German Tea Market:

Hot Stuff, High Margins

BY MANFRED KÖRNER

Germany is known to be coffee roasters’ El Dorado with Germans sipping on average more than 150 liters of
coffee per head and year. Average annual per capita consumption of tea is only around 26 liters in comparison.
However, tea has managed to hold its position on a high level as one of the most popular non-alcoholic, non-soft
beverages after coffee. Total consumption of black and green teas rose from 18,512 tons in 2003 to 18,697 tons in
2004, representing a 1% increase of the market. Prices remained stable in contrast to hitherto slumping coffee
prices, which have begun to recover only recently.

Innovation Key to Success

What makes the tea business so successful in a country that has generally no strong traditional ties to the
beverage save the region of East Frisia? “It’s the increasing variability of available teas, an immense offer of
specialties, and the wellness trend in combination with the consumers’ growing health consciousness,” explains
Jochen Spethmann, c.e.o. of Ostfriesische Teegesellschaft (OTG) and at the same time head of the German Tea
Association. His company is market leader, representing over 30% market share. Sales accounted for some $340
million in 2004 including production of private labels. OTG’s own leading product range under the trademark
“Messmer” is growing at twice the size of the total market, while the company’s two other brands “Milford” and
“Onno Behrends” did also very well. OTG is part of the Laurens Spethmann Holding with production sites in
Austria, France, and the U.K. and operates a network of business links with agencies, importers, and distributors in
more than 50 countries.

As health aspects play an ever more important part in modern consumers’ choice of food, tea has been one of the
profiteers of this trend. “A number of scientific studies have demonstrated that the consumption of black and green
teas have beneficial effects on human health and general well-being”, says Spethmann, adding that tea is virtually
free of calories if consumed without any other ingredients. Thus, it is an ideal beverage for people caring for their
slim line.

Black is Beautiful
Black teas in all variations are the number one choice of German tea lovers, accounting for a stable 81% market
share and leaving the rest for green tea. However, green tea’s popularity is on a steady rise. Compared to the
previous year it had gained 1% in share. Though still small in volume, herbal and fruit teas are booming. Creative
new products with unusual taste innovations and in unusual mixtures are rejuvenating the market. Herbal mixtures
with exotic aromas are particularly successful.

Tea has become an ever more interesting subject within the HoReCa sector, not only because of an increasing
demand by the guests but also of its excellent margin for the caterer. On top of the latest trend of tea drinking
habits particularly among young people are so-called “mood teas” based on the Indian Ayurveda teachings and
“country teas” representing the special tea taste of other cultures like the South American Lapacho or the Indian
Chai.

Specialty Tea Shops Still Strong

German consumers in their majority prefer loose leaf teas. They make up for 60% of the total volume sold, while
teabags account for 40%. In spite of the sometimes hefty public discussion about biological food and its supposed
health benefits, organically grown tea could not increase its rather small market share of some 2% of total sales.

Food stores represent the most important sales channels, accounting for roughly 44%. They are followed by
discounters and supermarkets, which make up for another 17.4%. Interestingly enough, specialty tea shops are
held in high esteem by a certain segment of customers. 17.2% of the total volume is being sold through these
traditional outlets. Obviously it is the professional knowledge and counseling of the shop owners or operators
combined with the exclusive offer on sale which the true tea lovers seek. The gastronomy including caterers and
other consumers at large account for 4.3% followed by mail orders with another 4%. This leaves 11.8% for various
other but not specified outlets including small retailers.

India Stays Number One Supplier

In 2003 Germany imported 59,205 tons of tea, some 7,303 tons more than in the year before. India is traditionally
the most important supplier. In 2003 it exported 7,618 tons or around 13% of the total volume. Indonesia and China
shared second place with another 12.5% each, followed by Sri Lanka with 9.4% or 5,542 tons and Africa with
another 3,756 tons or 6.3% Amongst the African tea suppliers Kenya has managed to maintain its 15% share of
African deliveries over the past years.

25,419 tons of the German imports were re-exported after value-adding mostly to EU countries such as the
Netherlands, France, Sweden, Austria, and even to the U.K., the famous motherland of the tea drinking habit.

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These were some 681 tons more than in the previous year. Some smaller volumes were exported to third
countries, for example the U.S. Germany, thus, is an important hub for the international tea trade.

Worldwide Boom Beverage

Internationally there is a growing tea trend, too. Tea production increased by 40,681 tons to 3,096,707 tons. India
was the most important tea grower. Its production accounted for 857,055 tons. However, it exported only 165,000
tons, while the rest was consumed domestically. The annual per capita consumption in India averages some 660
grams of tea as to 250 grams for example in Germany. In contrast, Sri Lanka, which produces considerably less
tea than India, exported 291,891 tons or 96% of its production, making it the Number One exporter worldwide.
Third place of tea exporting countries is held by Kenya with some 268,801 tons of exports or 92% of its production.

The coming tea year will be, according to Spethmann, another good one. “Tea held firm in 2003, when
circumstances were difficult. Recent consumer surveys indicate that people stay attracted to tea because of the
vast range of flavors and because they enjoy the pleasant effects of tea drinking. This makes tea an every day’s
drink just right for any occasion.”

Another indicator of tea’s attractiveness is the gradual appearance in Germany of stylish tea shops where all kinds
of freshly brewed specialty teas are served. They can be compared with coffee shops. Experts believe that it is
only a matter of time that people can buy “tea to go” as is the case with coffee in coffee shops.

As a hot beverage tea is naturally a favorite during the cold season. However, hot tea is also a good thirst
quencher in summer. This is demonstrated by the tea drinking habits in such warm nations like Sri Lanka, India or
Tunisia. “Even in summer time you can find hot tea refreshing, particularly when the temperatures are soaring”,
says Spethmann. He does know, because you will scarcely observe him without having a good cup of tea in hand,
whether in winter or summer months.

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