Tea - Canada- Market Report
HEADLINES
- Off-trade value sales of tea reach C$365 million in
2010, up by 3%, while total volume increases by 1%
- Tea consumption, especially of speciality tea, is
becoming more fashionable, boosting consumption of unpackaged tea at the
expense of packaged tea
- Green tea shows the highest total volume growth in
2010, of 6%
- Unit prices are going up, as consumers are trading up
to more expensive speciality teas
- Tetley Canada Inc leads off-trade sales, with 34% of
off-trade value
- Tea sales are expected to grow by a CAGR of 1% in total
volume terms over the forecast period, to 20,100 tonnes, while off-trade
value will grow by an annual average of 2%, to reach C$402 million at
constant 2010 prices
TRENDS
- Total volume sales of tea rose only marginally in 2010,
by 1%, overall to 19,200 tonnes. On-trade sales were slightly more dynamic
than off-trade sales.
- Two separate trends are shaping demand for tea. Over
the review period, growing awareness regarding the anti-oxidant properties
of tea boosted sales in Canada. This movement continues to drive sales by encouraging
consumers to switch from other beverages, such as carbonates and juice, to
a healthier option. The perception of tea as a healthy beverage has been
particularly instrumental in the popularisation of green and white tea,
which are naturally higher in polyphenols and lower in caffeine than black
tea. In 2010, green tea saw the highest growth, with a 5% rise in
off-trade volume. It accounted for 5% of off-trade volume in that year.
Several manufacturers are expanding their lines of green tea by tapping
into previously niche segments or by innovating with their flavours. For
instance, Tetley Canada’s green tea line now includes both Jasmine green
tea, which is traditional and very popular in Chinese culture, and its own
innovation, flavoured Lychee Pear Green tea.
- The second movement sustaining the category is a more
recent trend pointing to the redefinition of tea as a fashionable and
sophisticated drink. Driven by the emergence of several tea salons and
specialist tea boutiques, Canadians are discovering the versatility of
this beverage, whose flavour can be complemented by several ingredients.
Specialist stores and salons offer fresh, premium teas, ranging from
traditional to exotic, especially when compared to large-scale
manufacturer brands. An example of such a store is the chain Davids Tea,
which was founded in 2008 and now has over 30 stores spread across Canada.
It retails over 125 different tea varieties, including several sorts of
black, green, white, oolong and herbal teas. As with other tea boutiques,
products carry original names and certain flavours with adventurous
associations. For instance, the store sells a black tea named Kiss Me,
Kiss Me, which contains Chinese black tea, vanilla, peppermint, chocolate
and red peppercorns. In 2010, Davids Tea introduced the innovative Wine
Tea collection, which include Champagne, Cabernet Sauvignon and Marsala
flavours, inspired by the alcoholic drinks. For many consumers, teas from
specialist stores not only represents higher quality, but are also seen as
more upmarket, thanks to their presentation and packaging. Another
difference with grocery store brands is the seasonal collection of
products, usually revolving around weather seasons, such as spring and
autumn collections, as well as special occasion collections for the
holidays. In parallel with tea stores, tea salons are also gaining
popularity. In contrast to cafés, their décor is usually more elaborate,
for instance, Orienthé, in Montréal, has a Moroccan inspired décor and
ambiance. It should, however, be noted that this report only covers
packaged tea. As a result, the impact of the rise of unpackaged tea is not
reflected in the reported data. Nevertheless, the growth of this niche in
encouraging Canadians to become more interested in the various options of
packaged tea, with a knock-on effect on sales of packaged tea.
- Black standard tea remains the dominant type, and
accounted for 84% of off-trade volume sales of tea in 2010. Black tea
varieties, such as Darjeeling or Lipton’s Yellow Label, resonate with
consumers as a familiar, “classic” product that they have known for years.
However, consumers are increasingly shifting from the familiar to newer
categories. As a result, growth of standard black tea has lagged behind
that of speciality black tea and green tea. In 2010, standard black tea
saw only marginal growth in off-trade volume, while speciality black tea
grew by 2% and green tea by 5%. The faster growth rates of black tea and
green tea led to their increasing their share of the category at the
expense of standard black tea. In 2010, speciality black tea accounted for
6% of off-trade volume sales of tea, compared to 5% in 2005. For both
standard and speciality black tea, tea bags largely dominate over loose
tea, representing over 90% of volume sales in both cases. However, in
specialist tea stores, tea is sold predominantly in loose form.
- Fruit/herbal teas, which made up 5% of off-trade volume
sales in 2010, saw only marginal growth in that year, of less than 1%, led
by fruit teas. Traditional medicinal and slimming teas, which jointly
account for less than 15% of fruit/herbal teas by volume, are on the
decline in Canada, due to the regulatory environment. Any products
claiming to offer “medicinal” virtues, or health benefits claims, must have
their claims individually approved by Health Canada, with scientific proof
behind health claims (such as the results of clinical trials). These
products are then categorised as a drug, with a unique serial number and a
“Natural Health Product” designation. This creates a challenging
environment for manufacturers who are unable or unwilling to undergo the
approval process that can be costly and long.
- Unit prices for tea are increasing ahead of inflation.
In 2010, the average unit price of tea reached C$26/kg, up by 3% from the
previous year. The price rise reflects the transition from standard black
tea, which is the cheapest variety, to other, pricier types.
- In terms of distribution, by far the majority of
packaged tea is purchased from grocery retailers, which accounted for 99%
of off-trade volume in 2010. Over the review period, there was a shift
from small grocery retailers and, to a lesser extent,
supermarkets/hypermarkets to discounters, reflecting the broader trend of
changing grocery shopping habits.
- Pod formats in tea are less common than in coffee, and,
as of 2010, pods accounted for considerably less than 1% of total packaged
tea volume. Unlike coffee, which is usually sold loose, most tea is
consumed from teabags, hence diminishing the utility of a pre-dosed pod.
Moreover, tea preparation is relatively simple compared to preparing an
espresso, where temperature and pressure need to be gauged more
accurately. Currently, the selection of tea pods available in the
off-trade is smaller than that for coffee. The Nespresso brand, for
instance, does not have tea capsules. As with coffee, particular brands of
brewer are affiliated with specific tea brands. For instance, Tassimo pod
brewers offer the Twinings brand of tea pods, while Keurig is associated
with Timothy’s Tea.
COMPETITIVE LANDSCAPE
- Tetley Canada Inc and Unilever Canada Inc lead
off-trade value sales of tea, with shares of 34% and 24%, respectively, in
2010. After these two large volume manufacturers, sales are fragmented
between several smaller players. Hence, the majority of sales are driven
by the familiarity of longstanding brand names. In light of changing
consumer tastes, the major players are changing their product lines,
offering a greater range of flavours and options.
- Tetley Canada and Unilever are particularly strong in
off-trade sales of black tea, where they accounted for 41% and 30% of
off-trade value, respectively, in 2010, followed by National Importers
Ltd, which represented 8% of off-trade value. These three companies market
popular large-scale brands, including Lipton and Red Rose for Unilever,
and Twinings for National Importers limited. Tetley, with its eponymous
brand, has been able to maintain its significant lead thanks to its
affordability compared to other brands. For instance, the unit price of
Tetley Earl Grey is C$0.09 per teabag in a carton of 36. In contrast,
Twinings Earl Grey has a unit price of C$0.17 per teabag, despite being
sold in a carton of 50. Tetley’s prices are comparable with those of
private labels such as President’s Choice.
- Since 2001, Tetley has supported the Canadian Breast
Cancer foundation campaign annually, by launching a limited edition of its
products featuring the pink ribbon logo on its packaging. For every item
sold, Tetley gives C$0.15 to the foundation. This affiliation serves both
as a fundraiser and a good marketing tool. In 2010, for instance, Tetley
used the logo in the promotion of its new product line, which includes two
green teas and a white tea. In recent years, Tetley has expanded from its
classic black tea offerings and increasingly focused on speciality teas
and green teas. The design is more modern, in terms of the colour scheme
and packaging. Unlike the carton boxes used for black tea, Tetley’s line
of green teas, herbal and fruit teas are offered in a small tin can, with
brighter colours and more lively images on the labels. The focus is not
only on the content, but also on ideas associated with a specific variety.
For instance, the tins feature words such as “dream” and “inspire”, in
bold lettering, associated with a particular colour and tea variety.
- Within fruit/herbal tea, Hain Celestial Canada leads
sales, with 25% of off-trade value in 2010. The Celestial Seasonings brand
has the advantage of being distributed both in grocery channels and
specialist stores, giving it more exposure to consumers. Moreover, it has
an extensive selection of tea blends.
- After losing market share over the review period,
private label saw growth in 2010, reaching 10% of off-trade value. Some
private labels are on the rise due to their premiumisation. President’s
Choice, for instance, has a wide range of teas, including speciality and
fruit teas. Moreover, it has an Organics selection, which offers premium
and fair trade options. Other private labels do not offer as much choice
and are thus at a greater threat from consumers’ switch to premium
segments.
PROSPECTS
- Over the forecast period, sales of packaged tea are
predicted to experience only marginal growth, with a CAGR of 1% in total
volume terms, to 20,100 tonnes. Off-trade value is forecast to grow by an
annual average of 2%, to reach C$402 million at constant 2010 prices. One
of the main contributors to growth will be consumers switching from other
beverages, as they view tea as a healthier choice. As was the case during
the review period, green tea will lead growth, with a total volume CAGR of
4%, while slimming teas will continue to decline.
- Growth of packaged tea will be hampered, despite the
growing interest in tea, due to the rapid development of unpackaged tea
through the expanding network of specialist tea shops. The current success
of tea chains, retailing premium and fresh varieties of tea, is likely to
lead to further cannibalisation of branded packaged tea. Some chains, such
as Kusmi Tea, are present in both the packaged and non-packaged segments.
Over the forecast period, other chains may enter the packaged segment once
their brand name is established. Certain tea chains currently offer gift
boxes and discovery sets to popularise their teas. Once they have a strong
customer base, they could offer premium packaged tea, although
distribution is likely to remain restricted to their shops. The shift from
grocery brands to speciality brands is expected to parallel the movement
seen in coffee, where consumers are seeking premium, fair trade coffee
from specialist stores, at the expense of grocery brands.
- In response to the growth in the unpackaged tea
business, manufacturers will continue to offer new flavours and more
diverse types of tea. Brands such as Lipton and Tetley will continue to
strengthen their portfolios of non-black tea offerings, including fruit
teas, green tea and white tea. Unlike specialist teashops, large volume
manufacturers do not have the flexibility to launch teas with multiple
ingredients such as various dried flowers, nor will they risk very
specialist products that will not have mass appeal. As a result, they will
continue to introduce large-scale but more “generic” flavours. In terms of
packaging, Lipton is benefiting from its recently introduced trademark
pyramid shaped tea bags, and over the forecast period, the use of this
packaging could become more extensive.
