Forecasts of overall demand for tea in Western Europe over the coming few years are around half those made 2-5 years ago for the same time frame. Then, growth was expected to be in the 5-6 percent range. Now, estimates are uniformly under 3 percent and are as low as 1 percent. This contrasts with those for the Asia-Pacific region, where growth is expected to be 7 percent per anum for the coming decade.
Much of this lowering ofexpectations reflects the uncertainties and disruptions of the still unresolvedBrexit chaos. Most recently, concerns about a recession are spreading, mainlyfueled by U.S. trade war threats and slowing exports. In January 2018, forecastsfor Eurozone growth were for a healthy and sustained 3 percent. In April 2019,the German government halved its estimate for its pace-setting economy fromjust 1 percent to 0.5 percent.
The tea market of WesternEurope is one where “on average” and “typically” don’t mean much. First, WesternEurope hard even to define. There is the CIA classification of Western Europe composesthe seven countries that formed the Cold War bastion of anti-Sovietdemocracies. Some definitions show it as 13 countries – or 17. When Scandinaviaand South West Europe (Andorra, Spain and Portugal) are included, the totalleaps to 23.
However defined, WesternEurope is a market of contrasts. It includes two of the world’s highest teaconsuming nations: Ireland, which ranks at the top along with Turkey, and theUK in fourth place in most surveys. In many regards, Western Europe is markedby a tea or coffee divide. Approximate figures are: UK and Ireland 2 kilogramsper capita, Netherlands and Germany 0.8. Switzerland, and France, Spain, Italyand Scandinavian countries all less than 0.2.
The range is very wide, butthe same general pattern emerges across imports and retail sales: a sustained 2-3percent drop in volume but an increase of 3-5 percent in value. That seems tobe the single most useful statistic for assessing demand within and acrosscountries and targeting consumers and product innovation. Simply stated, itmeans people drink less commodity blacktea and more premium teas of all types in close to every market forecast andindustry analysis. This trend has been continuous over the past decade.
Teain France: representative of how Europe’s tea markets grow
France is useful as an illustration.It ranks 8th out of 17 countries surveyed in per capita teaconsumption and even lower in black tea. All the market growth is for green andherbal/fruit blends. The mainstream retail supermarkets and giant hypermarchéssuch as Carrefour are losing market share as are the major brands like Lipton.
France has for centuries beenoutstanding in its tea dining tradition, with Mariage Freres providing theblueprint for the tea shop in whatever heaven you believe in. Le Palais desThés and Kusmi are noted for their blends. Unilever acquired the FrenchElephant company as a base for innovation in flavored teas. Les 2 Marmottes hasbeen successful in building a specialty in aromatic tisanes that are sourcedentirely from French farmers. At the other end of the market, French teabag tepidofferings aspire to but rarely achieve mediocrity. Mediocre tea doesn’t sell aseasily as it used to.
These trends in the Frenchmarket seem structurally general:
- Basicblack is out: The erosion of the UKas a tea culture is the strongest illustration here. The in-home, black teatradition built on strong brands, low prices, supermarket tea bags and supplychain control has been declining in volume at a compounded rate of 4 percent peryear for decades. Britain is now a dynamic coffee culture with Costa Coffee beingthe most popular coffeehouse company, though still much smaller, counter toStarbucks and the flat white (a combination of Espresso and velvety milk,signed off with a florette) as an innovation to rival lattes. In 2006,tea consumption was twice that of coffee. By 2016, they were equal. DouweEgbert, the Dutch leader, is similarly losing sales in the commodity blacksector.
- Healthsets the pace: However, the teamarket has grown in value despite the slipping away of its core. Onecommentator captures the explanation: “Health and wellness drive all [tea]markets.” Unilever again is a bellwether. Its acquisition in 2017 of Pukka Herbswas a clear announcement of its strategic intent to be a leader in innovationthrough herbal and wellness teas. Germany has for long been the market withdemand most focused on health with a wide range of products such as Kinderteefor nursing mothers, ginger brews for colds, etc.
- Specialty is in: Germany points the direction for revitalizing the core market.It is dominated by black teas – and premiumization. Specialty black nowaccounts for 23 percent of all tea retail sales. Overall, the figure for Europeis just 5 percent. The main conclusion may be:
- Countries of high commodity tea drinking switch to coffee. (UK)
- Countries of more occasional black consumption switch topremium and specialty (e.g., Netherlands, Germany, France).
- Low consumption markets respond to tea as where it is trendyand associated with health (Italy and Spain).
- Heavy coffee consumption markets move to specialty greenand flavored tea out of sugar fear (Scandinavia).