DavidsTea makes the great wall of tea less intimidating by emphasizing
sampling with Canadian mall customers, growing to 100 stores (14 in U.S.)
2004 – Carbonated soda reaches its assent at 868 cans per year. Relentless
declines follow as Americans turn to water, tea, sport and energy drinks and juice.
2003 – Argo Tea founded in Chicago. Currently has 30 stores earning $25 million.
1997 – Teavana launches and eventually evolves a high-priced hard sell to earn $1
million in stores. The tea is a hit with many flavors and strong teaware sales.
1994 – Tazo founded in Portland, Ore., sold to Starbucks in 1999 for $8.1 million.
1972 – STASH Tea Co. founded in Portland, Ore. Opens only retail store in 2005.
1971 – Starbucks founded in Seattle, Wash. Original store sells tea & spice.

10. In March 2011 Starbucks unveiled a new logo
That CEO Howard Schultz explained “gives us the
freedom and flexibility to think beyond coffee.”
A few months later, after Teavana’s successful IPO
demonstrated that tea shops in malls could average
$900,000 in annual sales, Starbucks hired Charles
Cain, a seasoned tea retailer to head up the Tazo expansion.
Annie Young-Scrivner, chief marketing officer of Starbucks, told
stockholders at the company’s annual meeting that year:
“Tea is huge. Starbucks is reinventing a traditional beverage.”
Last fall Starbucks moved its Tazo operations from Portland, Ore.,
to nearby Bellevue, Wash., expanding its blending and distribution
capabilities. Tazo sales rose 43% during the past year.1
1SymphonyIRI (Bloomberg Businessweek Oct. 23, 2012)
Why Starbucks?

11. No one knows whether Tazo’s concept will work
but sales at specialty tea retailers top $1,000/sq. ft.
and that fact alone draws investors into the segment.
“The question is not whether there is current
demand to support rapid growth, but whether
there is the opportunity to raise the consumer's
expectations for, and interest in, good tea the same
way that others have done for specialty coffee, vintage
wine, and craft beer.” – Charles Cain, VP, Tazo Tea.
Starbucks has the deep pockets to test the concept and the
ability to rapidly expand should it prove successful.
“When they see an opportunity, Starbucks starts small and then
does things big,” says Cain.
Retail vitality is a reality

12. Lipton Sales Sag
Alfie Vivian, brand building vice president at
Unilever, says that the company’s Lipton tea
sources 12% of the world’s black tea crop, making
the $2.7 billion brand the “global market leader.”
Business is booming in MENA* where Lipton holds 70% share but in
America: “It’s almost become like a generic,” Mintel analyst David
Turner told Bloomberg Businessweek, “other brands have more
energy and motivation, and a better story to tell.”1
Sales volume has declined in three of the past four quarters for the
business unit housing Lipton’s portfolio of teas.
Lipton’s RTD teas, worth $652 million in sales in 2011, were pushed
from first place by AriZona Tea this year. Sales of Coca-Cola’s Honest
Tea, FUZE and Gold Peak were up 13% capturing market share.
In response Unilever’s $11.5 billion refreshment group is
working with Unilever Foodservice on a tea retail concept
to re-energize the Lipton, PG Tips and Lyons brands.
MENA (Middle East – North Africa trade region)
1 Bloomberg Businessweek Oct. 23, 2012

13. Battle of the Big Brands
$1.4 billion
Rs 7,483 crore
$11.2 billion
Rs 60,000 crore
$11.5 billion
Rs 61,617crore
$46.5 billion
Rs 249,147 crore
0 10 20 30 40 50
Tazo
Starbucks
Lipton Tea
Lipton (refreshments)
Unilever
$ (000,000,000s)
Annual Turnover: Unilever vs. Starbucks
$2.7 billion
Rs 14,458 crore

14. Big Brand Tea Retail
$220 million
$95 million (est.)
$25 million (est.)
$1,400,000,000
Rs 7,483 core
300 Stores
100 Stores
30 Stores
0 200 400 600 800 1000 1200 1400 1600
Teavana
DavidsTea
Argo
Tazo
Teavana DavidsTea Argo Tazo
Store Count 300 100 30 1
Revenue (millions) 220 95 25 1400
$ (000,000,000s)

15. Specialty Retail is Driven by…
Source: Tea & RTD Tea in the US. Packaged Facts, Oct. 2011.
 TASTE. Media & marketers keep the health attributes of tea
top-of-mind but taste remains the primary attribute cited
by 77% of respondents who purchase tea. Others buy it
because it is refreshing (68%) and healthy (42%)
 AVAILABILITY. The more readily available, the greater overall sales.
Canadian grocers stock larger selections of specialty tea and advertise
tea more aggressively. America’s 150,000 convenience stores, all with
high carbonated soda sales, report 6% RTD tea growth and 1%
increase in hot tea sales. Even vending is embracing tea.
 CONVENIENCE. Tea travelers, FUSO® tetrahedral and pyramid tea
bags, bottom dispensing infusers for loose leaf in restaurants and
premium bottled and canned teas (Ito-En, Numi, Republic of Tea)
make it much easier to find and enjoy premium quality tea.
Lets take a closer look at several North American retail
concepts earning at least $1 million (Rs5.4 crore) per store.

16. In June Teavana Corp. spent $26.9 to acquire 46-store
Teaopia, Canada’s second largest tea chain and now re-
branding. Comparable store sales are up 3.5%. Growth
was 38% in the last quarter and annual sales are
estimated at $220 million. Sales of dry tea are 55% of
Teavana Corp. (Atlanta, Georgia)
Teavana storefront Nashville, Tenn.
total (with 20% single estate-80%
blends); 41% is merchandise sales
and 4% foodservice. The average
transaction is $40. The stock
trades around $11 down by half
following the June 2011 IPO. Store
count will be approximately 350 by
year end with the first overseas
store in Kuwait City. Goal is to total
500 stores by 2015. Payback on
new store openings is 18 months.

17. Teavana Corp.
Teavana Holdings operates 302 stores: 284 in 37 states are company-owned with
51 stores in Canadian.
Expansion: 60 stores in FY 2012 with 105 since June 2011 growing
to 500 with franchise operations in Mexico (16) and Middle East (1).
Net Sales: $168.1 million (FY 2011 – 200 Stores)
 Operating income: +86% to $32 million (margin 18.8%)
 Online sales growth: 56% (7% net)
 Average store sales: $913,000
 Comparable sales: +8.6%
 Sales per gross sq. ft.: $980
 History: $63.8 million (FY 2008)
$90.2 million (FY 2009)
$124 million (FY 2010)
$168 million (FY 2011)
Estimate: $220 million (FY 2012)
Latest Fiscal Quarter (ending July 29, 2012)
Annual Net Sales Estimate: $222-231 million
Net Sales 2nd Quarter: $43.1 million +38%
Comparable Store Sales: 3.5%
Operating Margin: 10.89%
Share Price: $10-$11 ($10.87 on 10/26/12)
Market Cap: $419 million
IPO Asking Price: $17 (July 28, 2011 - NYSE)
Source: Second Quarter Financials, July 29, 2012, Teavana 2011 S1 NYSE, Ticker Symbol: TEA FY2011 Report 9/4/2012

18. DAVIDSTEA (MONTREAL, QUEBEC)
Expansion to a national chain of tea stores seemed destined for 25-
year-old David Segal, founder of DavidsTea. Sales at the first Toronto
store in 2008 quickly topped $3.8 million. Backed by retail veteran
Herschel Segal (Le Chateau) the Mont-Royal, Quebec-based firm
attracted a $14 million investment from Highland Capital in 2012.
DavidsTea stocks 120+ varieties with
many flavored and seasonal blends.
A 50g pouch of DJ-1 from the Jungpana
Estate sells for $15 and a 250g tin brings
$75 ($300 kg). A Japanese Iwachu
Hailstone Teapot sells for $108. The
retailer operates 86 stores in Canada’s
provinces with 14 U.S. stores in
San Francisco, New York,
Boston & Chicago. The
firm employs 1,050.
Queen St., Toronto
Lansdowne St., Peterborough

19. Argo Tea (Chicago, Illinois)
Argo Tea, headquartered in Chicago, is a pioneer in tea concentrates
in foodservice, offering tea lattes and grab-n-go food since 2003. The
company’s bottled teas are sold in 3,000 grocery stores. There are
now 25 locations in the Midwest and five in New York City with a new
store that just opened in Beirut, Lebanon. The
venture is backed by billionaire Sam Zell.

20. Urban Innovation
San Francisco’s three Samovar
Tea Lounges promote tea culture
amid 150 teas and gourmet food
and together gross more
than $3.2 million annually.
From left: James Norwood Pratt (Author), Joshua Kaiser (Rishi Tea), Jesse Jacobs
(Samovar), David Lee Hoffman (Phoenix Collection), Ahmed Rahim (Numi Organic Tea).

21. CAMELLIA SINENSIS (MONTREAL, QUEBEC)
Annual buying trips mean all 250 teas are sold within a year.
A $20,000 air exchange system ensures perfect conditions in
their 32-seat space. Tables for two focus on the tea. The shop’s
four owners, tasters all, limit expansion to three shops and 30
staff. The retail/wholesale operation makes up 85% of sales.
The teahouse earns 5% of gross sales and online sales
contribute 10%.
Tea is sold in 50 and 100g pouches.
Rare teas in 25g pouches. Tickets
average $12-$15. Online sales are
$10-15. An organic Fairtrade DJ-1
Darjeeling is $16 for 100g or $320
kg. More than 95% of Camellia’s
teas are purchased direct from
growers around the world.

22. AMERICAN TEA ROOM (BEVERLY HILLS, CALIFORNIA)
This California tea bar seats six. A pot sells for $5. Tea service
with scones is $20. Top selling Nirvana, a blend of Japanese
Sencha, berries, figs and kiwi retails for $15/100g. Food is 4%
of sales. Yet the this shop grossed $1.5 million (Rs8 crore) in
2011 and 2012 selling premium loose leaf and teaware.
How does he do it?
A typical transaction consists
of four $15-20 packets of tea
and an accessory. Average
ticket is $89 but topped
$100/Q4 (2011). On March 20
sales were $17,000 (Rs9.1
lakh) their best day yet.
 Exceptional online sales.
 Relentless marketing.
 Ever-changing offerings.

23. AMERICAN TEA ROOM
“We paid $340 per kilo for a white Darjeeling, the
rest were more in the $200 range. We ordered
several first flushes and will be bringing in both
white and slightly more oxidized first flushes from
Darjeeling. I was in Japan to inspect the first flush
Sencha in late April. The prices we are getting for
pre-rain Long Jing are $35 to $80 for 100 grams.
“We were fortunate to sell more than 40 kilos of
various first flush between May and July (when we
usually run out). We would buy more but much of
the finest and rarest first flush goes to Germany so
it is not so easy to get the quality we want. Our
Arya Pearl was extraordinary last year. It really
helped out with sales.” - David Barenholtz, founder
of American Tea Room in Beverly Hills, Calif.
David
Barenholtz, founder of
the
American Tea Room,
Beverly Hills, Calif.
Arya Pearl
$52 – 2 oz. (57 g)
$144 – 7 oz. (198 g)
$256 – 14 oz. (397g)
Inventory: 7 kilos
Gross: $50,400

24. How to be a tea crorepati
Every garden in India has a special hillside kissed by sun and shielded
from wind, with deep rich soil that rapidly drains; a carefully terraced
hillside of 10,000 bushes in their prime. These are healthy, sustainable
bushes with enough shade, just enough mist, just enough care to yield
9,000 kg of raw leaf sufficient to produce 2000 kg of superlative tea.
This is true in every region. In every state. In every garden.
High-grade leaf (30%) brings $50/kg
with 40% earning $20/kg and $5/kg
for the rest. Average: $24.50 – $25.
Selling direct to EU and U.S. packers
brings in $50,000 – reasonable for a
retail price of $17 for 100 grams.
First year: Rs2.6 million (26.88 lakh)
In four years: Rs10,000,000 makes
this hard-working grower a crorepati.
How to be a tea crorepati: http://www.linkedin.com/manageGroup?dispAddMbrs=&gid=1796519&invtActn=im-invite&cntactSrc=cs-connections&trk=grpmgrtab_invite
Example: Indi/BouTEAque Tea www.bouteaque.com
Source: Nigel Melican, TeaCraft www.teacraft.com
World Tea News LinkedIN Discussion Group www.linkedin.com

25. Next Steps
 It takes five years to develop the land, improve your tea-making
skills and establish market relationships to reach this threshold.
Join a Small Tea Growers (STP) Self Help Group (SHG) to start.
 Seek government (India Tea Board) assistance with replanting to
offset social costs such as health and housing facilities for workers.
 Create a brand. Now that tea retails for Rs200-290/kg in India it is
not essential to export. Innovative marketing and visibility will
(Chamraj) bring higher prices. Consumer demand is rising with per
capita consumption up 3% annually. Master the local markets first.
 If you choose to export devise a sophisticated sales presentation
tailored to the needs of buyers that serve premium clientele. Deal
only with those who are open-minded, respect the grower’s expertise
and recognize quality tea (firms like Harney & Sons in the U.S. or
Fortnum & Mason in the U.K.). Share experiences among fellow
growers to identify buyers honest enough not to exploit a newcomer.
 Take the initiative. The hard work is done in the garden.
Done well it can lead to riches.

26. 1108-21 Roslyn Road
Winnipeg, MB R3L 2S8
Canada
+1 204 788-1359 (CAN)
+1 415 799-8086 (US)
+1 650 576-0306 (Mobile)
Skype: dwjbolton
Dan@WorldTeaNews.com
www.WorldTeaNews.com
Dan@TeaMag.com
www.TeaMag.com
Thanks for this opportunity.
Dan Bolton
Editor and Publisher