Conscious Tea DTTC hosts the 4th Global Tea Forum, Dubai, UAE 2,500 words (15 minutes timed

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v5/4/5/2012

TITLE SLIDE: Introduction

Good morning one and all. It is my great privilege to be here to discuss the vibrant Canadian and U.S. tea market. North America in my view is the most desirable target in the world for export-minded suppliers. • Not just because the market for quality tea is undeveloped. • Not because retail sales of tea are rising briskly and consumer cash is once again piling high on the counter. • And certainly not because it is easily accessible. Marketing can be extremely expensive and the beverage segment is highly competitive with significant barriers to distribution. I recommend it because North America is the most diverse beverage market in the world. Currently there is great upheaval in the 30 billion gallon refreshment beverage segment and consumers there reward innovation. In our marketing sessions yesterday we discussed the importance of innovation…. of entering the market with something different, something compelling. If you are developing such a product… products like the new Japanes cold-brew green tea in a bottle… This is the time.

OVERVIEW: Conscious Tea

North America is awakening to the taste of fine tea and investors are seizing the opportunity. While most consumers reach for tea without thinking, growing numbers are making a conscious choice. As in the past the majority prefer the convenience of tea bags and bottled teas. What has changed is their preference in the tea itself: They want healthful, sustainable, environmentally friendly, flavorful tea ― not just flavored iced tea.

SLIDE ONE: Aspirational Motivation

• Americans want suppliers of quality tea to be successful reaching this market. [RIF] My talk today is aspirational. I want to leave you with a strong desire to achieve something, to be successful in this market. My motive is entirely selfish because in making you richer we will have regained something more valuable – and that is our health.

a 30% jump in value of Japanese imports and a 27% jump in value of S. Major investors believe the tipping point is near and will speed it along through mergers & acquisitions. [RIF] I developed a couple of slides for this program using the USDA Global Agricultural Trade System Database [GATS].SLIDE ONE: Game Changer in Foodservice • This year marks the 7th year in a row that the volume of carbonated soda has declined. This opens an unprecedented opportunity for alternatives. growth of 35% and a market valuation of $800 million which is greater than several established coffee chains. already a big seller in package goods. That is why Coke is pumping money into Honest Tea. The Martin Bauer acquisition of Beverage House holds great promise. More on that in a minute… SLIDE ONE: Tipping Point • The number of tea drinkers is growing. [RIF] Lots of money is moving into new product development and acquisition of beverage companies. Botanicals are emerging. [RIF] Americans will drink just about anything. Recent acquisitions include Sweetleaf/Tradewinds by Nestle Waters North America and Tea Forte by Sara Lee and Talbott Tea by 750-store Jamba Juice. but what has changed is their wiliness to pay more for tea. Two weeks ago at the Starbucks opening of its first juice retail shop which is called “Evolution Fresh” not many noticed that one of the spigots in the innovative digital juice wall is for TAZO tea… SLIDE ONE: The Opportunity • The opportunity lies in convenience and in educating consumers to develop their personal taste preferences. As tea sales take off expect favorable winds for tisanes and botanicals in foodservice. Teavana. It records the declared value against volume of imports and you will see big spikes… like the 24% jump in value of imports from China. Water as a replacement simply won’t do. a chain of 200 retail stores newly listed on the New York Stock Exchange earned $168 million in revenue in the last fiscal year. Companies like Coca-Cola have 75% to 85% of their revenue tied to CSDs. Korean imports which is compelling evidence for my point that value-added teas can find a market in North America. The brand not distributes 100 million bottles nationally and has great potential overseas. Then mix it in smoothies to make it our own. We embrace time-tested teas as diverse as matcha and rooibos. . Sweetened teas have seen huge gains in fast-food restaurants. CSDs have fallen to 46% of the liquid beverage market.

Turkey and Japan. Consumption by volume is now 6th worldwide after China.S. Trading partners like Japan and China showed big gains in the value of the tea they shipped. ASIDE: ITC released its full-year calculations and Britain regained the title in 2011 by 200 metric tons both countries are at 127.S. The recession raised awareness of health and drove home value.500 mt) Russia imported 174. Tea is both. Sales of 100% juice are down 4% and sales of fruit drinks.  The declared value of imported teas rose 10% on steady volume. He sold $17.000 metric tons – and I must note that UK now sends the U. per capita use is now half a kilo in Canada and nearing that in the U.1% and now represent 46. some blended with tea are up 2.SLIDE ONE: Timing is Now. 5. SLIDE TWO: Five Key Market Facts • America is one of the top three tea import market in the world.  Investors are working feverously to develop new products and build retail infrastructure with unprecedented cash in hand to develop tea.000 metric tons last year and Pakistan 126.000 mt.  Ready-to-drink tea was the fastest growing (11.000 worth of tea that day and his American Tea Room will likely top $1. and Canada 5. 20 he couldn’t contain himself. They are now present in 46% of US homes. • The timing is now. gaining share against market leading soft drinks and fruit beverages.2%.8% and growth exceeded bottled water. surpassing Britain in (2010) after three hundred years and growing faster than Russia (CIS) the current import leader.  Convenience: Sales of RTD beverages were $6.4% of the juice market.5 million in gross sales again in 2012.5%) beverage segment in the U. India. This is equal to the top-earning coffee houses in America.  Five in six Americans drink tea. Russia (CIS).700 metric tons – slightly more than thirsty Ireland (5. On Mar.5 billion in 2011.S. [RIF] David Barenholtz is one of several dozen American tea retailers that routinely inform me of sales trends. Marketing will soon follow. In 2011 volume was up 4. .

SLIDE FIVE: TREND — Beer Iced Tea Americans and Canadians are world leaders in many things but we know next to nothing about quality tea. the most diverse beverage drinkers in the world. • Eighty-five percent of the tea consumed in America is iced. [RIF] (EXAGGERATED JOKING TONE) The real opportunity lies in the fact this is a continent of well educated. Market leaders are bagged. Fewer than one tenth of one percent of the public has sipped a splendid white. We are still unsure how to prepare greens. (PAUSE) and perhaps save us from ourselves. We know oolongs taste great but we don’t know why. What’s different today is timing. You can teach us and help us regain consciousness. Not to be out done. SLIDE FOUR: TREND — Evolving Market This month Molson Coors Brewing will introduce Ice T Beer with 4 percent alcohol and no caffeine. 60% prefer sweet fruit-flavored tea • 37% prefer organic/sustainable tea to conventional • Green tea imports are up 200% in 10 years. long-term and growing stronger.SLIDE THREE: Egalitarian Tea [RIF] Powerful market drivers health and convenience are in place. There is growing evidence Americans. are becoming more discerning. high-minded individuals who make notoriously bad beverage choices. . Samuel Adams is expanding distribution of Wicked Tea. You guys are in a position to help cure what ails us…. The above has been true for several decades. • The first-choice among hot tea drinkers is herbal infusions. It follows Anheuser Busch’s announcement they are rolling out 19th Hole. a mix of tea and hard lemonade. Here the sale begins with education. now worth $1. instant and from concentrates in cans and bottles.5 billion share of the market (2010) This has led the world to assume America has no taste for quality tea. most sweetened and flavored.

It really helped out with sales. India’s direct sales totaled $69 million a 12 percent increase over 2010. founder of American Tearoom in Beverly Hills. India and China earning $110 million at an average $1. Last year the Canadians sold 58.5 metric tons or $22 per kilo. 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. The acceleration is dramatic. We have been fortunate to sell more than 40 kilos of various first flush between May and July (when we usually run out). Our Arya Pearl was extraordinary last year.93 per kilo more than double that of the importers of Argentine tea. Calif. the American marketplace is now demanding much higher quality tea.6 million. As you can see tea imports were flat at 212 metric tons last year. but does include teas blended with herbs and florals). The Department of Commerce’s Department of Foreign Trade Statistics draws its numbers from bills of lading. “We are paying $340 per kilo for a white Darjeeling. The 50 metric tons imported from Argentina last year is in line with the past. . These FAS numbers are available on line on the Global Agricultural Trade Systems (GATS) website (www.9 metric tons of tea to the United States. A closer look demonstrates this trend is concentrated on the fewer producers of quality tea.usda. averaging $1. We are ordering several first flushes. however. outdid them all earning 34 million on 1.fas. China however sold us 29 metric tons direct valued at $114 million and this tea was valued at $3. Content to drink uniform blends for a century. Our prices for pre-rain Long Jing are $35 to $80 for 100 grams. But the real story is demand for superior teas. the rest more in the $200 range.87 per kilo. Value jumped 10 percent to $642 million up $59 million between January and December of last year. I will be in Japan to inspect the first flush Sincha on sight in late April and we will be bringing in both white and slightly more oxidized first flushes from Darjeeling. mainly from Sri Lanka. The value declared by American importers was $71. The Japanese.SLIDE SIX: TREND — Imports are Up The rapid acceleration of tea’s import value is evident in this slide.” David Barenholtz. (The tea category does not include herbal infusions.gov/gats) There is no charge.40 per kilo.

premium juices. Now it is time for tea. Consumers shun carbonated soda and are no longer enamoured solely with coffee. SLIDE EIGHT: Value of Tea Imports from China SLIDE NINE: TREND — Value Up SLIDE TEN: PART II — Investment Opportunity SLIDE ELEVEN: Investment Activity/Opportunity SLIDE TWELVE: TREND — Teavana Consolidated SLIDE THIRTEEN: TREND — Barriers to Entry Lower SLIDE FOURTEEN: TREND — Concentrates SLIDE FIFTHEEN: TREND — Martin Bauer-Beverage House SLIDE SIXTEEN: TREND — Healthy Beverage Format SLIDE SEVENTEEN: TREND — Jamba Juice & Talbott Tea SLIDE EIGHTEEN: TREND — Argo Tea SLIDE NINETEEN: TREND — Specialty Retail Drivers SLIDE TWENTY: PROFILE — Urban Success (Samovar) . In January 2000 there were only 1.567 stores — its all-time high. Eight years later. botanicals. kombucha and tea. the mighty mermaid had constructed 11. Executives realize the business opportunity in beverage retail includes herbals. Consumers fell in love with lattes in the 1980s but it took another 20 years for investors to supercharge the category.SLIDE SEVEN: TREND — Tea Incline It took investors 15 years to award Starbucks with the funds it needed for rapid growth. after averaging two new store openings a day during the peak of its domestic expansion. tulsi.996 Starbucks in the entire country. Coffee retailers introduced the consumers to highly specialized beverage selections. yerba mate. preparation techniques and customization that characterize the segment.

We are ready to catch up with a world that has made tea the most popular prepared beverage on earth. The tally consists of 157 million Americans and 14 million Canadians – about 85 percent will do so unconsciously. heavily flavored. Convenience is a consideration. SLIDE TWENTY THREE: PROFILE — American Tea Room American Tea Room is the new face of North American Tea SLIDE TWENTY FOUR: PROFILE — American Tea Room SLIDE TWENTY FIVE: TREND — Specialty Tea Growth SLIDE TWENTY SIX: END — Thanks for Attending American Tea Room is the new face of North American Tea SLIDE SIX: TEA EMPORIUM Located in a one of the largest grocery stores in North America SLIDE SIX: TEAVANA Sales of $1000 per square foot of retail SLIDE SEVEN: ARGO TEA Tea lattes head-to-head with Starbucks SLIDE EIGHT: TALBOTT TEA Jamba Juice These charts make it clear we are ready to listen and learn. milk. We are ready to pay for something that tastes good and is good for you. They will not know or care that it was grown in Argentina or India. The tea will arrive cold. Here it ranks number five… well behind beer. Indonesia or Vietnam. It is closing in on juice but xxx billion gallon short of soda. A modest 175 million North Americans will sip tea today. . overly sweet and in a tall fast-food cup of ice.SLIDE TWENTY ONE: PROFILE — DavidsTea SLIDE TWENTY TWO: PROFILE — Camellia Sinensis. Montreal Three founders visit 200 gardens annually personally selecting several hundred teas.

. The 350-store specialty coffee franchiser revamped its tea program. the largest of Canada’tea merchants opened two s new shops in downtown New York City signalling that retailers view the continent as a single market. according to market research firm Packaged Facts. Health is a concern. Third quarter net sales increased 35 percent to $33. manufacturing facility in Portland. In late November the company announced it will relocate the entire Tazo staff from its 80. Wash. which has now opened 196 company-owned stores in 39 states. Foodservice and retail sales of coffee topped $37. Grocery stores sell xxxxxxxxx. trained staff and introduced a new line-up that has invigorated the firm’s beverage program.000-sq.5 billion and the highest annual growth of the past five years.Price is a consideration. Specialty tea is poised for a growth spurt rivalling coffee in the 1980s.  In November grocery giant Loblaw Companies Ltd. The company projects annual sales of $162 to $166 million. is to accommodate planned expansion and consolidate distribution to 25.   In December DavidsTea. complex its "crown jewel”.S. up 10 percent over the previous year's sales of $34. The company calls the 85.000 sq.4 million and fourth quarter sales topped $66 million. Wal-Mart sells 22 percent of all the tea in America. Ore.000 retail outlets. ft. Coffee isn’t cooling in the U. The Tea Emporium is the first tea store to have a dedicated footprint inside a grocery chain-store of this scale.9 billion in 2011. Canadians turning on their favorite TV programs the past six weeks saw prominent Toronto-based coffee chain Second Cup pitching tea. is a hot stock pick following the NYSE’s first pure-play tea retail IPO. Here are examples where tea is aggressively stepping into the retail mix. consumption among previous-day drinkers is steady according to the National Coffee Association but volume has plateaued just as tea begins its rapid ascent.3 billion Tazo Tea in July and soon after hired respected tea retailer Charles Cain to head operations.  Starbucks named dynamic Global Marketing Director Annie Young-Scrivner as president of $1. The move to Kent. Packaged facts…. consider:  Atlanta-based Teavana. The coffee market is five times larger than tea and continues to grow but it is the coffee . Iced tea servings topped xxxxxxxxxxxx in foodservice last year because it is inexpensive. made room for specialty retailer The Tea Emporium instead of an in-store coffee shop it its newest Toronto supermarket. attracted new customers and boosted store sales while returning great margins.  Across the continent. (Honest tea introduction) Well financed and newly energized competition is heating North American beverage retail to a boil.. ft. convenient and a national facing an epidemic of diabetes is turning away from soda for something less sweet..

com/coffee-tea-market-c471/ Specialty tea on the other hand is making inroads among young coffee drinkers. released in October. far outpacing specialty coffee.4 percent volume share. Sales of herbal teas are up 11 percent compared to last year (rooibos is doing exceptionally well) and specialty black teas (blends) grew 27 percent compared to 2009. More than half of that volume is brewed in traditional industrial brewing machines and sold in various foodservice outlets. Matcha imports are up 25 percent.4 percent of the refreshment beverage market.7 percent growth in 2015. EMBED URL: https://www.packagedfacts.packagedfacts. around 80 percent of the 270 million pounds of tea imported annually is consumed as fresh brewed ice tea. and it is growing at a much faster pace than specialty coffee. EMBED URL: http://www. regular tea accounted for 76. The $4 billion market for tea concentrates and ready-to-drink tea is expanding. In Canada. Packaged Facts estimated tea sales grew 5. In terms of tonnage. According to the Tea Association of the USA. That was the first time in history U. In its Tea and Ready-to-Drink Tea in the USA report.7 percent to a record high in 2010. it is equally popular with young men and women and its popularity with boomers and Millennials means tea now accounts for 5. tea imports rose 25 percent in the past 10 years and were up 4.6 percent volume while specialty teas grew 8 percent in 2010 to gain 23. Tea sales topped $6.S.3 billion in the next five years.6 percent in 2012 to 8. Packaged Facts estimates an acceleration from 6. Some estimates range as high as $15 billion. More significant is the rate of growth. Conventional teas lost 2 percent market share last year.2 percent in 2011 and will reach $9.2 percent of the total market and was up 7 percent in 2010. EMBED URL: https://www. tea imports surpassed the United Kingdom.packagedfacts. The U.com/Tea-Ready-Drink-6210935/ .5 billion in 2011 according to Market Research firm Packaged Facts. now represents 9 percent of the global market and import totals through June as reported by the International Tea Committee indicate 2011 will break the import record again.S. the dollar share of specialty tea has grown to 57.S.drinker’s preference for more expensive premium coffee—not volume—that drives annual sales increases.com/Tea-Ready-Drink-6210935/ U.

000 locations.Expansion of Seattle’s Best to 30. .5 percent of total sales and 95.337 per store and those offering cappuccino and specialty coffee add another $11. Beverage sales account for 33.4 percent of the nation’s 144. compound the glut of availability. Coffee sales at convenience stores average $66. now approaching 15.787.435 per store.000 outlets in the past 12 months tripled the 2011 Starbucks Coffee Company domestic store count of 10.000 stores. according to Jeff Lenard. In contrast specialty tea sales are concentrated at fewer than 4. VP Communications at the National Association of Convenience Stores. McCafés. Americans now find a lot of latte wherever they turn.541 convenience stores now dispense hot beverages.