Tea or Coffee: The Great Debate

Editor’s Note: Did you catch Tea & Coffee Trade Journal’s October 2012 cover story, “Tea or Coffee: The Great Debate”? If not, you can click here for the digital edition, and be sure to click here to subscribe. Below is an extended version of this insightful article from Tea & Coffee Trade Journal, which is based on a session from 2012 World Tea Expo called “Will Tea Ever Be as Big as Coffee?”

Is it an epic global battle? Is it coffee vs. tea? Well…not really. You probably won’t ever see tea and coffee association leaders in the ring, brawling to declare a winner. However, the question of whether or not tea will ever be as big as coffee is a thought-provoking topic to contemplate. As some experts say, it’s not about naming a champion; it’s about exploring the issue and identifying and capitalizing on the opportunities. Yet, we still ask, “will tea ever be as big as coffee?”

It’s the question expert George Jage posed to the industry at 2012 World Tea Expo for a standing-room-only panel discussion, to spark conversation and evaluate the market. Jage is founder and director of World Tea Media, organizer of the annual Las Vegas, Nev.-based exposition. He says tea is exploding, the same as it did for specialty coffee in the 1990s. “When Starbucks hit the scene,” shares Jage, “we all wanted to know what a $4 cup of coffee tasted like, and then we were lured into Starbucks Founder Howard Schultz’s grand plan of the ‘third place.’ Tea is on a similar projection.”

Nevertheless, Jage believes the industry will not likely see the Starbucks-style explosion of tea-centric retail locations, yet specialty and premium tea is being offered at more and more outlets. “As people explore the category, their expectations rise,” he states.

The Industry Speaks Out
The “Will Tea Ever Be as Big as Coffee?” panel included David De Candia, director of tea at Coffee Bean & Tea Leaf in Los Angeles, Calif., among others. During his 16 years at Coffee Bean & Tea Leaf, De Candia says he’s seen continued growth of tea in the coffee environment. “Tea looks for a completely different customer. Their mind set is very different then coffee drinkers. Having seen the growth of specialty coffee, tea knows the pathway to growth. Tea also has the opportunity to be creative and expand on its many varieties. Consumers are more educated and are looking to slow down and be more ‘in the now.’ Tea allows that. The United States is just starting to see the huge potential for tea growth, and I don’t believe coffee will stand in its way.”

De Candia and all of the panelists – which also included Charles Cain, vice president, Tazo merchant and operations, Starbucks; Joseph Cugine, president, Argo Tea; and Jack Groot, founder, JP’s Coffee & Espresso Bar – agreed that tea can be as big as coffee in the near future. “I think that coffee would be happy to take a seat and give tea a chance. It may not have a choice,” De Candia reveals.

Diverse Perspectives
Culinary Tea author and expert Cynthia Gold, a tea sommelier at the Boston, Mass. restaurant L’Espalier, says, “Globally, of course, tea consumption greatly exceeds coffee consumption, but as much as I would love to say otherwise, I don’t expect those numbers to ever be fully reflected within the U.S. market.” However, with time and continued consumer education, she does expect tea consumption in the United States to continue to increase strongly. “I believe that tea will continue to gain in market share in both the volume of the beverage market claimed and, even more so, in revenues, as more and more people switch over from soft drink consumption towards tea and tea blend ready-to-drink (RTD) beverages, and as traditional tea consumption continues to swing towards the more lucrative specialty side of the tea market,” explains Gold. “We have a long way to go, and although I do not see tea drinking eclipsing coffee here, I see a bright future for the tea industry in the United States.”

Kim Plahn, president and CFO of Dunn Bros Coffee in Minneapolis, Minn., offers another view: “We don’t think tea will ever eclipse coffee in the United States, but tea is definitely on the rise. Tea’s ascent is part of a broader trend, where consumers are moving away from soda and toward healthier alternatives. Regardless of drink preference, today’s consumers can get their beverage of choice from just about anywhere, so it’s critical that coffee and tea vendors focus on quality to differentiate themselves.”

Sarah Scarborough, tea buyer for Rare Tea Republic, Novato, Calif., believes tea has the potential to become as big or bigger than coffee in the United States. “So far, in the brief history of the United States, we have developed a love for coffee over tea,” she says. “It may be because we are located closer to coffee-growing origins than to tea origins, and we rejected tea as a symbol of our freedom in the Boston Tea Party. However, the potential for tea is greater than that for coffee because Americans are drawn to the wealth of health benefits and flavors available in tea. Also, the functionality and lack of caffeine in herbal infusions offers more opportunities to enjoy a cup of tea throughout the day and in the evening.”

Ben Pitts, vice president of foodservice and hospitality for Royal Cup Coffee, Birmingham, Ala., believes the tea/coffee question is an interesting one. “I don’t see it as coffee vs. tea, but rather as the coffee and tea opportunity. Tea has been growing at a faster pace than coffee in the United States, but not at the expense of coffee. Iced Tea is taking share from soft drinks. Restaurants and retail outlets are introducing new products, such as tea infused with flavors, and marketing them effectively to consumers. Hot tea beverages are growing, too. At the same time, we are seeing a plethora of cold coffee-based drinks hitting the market, and specialty coffee is growing faster than any segment of the coffee and tea markets. From a health standpoint, both tea and coffee can claim benefits, but maybe tea has a slight edge at least in terms of perception. So, tea is growing rapidly in the United States, but it would hard to imagine the category overtaking coffee.”

Globally Speaking
Mo Sardella, director of marketing at The G.S. Haly Co., Redwood City, Calif., notes one major factor contributing to both coffee and tea sales around the globe: a rising middle-class in coffee and tea producing origins, such as India and China. “In these countries, consumer buying power is growing at exceedingly fast rates, with increased demand for both coffee and tea. In these countries, we see a rising interest in specialty coffee among youth; coffee represents a break from customary tea-focused cultures and offers younger consumers an alternative to the beverages that traditional generations are more connected to. Conversely, with increased awareness of tea’s healthful and natural properties, growing numbers of health-conscious and aging populations are reaching for tea as an alternative to coffee-based beverages.”

Overall, according to Sardella, tea represents a more vibrant consumer base, including health-related consumers, RTD buyers, nutraceutical seekers and specialty connoisseurs, which will propel tea sales across channels and throughout many diverse demographics. “While coffee may not be as dynamic in application and consumer interest, the sheer volume and increased loyalty among consumers will support continued growth and favorable interest around the world,” he says.

Timothy Schilling, executive director at World Coffee Research, Provence-Alpes-Cote D’Azur, France, and a member of the board of directors of the Long Beach, Calif.-based Specialty Coffee Association of America, turns to production for insights: “I can say that the climate change is affecting and will continue to affect tea production in roughly the same way that it affects and will affect coffee. So on that note, there is unlikely to be any production variable that will favor tea over coffee.”

Aaron Kiel is a writer and communications and public relations consultant who works in the tea and coffee industries. He can be reached at akiel@akprgroup.com.

Tea Will Exceed Coffee in the United States

By George Jage

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Consumer awareness of tea is skyrocketing, and I believe this is the single most important topic our industry should be talking about. Even many coffee people say the hottest thing in coffee right now is tea.

At World Tea Expo’s “Will Tea Ever Be as Big as Coffee?” panel session, we looked at three areas in the U.S market: 1) total retail doors, 2) per capita consumption (also called throat share) and 3) total retail sales.

In terms of total retail doors, the panel unanimously agreed we would not see 25,000+ U.S. tea outlets that coffee is estimated to have today in the United States. However, in the few months since that session, I am not so sure the same assessment would be agreed upon, especially as Starbucks announced plans for a tea-focused retail concept for their Tazo brand. Starbuck’s alone accounts for nearly 45 percent of the total specialty coffee retail outlets today, so consider what they could do with tea. Plus, every few weeks there’s breaking news on the expansion of tea retail. Yet, we still have a long way to go to be “bigger” than coffee, in terms of retail doors.

There’s also lot of data on the total retail market value of tea in the United States. Most estimates place it between $8 billion and $10 billion, but a recent report from Sage Group, in Seattle, Wash., estimates the total retail sales of tea in the U.S. at $17 billion.  Nearly all the data reports I have read are projecting big growth in tea and a near doubling in the coming three to five years. Coffee faces the same challenge with a lot of figures being used and promulgated, but for arguments sake, it is roughly $35 to 40 billion.

In terms of per capita consumption – also called throat share – tea ranks seventh, according to 2010 data from Beverage Marketing Corporation in N.Y.C.; closing in fast in the No. 6 spot is fruit beverages. The data on throat share will get cloudy as more companies are introducing mixed category beverages, such as juice, tea and Monster’s Rehab products that are mixed with tea. Coffee ranks No. 5 with 2010 consumption at 18.5 gallons per year per capita, versus tea’s 10.3 gallons. But it is important to note that from 2005 to 2010, of the top eight categories, only tea and bottled water increased in per capita consumption over that time period.

Big picture: Yes, tea will exceed coffee in the U.S. in terms of total retail dollar sales within the next five years, driven by a significant increase in availability (outlets), which will increase consumer awareness and demand, which will lead to increase consumer sophistication and increasingly higher prices paid for premium and quality tea.

George Jage is the founder and director of World Tea Media, organizer of World Tea Expo, the North American Tea Championship and World Tea News.

Coffee May Be in an Unscalable Position

By Robert F. Nelson

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Take a walk along any street in New York City, and the answer seems obvious. You’ll find coffee shops on nearly every corner, and “coffee” signs in deli, diner, bake shop, and fast food windows everywhere in between. But, you’ll trek many city blocks to find the nearest purveyor of teas.

The more interesting question is why. Demand drives supply, and retail outlets don’t pop up in a vacuum. Americans clearly love coffee. Research from the National Coffee Association (NCA), based in N.Y.C., finds that two-thirds of American adults are daily consumers. Overall, eight in 10 say they drink coffee. And, they’re exploring every corner of a growing menu – and enjoying all the options.

NCA’s National Coffee Drinking Trends study also shows that 58 percent drink gourmet coffee beverages while 71 percent drink traditional coffee – clearly, many consumers are splitting their orders. Half of respondents say they drink espresso-based beverages, including a third who drink cappuccino, a quarter each for latte, café mocha and espresso, and 10 percent for a macchiato. A quarter also choose frozen blended coffee varieties.

Numbers aside, there’s also a bang beyond the beverage. Coffee is a lifestyle as well as a drink, an occasion that transcends the moment. “Coffee break” has meaning beyond the time to sip a cup or two, and “let’s meet for coffee” is a fixture of our daily lexicon. Coffee shops have become iconic venues to meet friends and classmates, interact with business colleagues, work, read or just plain relax.

Getting back to the question at hand, will tea ever achieve the popularity and caché of coffee? Perhaps. But, it has a long road to go and a tough act to follow. In short, coffee has set a bar so high that it may occupy an unscalable position.

So, next time you read about artisanal teas in the New York Times Food section, take a walk to see what’s really going on.

Robert F. Nelson is president and CEO of the National Coffee Association.

Consumers Are Excited About Both Coffee & Tea

By Charles Cain

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Tea has been a part of Starbucks heritage since 1971 when the company was founded as Starbucks Coffee, Tea and Spices. In those early days, Howard Schultz scooped 27 different kinds of loose-leaf tea from the original store at Pike Place Market in Seattle, Wash. It appears that offering was a few decades ahead of its time, but tea has been a part of the experience at Starbucks ever since. In 1999, we acquired Tazo for $8.1 million, and have grown the brand to more than $1.4 billion in annual sales by sharing premium, artfully blended teas with our customers in Starbucks stores and through grocery and specialty retailers nationwide.

This fall, we’ll be opening the first Tazo Tea store as a continuation of our efforts, to bring the artistry and heritage of tea to life for our customers. Our mission is to raise consumer expectations for their tea experience the same way that Starbucks did for coffee.

The Tazo retail store will offer an interactive retail experience with more than 80 brand new loose leaf teas, a curated collection of tea merchandise, and a tea bar with a wide range of beverage options and food pairings. We see an opportunity to introduce the casual American tea drinker to a tea experience that will change the competitive landscape.

This “casual American tea drinker” presents a unique growth opportunity for the tea industry in North America. Nearly 80 percent of American households have tea in the cupboard, but the quality of the average tea experience leaves a lot of room for improvement. For Starbucks, we’ve never seen it as a “coffee or tea” proposition. By and large, we’ve heard and seen that the majority of consumers are open to and excited about both tea and coffee in different ways, at different times of the day, and to meet different needs.

The future is incredibly bright for specialty tea, but the industry needs to continue the focus on consistently delivering on the promise of good tea.

Charles Cain is vice president, Tazo merchant and operations, Starbucks Coffee Company.

Tea Is Already Bigger than Coffee Worldwide

By Joe Simrany

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If we were allowed to acquire only one extraordinary skill in our lives, then the gift of prescience would be on top of the list. Success in all matters would be virtually assured and the answer to this question would be immediately known. Since we can’t predict the future, we must rely on our experience and judgment.

There is perhaps nothing as satisfying as a successful outcome. To accomplish something which was thought impossible validates the efforts and resources devoted to the task. It also reenergizes future efforts and resets goals to take on ever more ambitious challenges.

Over the last two+ decades, the tea industry in the United States has been transformed from an unremarkable beverage category with narrow demographic appeal to a vibrant segment with widespread appeal. This nearly impossible transformation came about as a result of understanding consumer wants and needs and matching them to the inherent qualities of tea. Repositioning tea was only part of the challenge. We also needed an efficient way to communicate the sensory and the healthy qualities of tea to consumers, in a market where beverage competitors have virtually unlimited marketing budgets.

The solution was to capitalize on the inherent healthy aspects of consuming tea and to use creative events to turn these efforts into news-worthy public interest opportunities. By allowing the science to do the talking for the industry, it increased the credibility of the message which prompted the media to communicate the news to consumers. This approach is infinitely more believable than advertising and allowed the tea story to break through the clutter.

Tea is already bigger than coffee worldwide and we are encouraged by recent successes to believe that same kind of popularity will someday be possible in the United States.

Joe Simrany is president of the Tea Association of the USA, Inc.

Tea Will Be Hard-pressed to Catch up to Coffee

By John W. Rogers

Rogers Family Company actually started as a tea company in the late ‘70s, adding coffee a few years later. The coffee boom that started in the ‘80s has left tea in the dust, and coffee has never looked back.

Will tea ever catch up to coffee? It is possible, as tea shares many of the positive attributes of coffee and has been enjoyed for more than 4,000 years, after all. However, it seems that tea will need to get distinction as a morning beverage, if it is to ever catch up with coffee in popularity.

The majority of tea sales in the United States are iced tea, whether it is brewed, instant or ready to drink. Sodas have also made many inroads as a morning beverage among younger demographic groups. With the backlash against sugary drinks, it is possible that tea could try and capture some of these young consumers who have abandoned soda in the morning, especially as scientists continue to study the relative benefits of various tea varietals.

On the other hand, coffee’s social and economic equity as a commodity continues to expand globally. Coffee is a very specific agricultural commodity – and one of the most traded in the world. Tea is not as distinct and remains ill-defined as a commodity. So, ultimately, coffee will continue to win. It’s social.  It’s versatile. Its popularity continues to grow. It is a singular beverage, and a singular commodity – one that will continue to provide deep satisfaction to millions for many years to come. Tea will be hard pressed to catch up.

John W. Rogers is vice president of sales and marketing, Rogers Family Company.

Editor’s Note: The above article originally appeared in Tea & Coffee Trade Journal’s October 2012 edition (“Tea or Coffee: The Great Debate” cover story). The above is an extended version of the article. You can view the digital edition of the magazine here, and be sure to click here to subscribe. Thank you to Tea & Coffee Trade Journal.

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