Vladislav Vorotnikov Archives - Tea & Coffee Trade Journal https://www.teaandcoffee.net/people/vladislav-vorotnikov/ Tue, 20 Aug 2024 11:50:57 +0000 en-GB hourly 1 The rise and fall of the Caucasus tea industry https://www.teaandcoffee.net/feature/34853/the-rise-and-fall-of-the-caucasus-tea-industry/ https://www.teaandcoffee.net/feature/34853/the-rise-and-fall-of-the-caucasus-tea-industry/#respond Wed, 21 Aug 2024 10:25:09 +0000 https://www.teaandcoffee.net/?post_type=feature&p=34853 The Caucasus region's tea production has struggled since the fall of the Soviet Union. However, there are hopes of rejuvenating their tea industries by focusing more on quality and less on quantity. By Vladislav Vorotnikov

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Once a thriving region for tea production, The Caucasus has struggled since the fall of the Soviet Union. However, tea revival programmes have been launched in the Caucasus states with the hopes of rejuvenating their tea industries by focusing more on quality and less on quantity. By Vladislav Vorotnikov

In recent years, business was tough for tea growers in Caucasia, comprised of Armenia, Azerbaijan, and Georgia. The importance of tea production at the world’s most northern plantations is even recognised at the state level, but in the face of stiff competition with imports, this is still not enough to help the industry out of its current predicament.

The Caucasus region has a rich history in tea production, which might surprise many. In the 1970s, this area was a significant contributor to the global tea industry, with an impressive output of nearly 140,000 metric tonnes (mt) of tea. Georgia played a major role in this, accounting for 60 percent of the total production. At its peak, Georgia’s tea production alone reached an impressive 95,000 mt per year.

Caucasus tea largely met the demand of the tea market on one-fifth of the world’s land surface. It was also exported across countries of the socialistic camp, as well as to Afghanistan, Iran, Syria, Yemen, Mongolia, and some African states. In the 1980s, the Soviet Union was the fourth largest tea producer, following India, China, and Sri Lanka.

Those days are long gone now. In the 2020s, Caucasus tea accounts for only around 0.05 percent of the global production, as estimated by the Food and Agriculture Organization (FAO) of the United Nations. The transition to a market economy has been brutal for the tea industry in the Caucasus. Over 90 percent of cooperative farms involved in tea production have gone bankrupt, leaving behind vast swathes of abandoned tea plantations across the region.

Now, Georgian tea is even losing the domestic market, as estimated by Tengiz Svanadze, head of the Georgian Tea Association. In fact, Georgian tea meets only 25 percent of the local demand, while the rest is covered by imports.
Despite the bleak situation, there are glimmers of hope. In 2016, Georgia launched a tea industry revival programme, aiming to rejuvenate 7,000 hectares (ha) of abandoned tea plantations. A similar initiative was undertaken in Azerbaijan in 2018, with a goal of increasing tea production eightfold by 2027 to 8,500 mt.

However, these efforts have yet to pay off. Svanadze estimated that as of 2022, Azerbaijan manufactured between 500 and 1,000 mt of its own tea. A substantial share of the tea imported on the Georgian market comes from Azerbaijan, he admitted, adding that those were not locally grown products.

Georgian tea brand. Image: Friends in Georgia

Over the last several years, Azerbaijan heavily invested in several tea factories, which import tea leaves from Asia, instead of cooperating with local farmers.

In Armenia, the tea industry has a much smaller scale and is primarily concentrated in several high mountain areas nearly 1,700 meters above sea level, where farmers focus on herbal tea production. As reported by a local news outlet, Mir, Armenian mountain herbal tea is exported to Russia, Europe, and North America, though in small quantities.

In fact, tea growing has never been popular in Armenia – a country of coffee lovers. For example, BusinesStat, a local think tank, calculated that sales in the domestic tea market between 2018 and 2022 dropped from 370 to 346 mt, and the trend is likely to continue. The analysts emphasised that, on the other hand, Armenia has some of the highest coffee consumption levels per capita in the entire post-Soviet space.

A hard-to-forget bad name

It has been over three decades since the Soviet Union ceased to exist, but Caucasus tea growers still blame it for the ruined reputation of their brands.

“They [Soviet managers] tried to pump up Georgia to produce large quantities of tea to cover the Soviet’s needs for the drink. But this was an impossible task for a small country,” commented Andrey Skidan, tea production technologist. As a result, the quality of Georgian tea at that time was poor. Tea leaves were mixed with pieces of wood and other components, sometimes of unknown origin. “In the end, the drink was poorly brewed; its taste was dull and unsaturated,” he said.

Similar practices were introduced in Azerbaijan, but poor-quality tea is primarily associated with Georgia since it was the largest tea manufacturing republic at the time.

“We tried to break out to the Russian market with our tea, but the memories of Soviet-era quality are still blood-curdling,” a manager of a Georgian tea company revealed, admitting that some Russian importers still refrain from working with Georgian tea suppliers, though there are signs of improvement in this field.

Unfortunately, official figures suggest that the Georgian tea industry revival programme has gone sideways. In 2023, the country exported 1,522 mt of tea, worth only USD $2.2 million. Exports have been steadily shrinking during the last five years, plummeting by 27.5 percent during this time. In monetary terms, sales to foreign customers are halved compared with 2019, when they generated $4.4 million for the Georgian tea companies.

Georgian tea exports are shrinking but prospects are bright. Image: Organict Store

Svanadze insisted that the downward dynamics are not a sign of a crisis. He explained that the drop in sales is primarily attributed to a gradual switch of Georgian farmers towards manufacturing better quality products, which entails a temporary decline in output. “Georgian firms have switched to the production of high-quality tea. Everyone wants to brew high-quality tea, while the low-quality tea production, in practice, is no longer profitable, and accordingly, the harvest has shrunk.”

Svanadze said the change in quality helps Georgian tea better compete with imports on the domestic market, and the share of locally grown products has been steadily growing in recent years.

Some Georgian firms have reported a burgeoning tea-export renaissance. Tornike Shekiladze, director of tea manufacturing company, Gezruli Tea, disclosed that the company exported 400 kg of tea last year, primarily to the European Union (EU). Nearly 60 percent landed in France, 30 percent in the Czech Republic and the rest in Germany.

There might be other reasons for the negative production dynamics. Recently, Georgian farmers growing tea have faced fierce competition for land with other agricultural manufacturers and even investors from other economic segments. An ongoing boom in solar power generation in the country promises to drive the cost of land even higher, meaning that only high-margin businesses can sustain the rising costs.

Organic tea potential

Shote Bitatdze, founder of the Association of Georgian Organic Tea Manufacturers, is one of the enthusiasts struggling to give a new life to the local tea production. Bitatdze, who was engaged in successful business in China until 2006, moved back to his country where he saw a potential in growing high-quality ‘specialty’ tea.

Organic tea production perked up to 30 mt in Georgia in 2023, Bitatdze estimated. He added that this figure has a potential to grow to 200 mt if there is sufficient demand in the global market. Since 2009, the Chinese government has supported organic tea production in Georgia, helping to train local farmers and their personnel, Bitatdze said. “As practice showed, there are no preconditions for the development of mass tea production in Georgia,” he said, adding that at the end of the day, production costs at Georgian tea plantations appear to be higher than that of those from countries with tropical climates.

Exports in the spotlight

Analysts believe exports will largely determine the future of the Caucasus tea industry.

Natalya Zhukova, director of the European Bank for Reconstruction and Development’s (EBRD) Agribusiness Department, for example, expressed confidence that the region can benefit from its strategic location, close to the big markets of the post-Soviet space and the EU. However, he emphasised that to grasp its opportunities, the tea industry should play its cards right and not repeat the mistakes of the past.

“The international tea market continues to develop, with trends showing strong demand for a variety of quality tea products such as oolong and white leaf tea. By ensuring improved product quality and efficiency throughout the supply chain, as well as diversification of production, Georgia and Azerbaijan have much to offer tea lovers,” Zhukova said.

High quality Caucasus tea is on demand on the global market. Image: TeaTerra

Georgia, with a population of 3.7 million, Azerbaijan, with 10.1 million, and Armenia, with 2.8 million, are markets not comparable in size with the nearly 200 million Eurasia Economic Union and 450 million EU populations.

Dodging the reputational damage, Azerbaijan’s tea industry, in recent years, has been successfully utilising the export-oriented development model. In fact, there is more high-quality Azerbaijani tea abroad than in Azerbaijan itself, Rauf Garayev, a local agricultural economist, said. “For example, if you buy Azerbaijani tea in Russia, you will see that it is of higher quality and tastes better than what is sold here.”

Remarkably, tea consumption in Azerbaijan has jumped by nearly 50 percent over the past decade. However, local customers are still unwilling to pay extra for high-quality tea, while in Russia and the EU, Azerbaijani tea is perceived as a premium exotic product.

“We can sometimes hear from our citizens that the [locally grown] tea is impossible to drink, while foreigners who bought our tea in their countries [report] that it is of excellent quality,” Garayev said.

Azerbaijani tea companies are confident that some measures are needed to help them regain their market from importers. Uncontrolled tea imports into the country reportedly threaten the industry, including its premium segment. “In the near future, Azerbaijan can become a net tea importer instead of a tea manufacturer. And no steps are being taken to prevent this from happening,” Garayev stated.

Tea exports are now on the agenda even in Abkhazia and South Ossetia – breakaway unrecognised regions of Georgia. The Abkhazian government has purchased and installed a line for processing premium tea products from China for $22,000 million. Thanks to these investments, several tea plantations were revived in the country, securing an output of eight metric tonnes of tea. A part of this volume is due to be exported to Russia.

It is unlikely that the Caucasus tea industry will ever again achieve the Soviet-era production performance. However, by focusing more on quality and less on quantity, local growers have every chance of finding a comfortable niche in the global market.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industries since 2012.

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Despite perceptions, Scandinavia offers opportunities for growth in coffee https://www.teaandcoffee.net/feature/34384/despite-perceptions-scandinavia-offers-opportunities-for-growth-in-coffee/ https://www.teaandcoffee.net/feature/34384/despite-perceptions-scandinavia-offers-opportunities-for-growth-in-coffee/#respond Thu, 06 Jun 2024 09:29:53 +0000 https://www.teaandcoffee.net/?post_type=feature&p=34384 Nordic coffee market is often seen as mature, with limited growth potential. However, a closer look reveals a dynamic and evolving landscape. By Vladislav Vorotnikov

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With a unique coffee culture deeply ingrained in its society, the Nordic coffee market is one that stands out. It is often seen as mature, with limited growth potential. However, a closer look reveals a dynamic and evolving landscape. By Vladislav Vorotnikov

While Scandinavia is a term commonly used to describe the region in Northern Europe, it is surprising that it has no clear definition. Most people imagine three countries: Norway, Sweden, and Denmark, though geographically, it is an area of the Scandinavian Peninsula dominated by the Scandinavian Mountains. This leaves Denmark out but includes the northern part of Finland.

The status of Iceland is also vague. The country has close linguistic and historical ties with Scandinavia and is considered a part of Scandinavia by many, though the island sits nearly 1,000 kilometres away from the Norwegian coast.

All mentioned countries share exceptionally strong coffee traditions and similar consumer preferences, though some differences exist. “[For example], in Finland, the volume [of coffee] consumed is much higher. In Norway, Sweden and Denmark, consumption is less, but consumers have a higher preference for high quality – specialty – coffee,” said Tjalling Jorrit de Boer, senior market analyst with Molgo, a Groningen, Netherlands-based research firm.

Kafferisteriet Merkur – a prominent coffee roastery established in 1993. Image: Wikipedia

A recent study conducted by Molgo showed that Norway, Sweden, and Denmark have coffee consumption levels that are well above the European average. Sweden, the largest coffee market in the region with a population of 10.5 million, ranks third in terms of per capita coffee consumption in Europe, following only Finland and Luxembourg.

Other Scandinavian countries are just a little behind. Norway, with a population of 5.4 million people, has a per capita consumption of 8.6 kg, the fifth highest in Europe. Denmark’s consumption of 6.6 kg makes it eighth. The high consumption makes the market relatively static with little room for volume growth, Salla Korpivaara, consultant at Euromonitor International, assumed.

Moreover, a number of factors in Europe have taken a toll on the Scandinavian coffee market in recent years. The Covid-19 pandemic definitely had an impact on the region, but to varying extent, Korpivaara indicated. For example, she said Sweden imposed a few restrictions on the HoReCa sector, and their lockdown was not as strict as Norway and Denmark. Hence, while in Norway, the coffee segment in HoReCa declined in 2020 by 27 percent and in Denmark by 19 percent. In Sweden, the decline was more moderate, around 14 percent. The HoReCa segment swiftly recovered starting the following year, 2021, for all three countries.

“At the same time, in 2020, all three countries saw a steep increase in the retail volume sales as Scandinavians, [like] the rest of the world, moved their offices to their homes,” Korpivaara noted.
De Boer said that it is hard to say how the cost-of-living crisis in Europe, which unravelled in 2023 and has yet to loosen its grip on the economy, has affected coffee consumption in Scandinavia. He assumed that it hadn’t had a significant influence on the volume, though it could trigger a small shift from the out-of-home to the at-home market and further small growth of the specialty segment.

Focus on innovation

Among the Scandinavian countries, the Danish coffee sector stands out for its innovative specialty segment. This segment is characterised by small-scale specialty coffee roasters who work closely together with each other and with their suppliers to create unique and high-quality coffee products. These roasters often experiment with different roasting techniques, sourcing methods, and flavour profiles, leading to a diverse and dynamic coffee market.

Scandinavian roasteries are willing to experiment. Image: Claus Sal

Local publication, Fodevare Watch, also recently reported a major shift towards innovation in the Danish coffee sector, with new companies, concepts, and ideas “springing up all over the country.”

The trend has become so massive that company managers are even starting to wonder whether there is room for so many new players in the market, especially in the retail segment, where the competition is particularly fierce. “I doubt there is room for so many competitors in retail because the shelf space is getting smaller. So, there will be a bigger battle for space in the future,” Tom Faurschou, managing director of Lavazza’s Danish division, told Fodevare Watch.

Henrik Aagaard, CEO of BKI Foods, on the other hand, argued that the Danish coffee market offers plenty of development opportunities, and those ready for bold experiments have good chances of being rewarded with strong consumer interest.

Competition in a market where sales volumes have already reached all possible heights and a further rise in volumes seems unlikely drives coffee companies to be more creative. “We are looking into a relatively stable market, but the requirements to develop and launch new concepts will only become more important in the future,” Aagaard said.

Market players indicate that Scandinavian coffee lovers are increasingly becoming more discerning, searching for new tastes and flavours, as well as new places and rituals associated with drinking coffee. However, the existing traditions are here to stay. “[Scandinavian] coffee culture is unique. In many gatherings and meetings, coffee has a key role. In Sweden, there is a tradition called ‘fika’. This social event is where people gather to enjoy coffee, often with sweet pastries or cakes,” Korpivaara said.

Analysts agree that innovation is the key for market players in Denmark and other Scandinavian countries’ markets to stay successful. This is particularly true, as some forecasts envisage that generation change can drag down coffee consumption in some segments. “Younger consumers are likely to consume fewer cups of coffee than their older counterparts but are likely to spend slightly more on each cup,” Korpivaara said.

According to Molgo’s research, innovative Scandinavian roasters have a significant influence on the global specialty coffee scene. In this context, the analysts pointed out that the Specialty Coffee Association originated in Norway. Furthermore, despite the projected limited growth options, the number of roasters in Scandinavian countries is increasing, particularly the number of micro-roasters. Many of these roasters distribute their coffee to local cafés but also have their own coffee shops. For instance, Sweden alone is home to around 80-100 micro-roasters.

Scandinavian countries have some of the highest coffee consumption rates in Europe. Image: Christian Caffe

Surprisingly enough, the innovation trend goes hand in hand with consolidation. Multinationals are taking over promising brands in the Nordic specialty segment, de Boer indicated. This is largely in line with the general trend of increasing consolidation in the mainstream coffee segment in Europe in the last few years.

Ethical consumption dominates

Observers also pointed out that demand in the Scandinavian market is increasingly being reframed by principles of ethical consumption. “Products with organic and ethical certificates, as well as products underlining the product’s origin, are seeing good growth in fresh coffee. This is in line with both the health and wellness trend and the increasing interest in ethical consumption, with many younger consumers prioritising quality and compatibility with these consumption trends over quantity,” Korpivaara noted.

In this background, she added, coffee pods registered a decline in volume sales last year in all three markets despite the convenience that these products offer. In an increasingly environmentally conscious market, pods are not seen as a sustainable solution. Many consumers would now rather look for coffee bean machines to have convenient, high-quality coffee. Competition in this area is intense and there has been some discounting on pricing.

Molgo analysts stated that Rainforest Alliance/UTZ, Fairtrade, and organic-certified coffees are particularly interesting to consumers in Scandinavia, where about 90 percent of all coffee sold in retail is certified. As a part of the same trend, Scandinavian coffee lovers have shown increasing interest in organic coffee. However, the European economic crisis has weighed on this segment in the past few years.

“We do not have exact figures for organic coffee, but we know that the high inflation and weakening of purchasing power in Scandinavia have led to a decline in the overall organic market,” Korpivaara said.

Promising niches

Sustainable, specialty coffees and premium quality coffees continue to be promising segments of the Scandinavian coffee market, Euromonitor International analysts claimed.

Scandinavia sees a growth consumption of specialty coffee. Image: Mork

“Fresh coffee beans are expected to continue to grow. Consumers are showing increased interest in fresh coffee beans as they look for products that they see as healthier, higher in quality and more ethical. An increasing number of Scandinavians will have a coffee maker [with a bean grinder] at home, and they will use it more on a daily basis rather than only on special occasions as was previously the case,” Korpivaara explained.

Foodservice coffee volumes are expected to see healthy growth in the forecast period as Scandinavian consumers will be spending more time out of their homes and retail outlets are looking out for new coffee formats to offer, she noted.

The coffee shop culture and takeaway coffees are also becoming more popular in the region, providing a further boost to sales. Retail e-commerce is expected to continue to see positive growth over the forecast period as online grocery shopping becomes a normal part of life for more and more consumers. “In addition to ordering supplies of conventional coffee via online grocery retailers, consumers will increasingly order more exotic coffee blends, beans and pods online from specialist coffee sites,” Korpivaara said.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industries since 2012.

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Entering the age of lavender https://www.teaandcoffee.net/feature/34288/entering-the-age-of-lavender/ https://www.teaandcoffee.net/feature/34288/entering-the-age-of-lavender/#respond Thu, 23 May 2024 09:54:54 +0000 https://www.teaandcoffee.net/?post_type=feature&p=34288 Lavender has long-been valued in herbal medicine for its health benefits. Now, the coffee industry is embracing the popular relaxation ingredient and the resulting beverages are quickly finding fans. By Vladislav Vorotnikov

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Lavender has long-been valued in herbal medicine for its health benefits and has been a leading ingredient in myriad beauty and skincare products due to its calming effects, as well as in tea to promote stress-relief. Now, the coffee industry is embracing the popular relaxation ingredient and the resulting beverages are quickly finding fans. By Vladislav Vorotnikov

In recent years, lavender has been rapidly building a fan base among coffee lovers around the world, and market players believe this trend is only just gaining traction.

Best known for its calming effects, lavender has historically been highly valued in herbal medicine for its health benefits, including antioxidant, anti-inflammatory and antibacterial properties. There is scientific evidence that lavender aromatherapy may help reduce stress, promote better sleep, lower blood pressure, and even relieve some pain. Research also shows that inhaling lavender can help reduce anxiety and depression.

The word lavender comes from the Latin word lavare, which means “to wash.” In many ancient cultures, including Greece, Persia, and Rome, lavender was believed to purify the body and mind. In Roman times, the blossoms were sold for about the same amount as a farm worker’s monthly salary. Fortunately, lavender is much more affordable today.

Tea & lavender: an ideal union

Over the years, this herb has gained a foothold in the tea industry, where it is appreciated for its pleasant taste and potential calming benefits. “Flowers are widely perceived to lift people’s moods and are also a popular choice of gift when trying to cheer someone up. Here is where floral teas can step in and raise their game in the mental wellbeing area,” said David Faulkner, associate director with Mintel Food & Drink.

According to Faulkner, in an increasingly chaotic world, relaxation is the top priority for tea drinkers. Already the leading category for stress and relaxation claims, tea is uniquely positioned to further develop this role in the coming years.

“Brands innovating around floral teas should actively target stress relief and good mood – the benefits commonly associated with ‘real’ flowers. Beyond ‘good night’, there is room for ‘good day’ mood-boosting teas.”

Tea is the leading category for innovation in this context. As estimated by Mintel, while Asia Pacific leads launch activity, remarkable growth can be seen in North America, where floral flavours doubled within the past five years.

The rise in popularity of lavender in the tea industry is absolutely in line with the existing trends of consumers becoming more health and wellness-focused, as well as the growing desire for more exotic flavours, especially among younger consumers, commented Niya Vatel, owner of Tea and I, a US-based tea company. She added that the general increase in the use of herbal and botanical ingredients is also contributing to the rising popularity of lavender.

Furthermore, “people are willing to pay a premium for a sensory experience and potential health benefits,” Vatel indicated. And perhaps more importantly in today’s world, lavender is now among the products that “ride the social media wave, being cherished by celebrities and influencers, which proves to be a catalyst for its booming popularity.

“We must also remember the influence of social media marketing. When lavender-infused beverages are showcased in visually appealing ‘Instagrammable’ ways, it can lead to faster widespread adoption,” Vatel said. What is additionally important, she continued, “is that the health benefits of lavender aren’t folklore: it’s backed by science, so it’s great for consumers looking for that reassurance and interest in organic, natural, clean-label products.”

A perfect blended paradox

While lavender has already become a common part of tea culture, it is still an emerging trend in the coffee industry.

Paul Rooke, executive director of the British Coffee Association, commented, “For several years, there has been innovation around the use of flavours and aromas in coffee, so it’s no surprise that lavender would be part of that development.”

In general, the rise in lavender’s popularity is partly linked to the young generation’s constant desire to experiment with flavours and tastes. “Coffee as a beverage readily lends itself to being combined with a wide range of different ingredients, and we see more of that as new generations of coffee drinkers explore these opportunities,” Rooke explained. “It is clear that the use of herbal and botanical ingredients as a part of that innovative exploration is fast becoming a staple part of the UK’s hot beverage scene.”

Analysts say that some customers may want to add lavender to their coffee, seeking a more balanced beverage. Coffee can make some people feel anxious and negatively impact their sleep, while lavender can calm and, in theory, counter those effects. Coffee companies are rushing to capitalise on the growing purple trend.

“We have noticed an increase in the request for lavender beverages,” said Megan Jackman, manager with Keweenaw Coffee Works. “Usually, lavender is a popular ingredient in the spring, and would mainly only show up on our spring seasonal menu. However, lavender has become so popular that we now offer lavender beverages as part of our ‘signature’ beverage menu, which is available year-round,” Jackman said.

The growth in popularity of lavender has become so evident that Keweenaw Coffee Works has also shifted to making its own lavender syrup in-house. “Because so many customers want lavender drinks, it is important that our lavender syrup is of high quality. A lot of the lavender-flavoured syrups available on the market have an artificial flavour or smell to them, so we made the decision over a year ago to make our own lavender syrup using lavender buds and simple syrup,” Jackman explained.

Gretchen Hashemi-Rad, beverage category manager for Caribou Coffee, has also observed a surge in consumer interest in lavender coffee. “In recent years we have noticed an increased demand for customisation, including the desire for plant-based milks.” She added that “this surge in popularity led us to the decision to offer free non-dairy customisation when ordering via the app. We also believe Gen Z and millennial customers are driving these beverage trends including lavender. The popularity of social networks and influencers has made a significant impact on these trends as well.”

Hannah Holmes, a spokesperson for flavours and ingredients supplier, Finlays, said the company “has certainly noticed a rise in lavender – and other floral flavours over the past few years.” She explained that several factors are driving its popularity, such as consumer demand for ‘adult’ soft beverages that offer an alternative to sweet carbonated soft drinks and alcoholic beverages. Holmes shared that lavender creates a more unconventional and sophisticated flavour profile, appealing to consumers seeking distinctive, artisanal and craft beverages.

“There’s also a health angle – as consumers typically associate lavender with relaxation and calming – as evidenced by its frequent usage in the health and beauty space in products such as bath soaks,” she said.

Additionally, the soft purple hue creates visual appeal, which is increasingly important for beverages gaining traction on social media, Holmes stated, adding that the new Starbucks Iced Lavender Cream Oatmilk Matcha is a great example of a distinctive beverage, drawing on the sweet floral notes and visual impact of purple and green from the matcha and lavender.

“Lavender is the perfect flavour to transition us from the winter season into spring,” said Patrick Penny, Starbucks beverage developer in a company-issued press release. “Its soft sweetness, light floral notes and beautiful colour ignite feelings of rejuvenation and awakening associated with the change of seasons.” The new Iced Lavender Cream Oatmilk Matcha features matcha and oatmilk served over ice, and topped with lavender cream cold foam, which creates sweet and subtle floral notes. “When creating the new Iced Lavender Cream Oatmilk Matcha, we wanted to capture the uplifting energy of spring in a cup,” Penny shared. “The vibrant green matcha topped with lavender-hued cold foam delivers a delightfully colourful and unexpectedly delicious flavour combination.” Starbucks’ spring beverage menu also includes an Iced Lavender Oatmilk Latte.

Herbal & botanical revolution

“The underlying trends for adult soft drinks, relaxation and visual appeal are key drivers of consumer behaviour so we expect lavender to remain popular for several years, but with key developments [such as] the distinction of ‘French lavender’ or the trend expanding to include other floral teas and botanicals [like] Darjeeling or peony,” Holmes shared.

However, the soaring popularity of lavender might be only the tip of the iceberg. There is a more powerful trend underneath, which is raising consumer interest in herbals and botanicals, including in coffee beverages.

“In seeking natural ingredients, consumers are driving the popularity of herbals and botanicals – there are several angles to this, health and perceived functionality; the visual impact of botanicals, eg, hibiscus; and the desire for new and innovative flavours,” Holmes said.

“Coffee is such an innovative space,” Hashemi-Rad pointed out. “Like with lavender, more herbal and botanical ingredients may end up having a bigger impact on the beverage industry in the future. While an unwavering love of specialty coffee is at the core of what we do every single day, our guests’ wants and needs are always evolving.”

Holmes suggested that businesses need to be innovative and forward-looking to ensure they are reactive to changing consumer preferences, which is obviously a major challenge with the fast-moving nature of trends. “At Finlays, we employ several tactics to stay ahead of the curve, including being highly active on #DrinkTok, using predictive AI to forecast trending flavours and ingredients and looking outside of the beverage category – for example into health and beauty – to understand the wider consumer landscape. This enables us to support customers in capturing pockets of high growth in the large and mature categories in which they operate,” Holmes said.

“Today’s consumers are informed and conscious about the health benefits of what they consume, so it’s unsurprising that companies are taking note and popularising botanical ingredients,” agreed Tea and I’s Vatel. “Consumers want the best of both worlds: beverages that taste great and are good for them. The boost in lavender use aligns with that growing trend of taste exploration and health-conscious consumption, and I don’t see it going anywhere any time soon.”

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industries since 2012.

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South Korea’s coffee market: optimistic yet intensely competitive https://www.teaandcoffee.net/feature/34173/south-koreas-coffee-market-optimistic-yet-intensely-competitive/ https://www.teaandcoffee.net/feature/34173/south-koreas-coffee-market-optimistic-yet-intensely-competitive/#respond Thu, 02 May 2024 15:09:37 +0000 https://www.teaandcoffee.net/?post_type=feature&p=34173 With one of the world’s highest coffee consumption per capita, South Korea lures the best coffee chains in business to the local market. Although, success is not entirely guaranteed. By Vladislav Vorotnikov

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With one of the world’s highest coffee consumption per capita, South Korea lures the best coffee chains in business to the local market. Although the opportunities are enormous, success is not entirely guaranteed as the coffee market in South Korea is in transition due to rapidly increasing competition and rising labour costs. By Vladislav Vorotnikov

Coffee is so loved in South Korea that the slogan “Korea is a Coffee Republic” has become viral on social media networks over the past few years. Per capita consumption stands at 405 cups, more than twice above the global average of 152 cups, Euromonitor International calculated.

The Korean Economic Institute of America put the consumption at as high as 512 cups per year. One way or another, in terms of coffee consumption per adult, South Korea is ranked the world’s second, following only France.

Coffee accounts for 30.8 percent of the total South Korean beverage market, which is even higher than the share of carbonated drinks of 25.5 percent, the Korean Food and Drug Safety Ministry estimated.
The key factor behind the soaring popularity of coffee in South Korea is a busy corporate and lifestyle culture, Taeyoung Lee, a local analyst, noted. In recent years, it has also been complemented by the high accessibility of coffee, as coffee shops in the country can be found virtually on every corner.
A study conducted by the Ministry showed that in 2022, coffee sales in South Korea were valued at KRW 5.7 trillion (USD $4.3 billion), making it the world’s third-largest coffee market.

Starbucks is the undisputed market leader and a symbol of the country’s coffee culture. After entering the country in 1999, the company swiftly conquered the hearts and minds of local coffee lovers. Starbucks sales are consistently trending upward, reaching a staggering KRW 2.59 trillion ($1.9bn) in 2022, against KRW 1.93 trillion ($1.47bn) in 2020 and KRW 2.38 trillion ($1.82bn) in 2021. With 1,750 stores all over the country, South Korea is Starbucks’ fourth largest market after exceeding Starbucks Japan in 2022, just behind the United States, China, and Canada.

A battleground of franchises

International coffee chains flock to South Korea to capitalise on the exceptional demand for coffee. The official figures indicated that the number of coffee brands present in the country jumped from only 390 in 2020 to 852 in 2022, and the trend is yet to wind down. Against this background, the total number of coffee shops, coffee-to-go points, and cafés reached the historic record of 99,000 outlets at the end of 2022.

Local press reported that South Korean market newcomers dream of “becoming the second Starbucks.” Although matching Starbucks’ store presence is hardly within grasp, new chains can still get their piece of the ‘coffee pie’.

Canadian coffee brand Tim Hortons, which launched in South Korea in December 2023, announced that it sold 300,000 doughnuts and over 100,000 cups of coffee within a month of opening. The company has swiftly launched three more outlets and, at the time of writing, was on the fast track to putting the fifth into operation.

Peet’s Coffee, one of the top three coffee brands in the western part of the United States, registered its trademark in South Korea in May 2023 and is preparing to open its first outlets. Intelligentsia, one of the top three specialty coffee brands in the United States, is also preparing to enter South Korea. When Intelligentsia opens a store there, it will be the brand’s first store outside the United States.
Growth comes at its own price. Local publication, Chosun, citing its own sources in the industry, reported that while the upward trend in the coffeehouse market continues, the number of coffee shops that closed in 2023 appeared to be the highest ever, as not everyone is ready to withstand competition.

ome brands that have entered the South Korean market in the previous few years have found it challenging to scale up their businesses. Chosun, for example, said that Japan’s Percent Coffee, Vietnam’s Kong Café, and Denmark’s April Coffee are among the brands that have entered the market in the previous years and still have a relatively small presence in the market.

On the other hand, ultra-low-cost coffee brands such as Mega Coffee and Compose have been expanding their operations in the market.

Despite being geographically small, specialist coffee and tea shop chains in South Korea have shown a remarkable 11.92 percent compound annual growth rate for the outlet growth from 2018 to 2023, Kevin Han, research analyst with Euromonitor International, commented. “This growth is heavily influenced by the emergence of low-priced coffee brands and their aggressive outlet expansion strategies.”

As expected, the fight for customers eventually undermines revenues across the board. “As these brands have competed for the same market share by entering the same location, there has been a noticeable decrease in sales per outlet for each low-priced coffee brand in the second half of 2023, indicating a decrease of consumer visits per outlet due to the fierce competition,” Han said.
To address this challenge, low-priced coffee brands have diversified their menus by adding bakery and dessert items. This strategic move aims to avoid a decline in sales per outlet by encouraging higher average customer spending, and this trend is expected to continue, he said.

In the last couple of years, the South Korean coffee market has also witnessed a surge in the popularity of specialty coffee. This is evidenced by the sales dynamics of Paul Bassett, the leader in this segment.
Paul Bassett’s sales have reached KRW 145.6 billion ($111m) in 2022 from KRW 107.5 billion ($82m) in 2021, which increased from KRW 81.3 billion ($62m) in 2020. The figures are on the rise as a growing number of Korean customers seek better taste features.

A spokesperson for the company said, “Our greatest competitiveness is the high level of quality shown in all our stores. In the future, we plan to operate specialised stores or expand our product range to better suit customer tastes.”

There are other signs that the market players believe the growth opportunities in the premium segment of the South Korean coffee market are far from being exhausted.

Lotte Department Store recently announced that it had exclusively secured the domestic franchise and distribution rights for Bacha Coffee, a brand that originated in Marrakech, Morocco, and currently operates a total of 18 stores in nine countries, including Singapore, France, Hong Kong, and the United Arab Emirates.

Local press reported that Lotte Department Store CEO, Jeong Jun-ho, spent about 18 months personally persuading executives at Basha Coffee’s headquarters in Singapore to import its coffee. The exclusive domestic franchise and distribution rights contract was signed in September 2023, and the first store in the country is scheduled to open in July 2024.

Transition stage

While interest in specialty coffee remains high, within the overall coffee shop segment, the
main emphasis is no longer on further improving taste.

“The Korean coffee market is undergoing a transition, shifting its focus from the taste of specific beans and individual coffee products to considerations such as convenience, pricing, new offerings, and ambience,” Han said. “Consequently, there is a notable expansion in the market towards offering a variety of beverages and bakery items, accompanied by a strong emphasis on interior design and distinctive outlet concepts,” he noted.

This diversification leads to the continuous development of Korean specialist coffee and tea shops and the café market, which, according to Han, is predicted to grow at a 3.75 percent compound annual growth rate in retail value between 2023 and 2028.

Another powerful trend, said Taeyoung Lee, is that Korean coffee lovers are increasingly becoming more health-conscious.

As a result, pre-brewed coffee was the only segment where sales have dropped in the past few years, as customers were wary of sugar and flavouring content. Since 2018, pre-brewed coffee sales have dropped by roughly 16 percent.

“The growth of coffee franchise brands with a low-price strategy and the tendency to prefer coffee shops such as cafés have had an impact on the decline in the size of the pre-brewed coffee market,” explained Lee.

Losing identity

Based on the current trends and dynamics observed in the Korean coffee market, the outlook remains optimistic yet competitive, Han said. However, serving coffee is no longer enough to succeed in this business in Korea.

In 2023, Euromonitor International observed that independent cafés, with a focus on food, bakery and dessert offerings, exhibited a higher year-on-year growth rate in terms of value and transactions compared to independent specialist coffee and tea shops that mainly focused on coffee and beverage products.

“This trend highlights an increasing significance of bakery and desserts and suggesting a new transition in the Korean coffee market. Therefore, in the forecasted period, not only are specialist coffee and tea shops continually introducing bakery products, but independent cafés would also improve the quality of bakery and dessert offerings as a core differentiation,” Han explained.

Additionally, most specialist coffee and tea shops are transitioning from using baristas to brew coffee to using high-priced coffee machines, primarily to manage labour costs, he added. To a degree, this trend is causing coffee shops to lose their identity.

Han shared that, despite the benefits of operational standardisation, he “firmly believes this shift has led to a loss of differentiation among specialist coffee and tea shops, intensifying competition by making entry into the Korean coffee market relatively easier for both domestic and international brands.”
In the long run, this trend may offer additional business development opportunities for those players that are contemplating entering the Korean coffee market.

“There may be an increase in the entry of international chained specialist coffee and tea brands in upcoming years, while domestic brands focus on improving product offerings and atmosphere to emphasise their unique selling points and to deliver more personalised and new experiences to enhance consumer engagement,” said Han.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industries since 2012.

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When tea is not a tea: non-Camellia sinensis ‘teas’ https://www.teaandcoffee.net/feature/33738/when-tea-is-not-a-tea-non-camellia-sinensis-teas/ https://www.teaandcoffee.net/feature/33738/when-tea-is-not-a-tea-non-camellia-sinensis-teas/#respond Thu, 22 Feb 2024 14:39:39 +0000 https://www.teaandcoffee.net/?post_type=feature&p=33738 Alternative plants that live in that space between Camellia sinensis and herbals/botanicals, and brewed similarly, offer enormous potential, both revenue- and health-wise. By Vladislav Vorotnikov

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Alternative plants that live in that space between Camellia sinensis and herbals/botanicals, and brewed similarly, offer enormous potential, both revenue- and health-wise. By Vladislav Vorotnikov

By strict definition, tea is a beverage made by brewing tea leaves in near-boiling water. Whether the tea is black, green, white or oolong, these leaves come from the same plant: Camellia sinensis. Technically, anything not made from this plant should not be called tea.

The history of mixing Camellia sinensis leaves with those from other plants to get new taste and aroma traces its roots to ancient times. Over the years, some additives and alternative plants have started to be consumed independently from Camellia sinensis leaves. This emerging segment is frequently referred to as ‘new teas’, and according to market players, it has a bright future.

The Covid-19 pandemic was certainly good for the herbal tea category, commented Matthew Barry, insight manager, food & beverage research with Euromonitor International, an international think tank.

“Many herbal teas have strong functional positionings that were in demand in 2020, including immune support, anxiety relief, and treatment of Covid symptoms like coughs and sore throats,” Barry said. Growth has been slower since then, but it is notable in itself that the category did not shrink in 2021 the way so many other food and beverage categories did once the pandemic eased, and people’s shopping habits started to return to normal, he added.

In recent years, yerba mate tea, one of the prominent segments of the new teas, enjoyed a strong growth in popularity, commented Amelia Quelas, president of the newly established American Yerba Mate Association (AYMA).

Up until a couple of years ago, the yerba mate business was restricted to those who brought the custom and tradition to consume it from their homelands, specifically South America, including countries like Argentina, Uruguay, Paraguay, and Brazil, and the Middle East, and was sold in small markets and delis that catered to those communities, Quelas said.

“Slowly but steadily, a couple of companies started producing yerba mate-based carbonated drinks and entered the market through larger chains of food supply. Also, stars like Lionel Messi and teammates in the soccer world have spoken about their commitment to using yerba mate for stamina, energy and resilience,” Quelas added.

The emergence of new ‘teas’

Other types of new teas are performing similarly well. The moringa tea market, for one, has been growing steadily in the past several years, commented Clarissa Akakpo, CEO of the Accra-based moringa tea manufacturer, Aguma Tea.

“My tea business is primarily in West Africa, and there is a certain level of local knowledge that the moringa leaf is a great source of nutrients and can aid the symptoms of a variety of ailments,” Akakpo said.

In general, there used to be a perception that moringa is a tea to be consumed when sick or dealing with some form of health condition. The pandemic, however, was a game-changer for the moringa tea market.

“With the Covid-19 outbreak at the beginning of 2020, there was an increase of enquiries for moringa tea globally,” Akakpo shared, explaining that customers were looking to strengthen their immune systems and alleviate some of the symptoms. “This developed an increased general knowledge about the benefits of moringa tea,” she said, emphasizing that the impetus started by the pandemic to the moringa sector had not winded down even when the worst period ended.

Occasional reports indicated that purple tea, another type of the new tea segment, also enjoyed a rise in popularity, although it is twice the price of traditional black tea. Companies working in this niche also emphasize the health benefits of their product.

For example, Summer Tea, a prominent Kenyan purple tea manufacturer, lists high antioxidant content, weight management and improved heart health as the key benefits customers can get from consuming purple tea.

Capitalising on health habits

The Covid-19 pandemic undoubtedly boosted the popularity of at least some new teas, but there is more to it than that. As growing numbers of consumers continued to pursue healthier choices, new teas continue to come into the spotlight. Tea continues to benefit from consumers’ focus on health and wellness in a post-Covid-19 world, said Tan Heng Hong, senior food & drink analyst with Mintel, an international consultancy.

Additionally, Hong suggested that brands can deliver stronger messaging, provide more eco-friendly options, and deliver greater transparency to ensure tea’s continued relevance among sustainability-minded consumers.

In the coming years, the new teas market is poised for exceptional growth in sales, largely owing to a low-base effect. “Teas are recognised as having health benefits, and yerba mate, also has many health benefits, but because it was consumed by a much smaller population than traditional teas, it is coming a little late to the party in the US but [has staying power],” Quelas said.

With regard to herbals, Euromonitor’s Barry said there is not one specific factor behind the growth, “there are a number of things. One is simply a restlessness we find among younger consumers across many beverage categories. Younger people are abandoning sodas for waters, lagers for ready-to-drink (RTD) cocktails, etc.”

According to Barry, another reason for the rising popularity of herbal tea is the interest in functionality. Herbals have done a really good job of speaking to the functional space with a wide array of targeted products, he said, adding that in his opinion, black tea has not touted its own health benefits enough. “Regular consumption of teas from Camellia sinensis is linked to all sorts of positive health benefits, yet black tea is not really thought of as a health drink.”

Akakpo also said that the moringa tea business is growing, and the demand is increasing with the rise in interest in preventative health and well-being techniques. “I have observed that consumers want to incorporate new natural remedies into their everyday diet, and moringa is one of them,” Akakpo said.

A place on the infinite shelf

New teas offer excellent opportunities for tea companies looking to diversity their product range.

“We have been gradually increasing our range of herbal infusions over the last few years for those looking to avoid caffeine as well as to increase the range of flavour profiles,” said Holly Grinstead, a marketing manager for Edinburgh-based tea company, Rare Tea Co.

“The East-to-West cultural exchange will create demand for more tea varieties and new ways to consume it. Tea can increasingly take inspiration from energy drinks and other energizing beverages as consumers look for more natural sources of energy,” Hong added.

“If you have a market where black tea has been dominant for a long time, it’s not surprising to see millennials and Gen Z instinctively want something else,” Barry explained, adding that there is a lot of room for experimentation because of all the different ingredients you can use, and consumers these days are very interested in trying new and unusual beverages.

He noted that the internet has played a key role in this. “Even the most well-stocked tea retail outlet can only have so many options, but online, you have the ‘infinite shelf’. Tea out-performs in e-commerce compared to other food and beverage categories, and I think the variety available is a key reason.” Barry explained that people only want so many kinds of peanut butter or toothpaste to choose from before it becomes too much, but when it comes to tea and herbal teas specifically, they really do seem to want a massive selection.

Market players also continuously study various options for mixing new teas in different blends.

“Business has been good for us in the value addition space,” commented Sahil Radia, CEO and co-founder of Kenyan tea manufacturer, Bahari Teas, which focuses on purple tea, among other things. “We find there’s a lot of focus on tracing the tea from farm to cup and ensuring the tea is planted and produced at optimum standards. organic, Fair Trade, non-GMO tea are even more important now, but commitment to quality and sustainable packaging is also key,” Radia added.

Social media plays an essential role in the growth of the popularity of new teas. “Some health commentators on social media platforms have shared that moringa forms part of the cuisine in India; for example, in some villages, moringa leaves are put into curries and used as a herb; this was also a common practice in many parts of West Africa where moringa leaves and stems would be used as a vegetable in soups and stews,” said Akakpo. “This conversation has led to different types of enquiries. As a result, I have had requests for whole leaf moringa.”

The product range of new teas, as well as the number of market players working in this field, is likely to keep growing for the time being.

“The yerba mate business is still in its infancy, and one of the targets of the American Yerba Mate Association is to help those companies that are already in the market, those that are interested in selling yerba mate products in the US, and also those that are ready to enter the market such as Matea, a new concept out of Boise, Idaho, which is producing a yerba mate matcha energy drink in different flavours,” Quelas indicated.

In general, analysts remain optimistic about the future of the new teas. Barry, for example, pointed to the fact that a lot of the underlying drivers boosting growth are strong and that there is little reason to believe that there will be a reversal anytime soon.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Consumers’ desire for health & wellness through beverages remains strong https://www.teaandcoffee.net/feature/33234/consumers-quest-for-health-wellness-through-beverages-remains-strong/ https://www.teaandcoffee.net/feature/33234/consumers-quest-for-health-wellness-through-beverages-remains-strong/#respond Thu, 23 Nov 2023 11:43:19 +0000 https://www.teaandcoffee.net/?post_type=feature&p=33234 The functional and wellness tea market is expected to continue growing as consumers adopt healthier lifestyles and become more knowledgeable in the benefits of functional herbs and spices. By Vladislav Vorotnikov

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The functional and wellness tea market remains vital and demand is expected to continue growing as consumers adopt healthier lifestyles, focus on preventative measures to maintain physical and mental health, and become more knowledgeable in the benefits of functional herbs and spices. By Vladislav Vorotnikov

The past few years have seen a steady rise in global demand in the functional and wellness tea market, and as consumers’ quest for health and vitality continues, market players expect this trend to kick into full gear.

The Covid-19 pandemic has become the biggest game-changer in the global market of functional drinks, according to analysts. “Following the Covid-19 pandemic, consumers face increased burnout due to a lack of separation between work and personal lives, leading to increased stress,” said Nathanael Lim, insights manager at Euromonitor International, a global market research firm. “At the same time, the pandemic has caused consumers to be more health conscious, looking after their own physical and mental wellbeing. This provides tea players an opportunity to launch functional ingredients in their tea products, appealing to consumer needs.”

According to the Whole Foods 2022 Trends predictions, functional drinks sales will continue to soar, doubling in the next decade. The analysts explained that consumers, especially those from Gen Z, are looking for healthier options than the traditional sodas their parents grew up on, and many are also interested in sober living.

Functional beverages include ingredients such as herbs, mushrooms, electrolytes, vitamins, minerals and probiotics. Some elements, like vitamins, consistently enjoy strong popularity, while others only start unravelling their potential.

In 2022, the retail value sales of immune support tea globally account for USD $2.7 billion globally. This is set to grow by 4 percent year on year, reaching USD $3.2 billion in 2027, Lim said. In Europe, retail value sales of immune support tea account for $77 million and are set to grow by 4 percent year on year, reaching $93 million by 2027, he added.

According to Market Research Future, another global market research firm, the functional and wellness tea industry has achieved a valuation of $7.2 billion as of 2022. Their projections indicate that by 2032, the industry is expected to reach a value of $12 billion.

“The demand for natural and organic production is rising, driven by concerns over synthetic additives and chemicals. The focus on preventive healthcare is increasing, with consumers taking proactive measures to maintain their health,” Market Research Future stated.

Science as a beacon

The list of functional ingredients available on the market today is long and diverse, but as an average customer grows more knowledgeable, businesses need to keep an eye on the science to make sure their products are appreciated by customers.

“Consumers are being more careful with how they spend their money, leading them to actively seek high-value ingredients – for 60 percent, this means those ingredients that are science-backed,” said John Kelly, strategy director for beverages with Kerry, an Irish food ingredients firm. He shared that “where immune health is concerned, this rises to 78 percent, while ‘clinically proven’ is the most sought-after claim for more than 80 percent of consumers. This echoes Kerry’s own research, which has found that 79 percent of consumers research ingredients for themselves.”

It is increasingly important to be able to provide high-quality research supporting the efficacy of the ingredients in your products, Kelly continued. Consumers are becoming much more discerning about which ‘healthy’ ingredients are actually supported by science. “Our own research last year showed that 79 percent of consumers say they conduct their own research into ingredients. Formulators need to ensure functional ingredients match expectations because, in the digital era, information travels fast,” he said.

Functional tea manufacturers agree that the science behind the offered functional ingredients remains the key to winning customers’ hearts.

Image: Smith Tea

“People are looking to improve their own health and well-being through the ever-increasing choices available in an expanding market,” commented Anish R Patel, a spokesperson for the UK-based functional tea manufacturer NutraTea Ltd. “Our NutraTea blends are created using only ingredients that have known health benefits, and nothing else.

The 8.8 percent increase in herbal tea consumption up to last year demonstrates that the market is on the rise, showing how the public is becoming more health conscious. This is especially true of the relaxation and pregnancy sectors where we have seen an evidential increase in demand for our products, Patel said.

“What sets apart the ingredients in our ProActive Health portfolio is the quality and quantity of the science supporting them. For example, BC30 TM, our patented probiotic ingredient, is backed by over 25 published papers, with research showing that it can help support digestive health, immune health, and may support protein absorption. Similarly, Wellmune® is the only ingredient of its kind supported by over a dozen published, peer-reviewed clinical studies,” Kelly said.

Stress-relief & immune-boosting teas are top performers

Different market players focus on their own niches, but the general consensus is that functional tea helps mitigate stress and fortify the immune system.

Stress relief, sleep aid and immune boosting features are key trends in the functional tea market for the future, Lim pointed out.

“With the stresses of everyday life, consumers want an easy way to support their wellness goals, and the demand for wellness teas will continue to increase,” commented Niya Vatel, founder and CEO of Tea and I, who also underpins the importance of the science behind the offered products.

“Social media and technological integrations have played a pivotal role in propelling the industry forward, attracting a fresh wave of functional tea enthusiasts from a younger demographic. As a result, the market has experienced a significant boost. Influencer marketing has amplified the popularity of wellness teas beyond the detox and weight loss niche,” explained Vatel.

Covid-19 undoubtedly was the main factor driving the consumer demand in the functional beverage market. Although the pandemic is officially over, its aftermath is still present.

“The big ‘mega-trend’ is increasing consumer proactivity when it comes to health and an active interest in everyday beverages as the vehicle for benefits. This has undoubtedly been accelerated by Covid-19,” Kelly said.

One of the findings of Kerry’s most recent global consumer survey was the increased scale of the impact of the pandemic on the demand for everyday beverages with functional benefits. Teas benefit from this demand as teas have a traditional positioning as wellness beverages.

“Their benefits in areas like stress relief have been enjoyed by people for thousands of years and are supported by a wealth of science. This inherent ‘health halo’ makes tea a great fit for functional products because consumers are most likely to expect benefits in categories that are traditionally associated with health,” Kelly said.

The list of reasons why customers opt for functional drinks is long. One study by Kerry, for instance, discovered both men and women attribute beauty support as the top reason they consume beverages with high nutritional value and are willing to pay a premium even amid global inflation. Men and women are both drawn to gaining beauty support from fortified beverages.

Image: Kerry

Skin is the top concern, with 51 percent when it comes to purchasing beverages fortified with nutrients. Skin support was essential to 58 percent of women versus 44 percent of men globally, revealing a small gender gap regarding the interest in beauty support.

Immune support, adaptogenic teas, and functional herbal blends are currently the main segments in the functional tea market, according to tea and herbal supplier, Hälssen & Lyon. The German-based company stated that “consumers are seeking beverages that offer health benefits beyond hydration, making functional and wellness teas an appealing choice. As consumers look for ways to proactively manage their health, functional teas, which are attributed to various health benefits, such as immune system support or stress reduction, are in high demand. The ageing population also contributes to this but is more focused on maintaining health and vitality.”

Emerging segments

The functional tea market is also expected to evolve fast, especially as the science behind more ingredients becomes increasingly convincing.

Hälssen & Lyon, for instance, expects nootropic teas to be among the fastest-growing segments in the following years. Nootropics are substances believed to improve cognitive function and may be included in tea blends. Ingredients like ginkgo biloba, lion’s mane mushroom, and adaptogens may enhance mental clarity, focus, and memory.

In addition, the company anticipates strong demand for plant-based functional ingredients, and sustainability and regenerative agriculture will stay at the centre of public attention.

“Immune-boosting tea continues to remain relevant for consumers, especially with many unknown diseases expected in the future. With features such as vitamins and botanicals like ginger, this serves to strengthen consumer’s immune system and protect them from infections,” Lim said.

New technologies also let tea manufacturers explore new niches. Probiotics are a particularly exciting area, partly because of the growing awareness of their benefits but also because the emergence of spore-forming strains has created opportunities for tea manufacturers to create innovative new functional products, Kelly said.

Market Research Future reported that a collaboration between functional tea manufacturers, ingredient suppliers and retailers foster innovation and market expansion, noting these collaborations enable knowledge sharing, distribution network enhancement and the development of new product lines, ultimately benefiting both industry participants and consumers.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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High tech is key to reducing coffee roasting’s carbon footprint https://www.teaandcoffee.net/feature/32589/high-tech-is-key-to-reducing-coffee-roastings-carbon-footprint/ https://www.teaandcoffee.net/feature/32589/high-tech-is-key-to-reducing-coffee-roastings-carbon-footprint/#respond Tue, 08 Aug 2023 14:59:50 +0000 https://www.teaandcoffee.net/?post_type=feature&p=32589 A key step in coffee roasters striving to become more sustainable is utilising more sustainable roasting machines, and the manufacturers are meeting this demand by providing roasting machines with cutting-edge technology. By Vladislav Vorotnikov.

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As coffee roasters strive to become more sustainable, they continually look for ways to reduce carbon emissions during roasting and improve energy efficiency. A key step in this process is utilising more sustainable roasting machines, and the manufacturers are meeting this demand by providing roasting machines with cutting-edge technology. By Vladislav Vorotnikov.

Coffee roasters are increasingly exploring ways to make their business climate positive, turning to advanced roasting machines to lower carbon emissions and improve energy efficiency. Roasting machine manufacturers, in turn, are putting ample effort into developing sophisticated solutions to meet their customers’ expectations.

On average, it is estimated that roasting contributes to around 15 percent of the overall footprint of coffee’s journey from field to cup. Making the roasting business more sustainable, among other things, helps the environment and helps companies to capitalise on responsible consumption trends.

A recent study by the United States think tank First Insight showed that a lion’s share of Gen Z shoppers prefers to buy sustainable brands, and they are most willing to spend 10 percent more on sustainable products. The report also found that Gen Z, along with millennials, are the most likely to make purchase decisions based on values and principles, including environmental.

In light of this, the leading coffee companies rolled out sustainability initiatives, looking to lower the carbon footprint throughout the supply chain to the maximum possible extent, including in the roasting segment.

Illycaffè has embarked on a decarbonisation roadmap which consists of actions along all the value chain: from green coffee to finished products, taking into account all the different steps, including transportation, packaging, distribution and use of coffee machines, said David Brussa, chief total quality and sustainability officer of illycaffè. The eventual goal is to reduce the carbon footprint to reach carbon neutrality by 2033 as a company.

“We strongly think that we need to act quickly to avoid impactful problems for the next generations—a climate disaster. As we often hear, the non-return point is very close to being reached, and we need to start acting responsibly for the sake of our planet and of the generations to come. We have a limited amount of time to put in place the necessary changes. But the change we should aim for is cultural first of all,” Brussa explained.

Nestlé has made the commitment for 100 percent of its coffee to be produced sustainably by 2025. In the roasting segment, the company said it considers lowering emissions by working in the field of consumption of energy, water and protecting atmosphere gases at factories. In addition, machinery use, waste generated at factories, employee commuting, and business travel are also to be reviewed and, if necessary, adjusted. Again, advanced technology is due to play a vital role.

Image: Bühler

Engines of sustainability

Sustainability consists of three basic pillars; all are necessary but not sufficient. Therefore, all must coexist to have a sustainable process: lower environmental impact, lower social impact, and lower economic cost, commented Elena Parmi, a spokesperson for Brambati Spa.

“The first engine of sustainability is tangible affordability for the user, basically lower energy consumption, lower maintenance cost, and lower operation cost. Automatically it leads to less environmental impact, meaning less energy is equal to less greenhouse gas, less social impact, meaning less need for night staff and emergency intervention leads to greater worker welfare, and greater economic sustainability as less need for energy, less need for spare parts, greater staff efficiency allows lower cost of operation,” Parmi said.

Brambati’s development program, which is already in place includes reducing the consumption and reuse of residual energy, reducing the number of components that make up the machinery, and permanent monitoring of the entire system with AI (artificial intelligence) that allows all operating variables to be under permanent analysis.

Parmi said that this is similar to if a person were being monitored with an electrocardiogram, blood analysis, and brain activity while doing a swimming competition or other physical and/or intellectual activities.

“Any deviations from optimal values are promptly identified when they are incipient, thus enabling timely intervention when appropriate and not in an emergency, avoiding the costs of interventions, spare parts and lost production,” Parmi said.

Among the concrete examples of how Brambati’s technological solutions help lowering carbon footprint, Parmi lists the elimination of transmissions with mechanical gearboxes, resulting in increased efficiency and reductions in components, weight, lubricants and maintenance. In addition, the reduction in energy consumption is achieved with regenerative and other innovative exhaust air abatement systems, as well as through intelligent system monitoring and management.

Preserving energy

Other companies also see energy consumption as the key segment, which could do wonders in terms of lowering carbon emissions. For instance, Berkeley-based coffee roastery Bellwether Coffee told Forbes in 2020 that its recirculating roasting technology eliminated particulates and volatile organic compounds in real-time during the roast process, eventually reducing the carbon footprint of each roasting cycle by 90 percent on average.

The company estimated that if a roaster uses renewable energy sources, it can save more than 157 metric tonnes of CO2 emissions. In addition, traditional coffee roasters use a single-pass system that intakes fresh air from outside the roaster, flash-heats it to roast the coffee, then releases it as exhaust through ventilation stacks. Bellwether’s roaster takes the exhausted air, cleans it, and reuses it. This provides hot, stable air throughout the roast cycle.

Image: Scolari Engineering

Energy efficiency and renewable energy are in the spotlight of several technology suppliers. “We focus on the efficiency of the roasting process by means of very fine control of the burner and energy recovery from the roaster stack, always focused on the coffee quality,” said Fabio Clivio, coffee roasting machinery engineer with Scolari Engineering SpA. “We have been doing this for years, so we have fine-tuned the software and the roaster to always get the best aroma from the coffee. We are using a smart green coffee preheater totally synchronized with the roasting cycle.”

In addition, Clivio said, the company has been continually reducing the quantity of CO2 emitted for a batch of roasted coffee by reducing the use of fossil fuels. Scolari realised that the roaster does not need a long warm-up, and when it is on standby, the software activates the energy-saving mode to reduce airflow and gas consumption.

“The preheating follows a specific profile of temperature and time; in this way, as the roaster is ready to load the new batch, the software ensures that the green coffee reaches the target temperature at the same time, with no risk of leaving the green coffee ìn the GBPH longer than necessary. In that way, the quality of the roasting process is guaranteed,” Clivio said.

“We are testing a roaster using a mix of natural gas and hydrogen. Also combined with electrical heating. The combination of hydrogen and electrical heating is the key for carbon-neutral coffee roasters,” Clivio explained, adding that the company uses the last generation of burners already designed to run with a mix of hydrogen and natural gas. “As the hydrogen will be available on industrial bases, our customers will be able to switch to hydrogen.”

Smart heat use

Bühler Group also has a roaster, though not for coffee yet, in its portfolio, running on hydrogen, commented Michael Blatter, head of business segment coffee and nuts, Bühler Group. “We are not only looking at the roaster but the entire value chain, and I think with our sustainability team, we are capable of offering unique customised solutions which are helping in various aspects of sustainability. The roasting process is one step, and we do have solutions in reducing fuel consumption, changing the type of fuel used and using the energy for alternative processes within a factory.”

Among the concrete measures applied to lower carbon footprint, Blatter lists, recirculation of hot air to reduce fuel consumption, preheating of coffee beans with off air from the roaster, and the use of heat recovery systems. In addition, a sustainability service analyzes the CO2 footprint of a factory and implements solutions into existing plants.

“We are working together within different businesses to use ideas and concepts, which already exist,” Blatter said, adding that the company has an R&D roadmap and is working on several solutions called to curb carbon emission of the roasting operations. However, Bühler is not disclosing the concrete details to the public, he added.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Tea-bagging tech answers the call of the modern era https://www.teaandcoffee.net/feature/32392/tea-bagging-tech-answers-the-call-of-the-modern-era/ https://www.teaandcoffee.net/feature/32392/tea-bagging-tech-answers-the-call-of-the-modern-era/#respond Fri, 14 Jul 2023 14:31:41 +0000 https://www.teaandcoffee.net/?post_type=feature&p=32392 The tea-bagging machinery sector had been slow to innovate but this is changing as manufacturers are stepping up to meet customer demands. By Vladislav Vorotnikov

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The tea-bagging machinery sector had been slow to innovate but this is changing as manufacturers are stepping up to meet customer demands for more sustainable, flexible, efficient, and automated equipment. By Vladislav Vorotnikov

As the global tea market continually becomes more sophisticated, tea-packaging tech is following the same path. Helping tea manufacturers meet the demand for more sustainable, environmental-friendly packaging is one of the critical challenges in the present time, and yet there are several other vital goals that must be chased.

The global automatic tea bag packaging market is expected to see a 4.9 percent average growth through 2026, owing to surging tea production and consumption in the coming years, primarily in the emerging economies of India and China, forecasted Mordor Intelligence (MI), an Indian think tank.

Packaging has a significant role to play in the expanding tea market as it not only protects and preserves the product within but also enables brand communication. It is perceived to be almost as crucial as the selection of the tea product itself and is a driving factor for the increasing versatility of tea packaging, with luxury aesthetics and smart carton design at the forefront of consumer attraction, MI analysts stated.

“Consequently, the packaging equipment manufacturer must explore long-term investment opportunities in versatile and adaptable packaging equipment to increase output, reduce labour costs, and maintain a foothold in the market,” per MI.

Among the key vendors in the tea packaging market, the MI study lists Teepack Spezialmaschinen GmbH & Company KG, Selo Group, Xiamen Sengong Packing Equipment Co Ltd, Liaoyang Conoval Machinery Co Ltd, ACMA SpA, FUSO International, IMA Group and Sammi Packing Machine Co Ltd.

All tech suppliers tend to shape up their offer in their own way, but there are some common trends everyone in the industry clings to.

Individually tailored solutions

Teepack recently presented a new model of the Constanta machine family – a highly popular tea-bagging line. Mario Kuhn, Teepack’s sales and marketing manager, disclosed that the company kept the characteristics of the old Constanta by being a rugged, reliable machine that does what it is supposed to do: producing good tea bags around the clock.

In addition, Teepack added flexibility by implementing a platform approach using standardised modules and connecting points. “If the machine is delivered in a certain configuration, it is easily upgradable and amendable in the field. For example, the version with a speed of 180 bags per minute (BPM) can be rebuilt in the field into the 250 BPM version,” Kuhn said.

“The same goes for envelopes: if your machine is equipped to produce heat-sealed envelopes, the machine can be upgraded in the field to produce also crimped paper enveloped bags. This benefits a customer in that the machine can grow with their requirements and allows them to react flexibly to new market developments, without having to buy completely new machinery,” he explained.

This approach also allows Teepack customers to use a multitude of consumables. The customer can decide which modules fit into the slots for consumables, so that they can produce with their current supply. The customer can choose from a total of 1320 possible configurations: two bag sizes, two types of envelopes plus naked bags, two speed versions and three types of removal options are just a few of the options available.

“We are especially proud of our newly developed pre-grouping system for the Constanta. The ejection chute is formed in a way, that an empty box can be put in front of the opening and the pusher pushes the stack into the box. With that innovation, the speed of 250 bags per minute can be operationally used without having to acquire additional staff. For the mature markets, a box erector with filler and lid closer is available, further automating the process if so desired,” Kuhn said.

With Industry 4.0 pushing network-centric connectivity, Teepack is currently looking into how to best apply these new and exciting opportunities for the benefit of its customers. Integrating the machines into a network and presenting the machine’s data in an easy-to-understand way helps to further improve reliability and profitability. Virtual reality is also a field in which there is a lot of potential. This technology enables customers to train personnel while being able to continuously produce with their machines, Kuhn explained.

Sustainability seems paramount

The desire to be more sustainable has become a primary concern in the tea bag packaging industry, the MI study has shown. Packaging equipment manufacturers are increasingly adopting automation in their production lines and adhering to sustainable trade initiatives throughout the world.

Nandini Roy Choudhury, client partner of Future Market Insights (FMI), an Indian consulting agency that recently conducted a comprehensive study of the global pyramid tea-bagging market said that the switch towards pyramid-shaped tea bags itself is one of the key consumer trends tech vendors need to address. The growth in this segment in the coming years is expected to outpace the rise in demand in the global tea market.

“Pyramid tea bags have gained popularity as premium tea products for several reasons. First, pyramid tea bags offer a higher quality tea experience compared to traditional flat tea bags. The pyramid shape allows for more space for the tea leaves to expand and infuse, resulting in a better flavour and aroma,” Choudhury said, agreeing that sustainability plays a particularly important role in the tea bagging industry now.

“Consumers are becoming more environmentally conscious and are looking for products that are packaged in a way that minimises their impact on the environment,” Choudhury explained, adding that customers globally are becoming increasingly aware of the impact of packaging waste on the environment. A particularly important factor is that consumers are willing to pay more for products that are packaged sustainably. “Pyramid tea bags that are packaged using sustainable materials and practices are becoming more popular as consumers look for ways to reduce their environmental footprint.”

When it comes to the growing popularity of sustainable solutions, there are several factors in play. Many governments around the world are introducing regulations to reduce packaging waste and promote sustainable packaging practices. This means that tea bag brands that adopt sustainable packaging practices can avoid regulatory penalties and maintain their market share, Choudhury said.

“Sustainable packaging practices can also create opportunities for innovation and differentiation. Brands that use innovative sustainable materials and packaging designs can differentiate themselves in a crowded market and appeal to consumers looking for new and sustainable packaging solutions,” she added.

Different tastes

The MI study disclosed that when choosing tea-bagging equipment not all tea manufacturers seek the same features. For instance, larger manufacturers in developing nations are anticipated to increase their use of tea packaging materials and adopt new packaging technologies to address issues such as contamination, extend the shelf lives of their products, and make them more aesthetically appealing.

Smaller firms in these countries are expected to mechanise tea-packaging processes to expand output and increase efficiency, further boosting tea bag-packaging machinery demand.

Laura Maria, sales area manager with Italy-based IMA Maisa said that the company primarily focuses on providing customers with easy-to-use solutions. “Our machines are very simple to operate with high performance, extreme simplicity, and mechanical sturdiness which are the most outstanding advantages we offer,” she said, adding that customers are also looking for better automation of their packaging lines.

The FMI study further disclosed that sealing is an important field in which a growing number of companies see room for improvement. “Traditionally, heat-sealing has been the most common method for sealing tea bags, but there is growing interest in alternative methods such as ultrasonic sealing, which can offer faster production speeds and reduce the need for adhesives,” Choudhury shared.

MI also said that the demand not just for an individual tea bag but also overwrapping for a tea bag is gaining popularity to preserve freshness, and for those consumers wanting hygienic and premium design. “Thus, packaging manufacturers are [developing] machinery that not only forms the bag but will also wrap the product,” MI analysts disclosed.

Streamlining operations

Manufacturers are designing solutions to make tea-bagging lines more effective. New Jersey-based Munson Machinery does not manufacture tea-bagging equipment, but its mixers are typically positioned upstream of tea bagging and packaging lines, which as explained by Susan Schaaf, office manager of Munson, require totally uniform blends to maintain consistent flavour.

“Because Rotary Batch Mixers continue to rotate during discharge, they prevent stratification and segregation of the batch regardless of disparities in the size, shape or bulk density of ingredients. This is especially critical when filling individual tea bags, since variations in blend ratios are likely to increase as the size of a given sample decreases,” Schaaf said.

While Munson Machinery offers eight types of mixers and blenders, the company’s Rotary Batch mixer design remains the clear preference among tea processors worldwide remains due to its tea-specific performance advantages including: rapid, gentle blending, fast cleaning, and equal efficiency, Schaaf added.

New form, new meaning

Sustainability has truly taken center stage across all sectors, and tea bagging is not an exception, said Viju Vasishta, sustainable materials expert at PA Consulting, which has recently rolled out an innovative product — tea sheets, designed to be an alternative to conventional tea bags. Vasishta said that the product is currently in the prototyping phase, though the company has already demonstrated the proof of principle in terms of performance compared to standard tea bags.

Brand owners will have to make their packaging sustainable, especially for end-of-life purposes such as recyclable and plastic-free, due to both consumer and regulatory pressures, Vasishta claimed. “Currently, some branded tea bags are packaged in foil wrap and other flexible plastic packaging, and the sector needs to be innovative to either fully eliminate the wrap or use alternative sustainable materials which can be recycled,” he explained, adding that paper and pulp are emerging as key substrates across many food and FMCG packaging and a similar movement regarding these materials is seen for the tea sector.

Generally speaking, the tea-bagging sector lacked groundbreaking innovations in the past few decades, Vasishta shared. “Consuming tea should be a moment of joy for the consumer, and we haven’t seen much innovation in the tea-bag market over the last few decades. We see the same format of tea bags with slightly varying shapes, and the consumer experience feels pretty flat,” Vasishta admitted.

“The [coffee sector], for example, has made the concept of coffee into a premium product. The tea sector has not yet reached that level of innovation. There is an appetite for the tea sector to transform itself, but brand owners are risk averse, and therefore, we are seeing low levels of innovation,” he said.

Digitalisation on the horizon

Automation and robotics are already being used in tea-bagging production to some extent, but the industry may see further advancements in this area, particularly in terms of the use of artificial intelligence and machine learning to optimise production processes.

Choudhury assumes that integration with technologies is not limited to automation. “There is already some integration between tea bagging and technology, such as the use of smart labels or QR codes to provide consumers with more information about the tea they are consuming. We may see further integration in the future, such as the use of augmented reality or virtual reality to enhance the tea-drinking experience.”

“Overall, as consumer preferences and technological capabilities evolve, the tea-bagging industry will likely continue to see innovation and advancements in production processes,” Choudhury added.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Functional coffee’s popularity is surging but the ‘true’ benefits remain questionable https://www.teaandcoffee.net/feature/31946/functional-coffees-popularity-is-surging-but-the-true-benefits-remain-questionable/ https://www.teaandcoffee.net/feature/31946/functional-coffees-popularity-is-surging-but-the-true-benefits-remain-questionable/#respond Sun, 15 Jan 2023 17:33:01 +0000 https://www.teaandcoffee.net/?post_type=feature&p=31946 Coffeemakers take advantage of a growing global demand for functionality, though long-term prospects are undermined by a scarcity of scientific data confirming the benefits of the most popular functional ingredients.

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Coffeemakers take advantage of a growing global demand for functionality, diversifying their offering at the expense of products having a healthy halo. This approach promises to work for the time being, though long-term prospects are undermined by a scarcity of scientific data confirming the benefits of the most popular functional ingredients. By Vladislav Vorotnikov

“Let food be thy medicine and medicine be thy food” harkens back to Hippocrates, the Greek founder of western medicine. This famous quote is a thousand years old, though it has never been as relevant as in the post-Covid era.

Functionality is the most prevalent trend in the non-alcoholic beverage industry, said Jochen Kistner, director of category marketing, EMEA, at Chicago-based Archer Daniels Midland, adding that what originally began in Europe in the 1980s with energy drinks for athletes has now turned into a much broader social phenomenon, with 68 percent of consumers worldwide in 2021 preferring to buy drinks with additional functional benefits.

The list of functional ingredients used in the coffee industry is long and constantly grows as more companies enter the segment with new offerings. Cannabidiol, mushrooms, superfruits, spices, antioxidants, and herb extracts are the most common examples, but the opportunities in this area are far from being exhausted.

The market is heading up

Analysts expect functional coffee to enjoy a strong growth in popularity in this decade. International think tank, Research and Markets, projects global sales to rise on average 5.9 percent per year between 2022 and 2027.

Image: Capsoil FoodTech, by Prodalim, Ltd

Technavio, a London-based consulting firm, forecasts a similar growth pace in 2021-2026, resulting in a rise in global sales by USD $2.36 billion during this period.

There is no consensus between the analysts about the current size of the global market, though. ReAnIn, an Indian research and consulting firm, also puts the compound annual growth rate of the global functional coffee market at 5.9 percent in 2018-2028, calculating however, that this would boost sales by only $1.1 billion to around $3.3 billion. This confusion primarily comes from the difference in research methodology and criteria of what coffee to attribute to functional.

Nevertheless, all analyst groups agree that the demand will rise in the next several years as consumers want double-duty from their favourite beverages.

“Consumers are developing an affinity for functional beverages seeing them as a suitable, convenient, and healthy alternative to soft drinks. The organoleptic versatility associated with functional coffee makes it open to manufacturers to innovate alongside the healthy trends,” Research and Markets said.

Technavio estimated that one of the key factors driving the global functional coffee market growth is the increasing popularity of coffee among millennials.

“An improvement in economic conditions and an increase in job opportunities have made different types of coffee more affordable to young consumers. Millennials tend to spend more on premium beverage brands and are also keen to experiment with new types, brands, and flavours of beverages,” the analysts said.

Millennials also tend to socialise more, especially in coffee shops. This has led to a surge in the number of coffee shops, which has further strengthened the global functional coffee market. In addition, rising disposable incomes in emerging Asian, Eastern European, and Latin American consumers is also contributing to the growth.

No compromises

“The challenge for developers is to find the right balance between functionality and taste,” Kistner said, adding that consumers want targeted nutrition, including ingredients benefitting alertness, relaxation, or concentration. On the other hand, consumers don’t want to compromise on taste to enjoy the product.

When functional ingredients become part of a beverage formulation, product appearance, taste, and even texture can all be impacted, which often becomes a challenge.

“Our first attempts at functional coffee were ridiculous as hell. We just took ginger root, grated it and kneaded it into the coffee. It was still ugly. But more importantly, it had nothing to do with that idea of a functional drink,” said Alexander Afanasiev, spokesperson for Biwell International SA, the manufacturer of Swiss premium, functional infused coffees. In 2019, the company launched Da Maestri capsules, a family of offerings compatible with Nescafé Dolce Gusto’s professional-grade single-serve coffee machine.

“At this point, we clearly realised the obvious — we will have to work very hard and for a very long time,” Afanasiev said, adding that it took the company years of time and tonnes of R&D to make a range of coffee that is functional and has an appealing taste.

Image: Biwell International/Da Maestri

The types of functional coffee mostly in demand on the market are those improving brain and memory function and cardiovascular system. The Covid-19 pandemic also bolstered the demand in the segment of coffee for immunity and digestive system, Afanasiev said.

SolaBev, a US-based proprietary single-serve capsule system for making filter coffee, also spent a lot of time developing functional coffee drinks, said Michael Szyliowicz, the founder. “The two types of drinks we have developed are CBD-infused and mushroom coffees. Both types represent trends that I believe will continue to grow as more consumers become aware of the benefits of both,” he added.

One of the most surprising discoveries the SolaBev team made was that the functional coffee market was full of misleading information about the available products. “Last year, one of our coffee roasters partnered with a CBD company to provide single-serve capsules infused with their CBD. Although there are many different coffees available with CBD, we found that most of the claims that were made were very misleading. Most of the CBD coffees for sale tout the amount of CBD in the bag or in the K-Cup, but do not address the issue of how much CBD is actually present in the cup after brewing,” Szyliowicz said.

“We tested a number of brands and found that most of the claims were wildly inaccurate. Because SolaBev is a proprietary capsule, we were able to ensure that the amount of CBD claimed, in this case, 15mg, was the amount measured in the cup,” he added.

CBD-infused coffee is believed to be one of the fastest-growing segments of the functional coffee market. Analysts put the annual growth in sales on the CBD coffee market between 14 percent and 27 percent in the coming years. On the other hand, coffee with mushrooms is a slow-growing category, Szyliowicz said.

Health benefits under question

The concept of functional coffee is tightly linked to adaptogens — plants and mushrooms believed to help your body respond to stress, anxiety, fatigue and overall well-being.

Over the years, people used to take adaptogens by adding them to food or beverages or take them as tinctures. Their popularity spiked during the Covid-19 pandemic, but so far, the science of adaptogens remains disappointing.

Image: Haley Sliwa

The term ‘adaptogen’ was first proposed in 1940 by Soviet scientist Nikolay Lazarev when he described “Schisandra chinensis” (plant with high potential for beneficial health effects such as anti-cancer, anti-aging; anti-obesity, anti-diabetes) and other herbs with the following definition: plant-originated adaptogens that can non-specifically enhance the human body.

Soviet nutritionists heavily studied several adaptogens during the World War II in an attempt to improve the performance of soldiers on the battlefield. In the following years, more than 1,000 studies were conducted on dozens of various adaptogens. In the 1980s, adaptogens even became a part of the popular myth of the Kremlin Pill – a legendary top-secret medicine that was said to cure all diseases.

A 2018 review conducted by a group of Chinese researchers on studies of adaptogens showed the clinical application of plant-originated adaptogens and their use in healthcare products remains in the preliminary stage. Some of the most widely used and popular adaptogens have never been adequately tested or appeared to have no suggested health benefits.

In a blog at the website of McGill University, Jonathan Jarry, MSc, pointed out that adaptogens have had a thick glop of marketing smeared all over them. “Product labels and social media influencers will parade limitless claims: adaptogens are said to sharpen your memory, boost your sex drive, rid yourself of exhaustion, help stabilise your blood sugar, and fight cancer. They might also assemble your IKEA furniture for you and help you with your financial investments if they had opposable thumbs and direct access to your bank account,” he said.

The relatively few studies on adaptogens done in humans tend to be disappointing. They often lack randomisation, recruit only healthy people, and they don’t specify the dose of the herb that was tested. Reviews of the evidence often conclude that, at best, adaptogens may help with stress and fatigue and that more studies are needed. At worst, there is no indication they have the claimed clinical benefit, according to Jarry.

The same goes for CBD, which seems to be everywhere, but scientists still don’t know much about it. The Food and Drug Administration (FDA) of the United States has approved only one drug containing CBD, Epidiolex, after clinical trials found it reduced seizures in children with two rare, severe forms of epilepsy. However, most studies on the effect of CBD on the human body remain controversial.

Scientists admit that CBD, as well as some other ingredients currently widely used to produce functional coffee, enjoy a lot of hype, but as customers are constantly becoming more demanding and knowledgeable, the long-term growth of the market is not guaranteed.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Europe intensifies battle against greenwashing https://www.teaandcoffee.net/blog/30905/guest-blog-europe-intensifies-battle-against-greenwashing/ https://www.teaandcoffee.net/blog/30905/guest-blog-europe-intensifies-battle-against-greenwashing/#respond Thu, 24 Nov 2022 15:27:00 +0000 https://www.teaandcoffee.net/?post_type=blog&p=30905 There are concerns that some companies try to present their products as more eco-friendly than they actually are. The term 'green-washing' was coined in the 1980s by environmentalist Jay Westerveld.

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Green claims about products, services or companies have become mainstream in the global tea and coffee industries. The lion’s share of all products, including almost all new offers, are advertised as climate-neutral, carbon-neutral or sustainable. There is a simple fact behind this trend: in the modern world, managers know that green claims contribute to an increase in revenue.

Still, analysts express concerns that some companies try to present their products as more eco-friendly than they actually are. There is even a special term to describe such dishonest behaviour: greenwashing. It was coined in the 1980s by environmentalist Jay Westerveld originally to describe a widespread practice under which hotels were marketing their reusable towels as part of an environmental conservation effort while, in fact, this was only a cost-cutting solution.

Some recent marketing studies have shown that more than half of consumers in the Western world opt for products marked as environmental-friendly, sustainable or having a lower carbon footprint. Most importantly, consumers say they are ready to pay more for eco-friendly products. This trend is here to stay, and it’s already proved its resilience in the face of a pandemic, economic crises, and even wars.

Over the past few decades, green labelling was thought to be a silver bullet for combatting greenwashing, but currently, it is equally different for consumers and company executives to make sense of the existing environmental labels. The European Commission estimated that there are 200 environmental labels active in the EU and more than 450 worldwide. Furthermore, there are more than 80 widely used reporting initiatives and methods for carbon emissions only. Some are more reliable than others, but the system remains confusing for consumers and manufacturers.

Some countries have designed a comprehensive legal framework to battle greenwashing. For example, London-based law firm Freshfields Bruckhaus Deringer LLP recently stated that greenwashing claims were rising in Germany over the past few years, adding that the law requires businesses to disclose more details about their products rather than using some cliché.

For instance, the lawyers explained that most courts found that advertising a product as ‘climate-neutral’ has an insufficiently clear meaning to consumers. In this background, businesses are best advised to be cautious about their climate-related advertising claims and should be prepared to prove the accuracy of such claims.

Some green solutions require no explanations. For example, Migros and its subsidiary Delica AG have recently introduced the first coffee capsule system without a capsule, known as Coffee Ball. The innovation is available throughout Switzerland and France and will be launched in Germany in spring 2023. The Coffee Ball is a small ball of pressed coffee covered only by a protective layer. Instead of aluminum in this system, an oxygen barrier is used to protect the coffee from the loss of aroma.

The environmental impact of such innovations is clear. The coffee pods – usually constructed from plastic or aluminum – take a mammoth 500 years to decompose. Millions of pods end up at landfills every year, despite efforts of the government to ramp up plastic recycling volumes.

Other market players are paying attention to this problem too. For example, Nespresso has created a paper-based home compostable capsule that will be piloted in Spring 2023. The company said that is uses biopolymer lining inside the capsule which protects the coffee against spoiling through oxidisation. Instant Brands has also introduced new compostable coffee pods and espresso capsules.

Fighting against greenwashing is crucial so that sound companies, truly investing in eco-friendly innovations and making a difference, could eventually benefit from their achievements.

In Europe, some positive development in this field might be in the pipeline. In March 2022, the European Commission published a proposal amending the Unfair Commercial Practices Directive and the Consumer Rights Directive, the main target of which was to enable consumers to make more informed purchasing decisions.

The proposal extended the list of unfair commercial practices to those associated with greenwashing and amended the list of product characteristics about which businesses must not deceive a consumer to include environmental or social impact, durability and reparability. This is considered a positive and timely development, but will unlikely end greenwashing, including in the European tea and coffee industry, completely.

  • Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Guest blog: Paying a high price https://www.teaandcoffee.net/blog/30432/guest-blog-paying-a-high-price/ https://www.teaandcoffee.net/blog/30432/guest-blog-paying-a-high-price/#respond Thu, 22 Sep 2022 14:10:52 +0000 https://www.teaandcoffee.net/?post_type=blog&p=30432 The world's leading cargo carriers have refused to call the Russian ports.

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Russian consumers have not yet witnessed any noticeable impact of economic sanctions and a mass exodus of Western businesses on the tea and coffee market. Still, as dark clouds keep piling above the Russian economy, the long-term outlook remains grim. 

Russian tea and coffee industry association Roschaicoffee forecasted a 5% to 7% drop in consumption in 2022. This is described as a technical correction, not comparable to a 30% slump in demand during the first lockdowns imposed in the country to slow down the spread of Covid-19 in the first half of 2020. So far, coffee roasters across the country have managed to maintain business as usual. 

In August, the Russian Agricultural Ministry ensured Russians that no shortage of coffee or tea on the domestic market was anticipated. It was said that almost all supplies of raw tea and coffee came from countries deemed as friendly. The largest tea suppliers to Russia are Kenya, Sri Lanka, China, and Vietnam, while in coffee it is Vietnam, Brazil, Italy, and Indonesia. Except for Italy, these countries have not joined the Western sanctions imposed against Russia over its invasion of Ukraine. 

However, the Russian government’s optimism is not entirely justified. Between April and May, Russian imports of raw tea and coffee were halved compared to the year-ago period. Ramaz Chanturia, general director of the Roschaicoffee, attributed these dynamics to the logistics crunch, as the majority of product batches from Asia and Latin America were passing through European port hubs. However, the world’s leading cargo carriers have refused to call the Russian ports, and the Russian vessels are banned from calling the European ports. 

Russian companies are struggling to rebuild the logistics chain redirecting supplies to Iranian and Chinese ports, Chanturia disclosed, expressing confidence that the problems would be eventually solved. Still, there are signs that even so, the new logistics schemes are associated with extremely high costs and extended delivery times. Local market players warned that, on average, it takes 90 days for a shipment to be delivered to Russia, compared to the usual 35 to 40 days. 

In 2022, tea and coffee jumped in price in retail in Russia by 30% to 60%. Russian retailers attribute the upward price rally to problems with package and logistics. However, the rise in costs is still partly downplayed by the strong ruble. Most forecasts expect the Russian currency to weaken substantially in 2023, so the Russian market will likely be braced for another upward price rally. 

Western Business is Fleeing 

Since 24 February, over 1,000 companies have withdrawn from Russia, as estimated by Yale University. This list includes the largest tea and coffee companies and keeps growing. In August, Rotterdam-based tea company Ekaterra announced plans to leave the Russian market. The company, which owns some of the most popular tea brands in Russia, such as Lipton and Brooke Bond, promised to suspend production in the country by the end of the year. 

Russian newspaper Kommersant reported that the Unilever factory in St Petersburg where Ekaterra products are packed, may be shut down permanently. 

However, the Russian government threatened foreign businesses suspending operations in the country with forced nationalisation of their production assets. The strategy called to prevent an outbreak of unemployment means that by simply setting the production facilities offline, the owners could eventually lose them. This has already happened with the Renault plant, nationalised by Moscow authorities in May to revive the production of an old Soviet brand. 

In this background, most companies severing their ties with the Russian market prefer to sell their production assets to Russian investors, providing they manage to find any. Thus, in August, Laurens Spethmann Holding AG & Co, owner of the Milford brand, sold its Russian division to local management. A similar step was made by Tchibo, which sold the Russian business to the general director of Tchibo CIS, Mikhail Kovalevsky. Beginning in 2023, Tchibo CIS must stop using any brands and labels related to Tchibo. 

A Delayed Effect 

Under the pressure of unprecedented Western sanctions, the Russian economy has not crumbled, and things seemingly remain normal from the outside. However, it would be wrong to say that the sanctions are not working. 

Russia may face a longer and deeper recession as the impact of US and European sanctions spreads, handicapping sectors that the country has relied on for years to power its economy, Bloomberg reported in early September, citing an internal report by the Russian government. 

The report paints a dark, gloomy picture of a deep and protracted recession, expanding sanctions, a drop in exports and a lack of critical imports. Furthermore, the Russian budget would lose the lion’s share of its revenue from selling oil and gas — a backbone of the Russian economy for the past few decades. The Russian economy could return to the 2021 level only around 2030 or even later. Mass immigration of the most skilled workers coupled with the demographic crisis would also take a toll. 

The crisis is expected to cause slow but steady degradation of the Russian economy, affecting all segments of the consumer markets without exception. The Russian population’s falling purchaser power will gradually change consumer habits, as customers would be forced to switch to lower quality, cheaper alternatives, avoid unnecessary purchases and start counting calories. The Russian tea and coffee markets will likely shrink in the years ahead. 

In addition, there are huge concerns over the future of the Russian tea and coffee factories. Russia produces nearly 85% of consumed tea and coffee domestically, but all factories run predominantly on Western equipment and technologies. Importing equipment and spare parts into the country is a tricky task right now. This factor already hurts several other industries. 

The Russian government has introduced a parallel import scheme to help the economy face this challenge so that the necessary goods and equipment could be imported through third companies, including in neutral countries like Turkey and China. However, this tool has not proved worthy so far. All in all, the future of the Russian tea and coffee industries look exceptionally challenging and highly unpredictable. 

  • Formerly based in Russia, and now living in Georgia, Vladislav Vorotnikov is a multimedia B2B freelance journalist writing about the tea and coffee industry. 

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Market Report: Italy – Traditions blend with innovations in the Italian coffee market https://www.teaandcoffee.net/feature/29672/market-report-italy-traditions-blend-with-innovations-in-the-italian-coffee-market/ https://www.teaandcoffee.net/feature/29672/market-report-italy-traditions-blend-with-innovations-in-the-italian-coffee-market/#respond Fri, 17 Jun 2022 09:58:24 +0000 https://www.teaandcoffee.net/?post_type=feature&p=29672 Preserving hundred-year-old traditions of coffee consumption, Italy is also actively embracing new market trends swinging towards specialty coffee, single-serve coffees and blockchain.

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Preserving hundred-year-old traditions of coffee consumption, Italy is also actively embracing new market trends swinging towards specialty coffee, single-serve coffees and blockchain. By Vladislav Vorotnikov

Coffee is a fundamental part of Italian culture. There are about 162,000 coffee bars in Italy on average serving 175 cups of simply espresso every day, the Italian Federation of Public Exercises estimated. As many as 97 per cent of Italians drink coffee several times during the day.

An average Italian spends EUR €260 a year on coffee, which includes consumption at home, at the coffee bars, and in the office, according to Coffee Monitor Nomisma. Some researchers even suggest that Italians drink so much coffee because of having a gene that influences the daily need for caffeine. In other words, Italians may have a passion for coffee written in their DNA.

Image: Segefredo Zanetti Italia

This makes Italy the third-largest coffee-consuming country in Europe. The Italian coffee market was valued at USD $3.16 billion in 2020, research conducted by Mordor Intelligence showed.

“Espresso is an icon of Italian consumption habits. Its rituality is codified and is hardly affected by major changes or fashions,” commented Nicolas Peyresblanques, CEO of Segafredo Zanetti Italia.

When it comes to consumption preferences Italian espresso has its own distinctive features, mostly linked to geographical areas, as in southern Italy the most consistent and strongest blends are preferred, whereas in northern Italy the roundness of flavour and the softness of extraction are favoured, Peyresblanques said.

The Italian market has always been considered rather conservative. There are certain rules of coffee consumption: a cappuccino with breakfast, a caffè macchiato – or two – as an afternoon pick-me-up, and espresso after dinner.

Image: Illycaffe

As explained, by Peyresblanques the charm of the traditional moka pot is handed down from generation to generation, so much so that coffee prepared with moka pots still accounts for 70 per cent of the consumption at home.

However, the demand for premium products has been increasing across the board. For example, the turnover in the 100 per cent Arabica coffee segment increased by 8 per cent in 2021 to €224.4 million compared to the previous year, research conducted by Nielsen showed. The single-origin coffee sales soared by 35 per cent to €12 million. Organic and capsule coffee products also enjoy rising demand.

“A new value system embracing all aspects of Italian people’s lives is taking hold making their future technological, green, healthy, and ethical,” Peyresblanques said.

Sting of the Pandemic

Wreaking havoc on the traditional coffee bars and locking people at home for an extended period of time, the Covid-19 pandemic has seemingly made a major shift in consumer preferences.
“The pandemic had a very strong impact on the hospitality sector, as bars and coffee shops were very affected but, at the same time, [retail] sales increased a lot,” commented Giacomo Vannelli, co-owner of Vannelli Coffee.

Vannelli explained that Covid-19 “let people re-discover the beauty to find the right time to make a coffee at home. Drinking a coffee in Italy has always been a fast ritual at the bar counter but finally, we can see that the trend is changing, and some people prefer making a coffee at home, maybe using different extraction methods despite the ‘classic ones’ such as the moka pot or espresso.”

The most recent statistical data shows that nearly 7,000 coffee bars were closed in Italy during the Covid-19 pandemic. The worst affected was Lazio, where the number of bars dropped by 10 per cent or 1,860 units. In Marche and Friuli Venezia Giulia, the number of bars dropped by 6 per cent, while in Tuscany, Veneto, Lombardy, and Trentino Alto Adige by 5 per cent.

The Covid outbreak had a strong impact on the out-of-home segment, leading to losses that have reached 37 per cent compared to last year, the Italian statistical service Istat estimated. The sales are yet to return to the pre-crisis level.

Image: Vannelli Coffee

“In such a challenging scenario, Segafredo Zanetti has tried to support its customers and agents at its best, both financially and emotionally, as we are convinced that the human factor is the engine of relaunching in crisis periods,” Peyresblanques said.

In 2021, the market recorded a slight drop in turnover by 1.5 per cent compared to the previous year. In light of this, the single-serve segment continued its path, already begun in the previous years, settling on higher turnover levels than in 2019, reaching 44 per cent of the market value, Peyresblanques said, citing the Nielsen research.

Rise of Specialty Coffee

The pandemic also pushed some consumers to try specialty coffee, opening a new chapter in the history of this segment in the Italian market.

“Choosing to have some time for themselves, people chose also to get better quality products and so many approached the specialty coffee world,” Vannelli said. “The young generation is, in our opinion, the main driver of the specialty coffee market. Young people are looking for high-quality products, caring about values of sustainability, traceability and human rights.”

“The traditional coffee offer has been increasingly enriched by specialty coffee recipes in bar and restaurant menu cards to satisfy the expectations of those demanding consumers who aim at experiencing a totally fulfilling coffee ritual,” Peyresblanques said.

Alberto Polojac, owner of Bloom Coffee School and the national coordinator of the Specialty Coffee Association (SCA) Italy, commented that while the specialty coffee market in Italy has huge potential, the market as a whole is still yet to recover.

“The positive sign is that big companies and brands are going into the specialty coffee segment. For example, Lavazza has recently launched its own brand in 1865, which is the foundation year of the company, and there is a lot of buzz about the specialty coffee in food magazines, and newspapers”, Polojac said.
“The market is very traditional, and it’s definitely growing,” Polojac commented, adding that SCA Italy spends a lot of effort to improve customer awareness about specialty coffee, including attracting influencers, with a famous Italian model Chiara Ferragni is the most recent example.

Image: Lavazza

“I see a huge potential of this segment in combination with traditional pastry, which is growing here in Italy. We see good examples in France, where pastry shops and the boulangerie are matched with specialty coffee shops. This is not happening yet in Italy, but we anticipate a boom in this segment in the next few years,” Polojac said. On the other hand, the current price fluctuations in the coffee beans market don’t help the coffee consumption, including in the specialty coffee segment, Vannelli said.

“People mustn’t lose purchasing power: we hope for no more restrictions, which could hinder the sale of a primary good, turning it into a luxury good,” Vannelli said, adding that despite everything, the company maintains a positive future perspective where the demand for specialty coffee will grow along with a conscientious and aware consumption.

Era of Blockchain

In the meantime, Italian coffee companies have also started employing new digital technologies both to improve traceability and to offer new payment methods.

For instance, Segafredo decided to launch a single-origin 100 per cent Arabica Rainforest Alliance-certified organic coffee, with an entirely transparent and traceable origin thanks to the blockchain technology that tells the full story behind each cup, enabling consumers to enter the farmers’ world and making them aware of the long journey it took and how much effort and passion it required, always respecting the people, the communities and the countries involved.

In a 2020 IBM survey, 44 per cent of all Europeans said it would be very valuable to have more information on the farmers who grow their food. A staggering 92 per cent of Italian consumers agreed that having food traceable on the blockchain would be valuable.

Segafredo is not the only company turning its sights on the blockchain. Caffè Barbera, which claims to be the oldest coffee roasting company in Italy, recently announced a new partnership with Algorand to use its blockchain for immediate and decentralised payments.

In 2021, Caffè Barbera started accepting payments in cryptocurrencies but limited to Bitcoin, Ethereum, and XRP. The new partnership will expand this list to ALGO, USDT, USDC, BUSD, DAI, BNB, Litecoin, Bitcoin Cash, XLM, and Tezos. In addition, this partnership will also be extended to business-to-consumer payments, using the Bleumi Pay payment aggregator, the company said.

The Organic Segment Looks Promising

The organic segment, which in other product categories has significantly influenced consumption trends and the organisation of on-shelf products, has been only slightly growing in the coffee market, perhaps less than expected, with a limited impact on the category, Peyresblanques said.

Nielsen estimated the organic segment turnover at €9.1 million in turnover in 2021, which corresponds to 0.7 per cent market share in value, and 0.5 per cent market share in volume. However, the demand from the market and the interest from younger consumers suggest that even this trend could have wide margins of growth.

Moka pot. Image: Pexels/Elle Hughes

“This is why our range –already including a wide option of premium blends –was enriched by organic products many of which present the Rainforest Alliance certification, the most accredited in the coffee market at present, synonymous with sustainable agriculture and better opportunities for the farmers, their families, and our planet,” Peyresblanques said.

The green agenda is not only limited to organic coffee. Italian customers are also paying a lot of attention to the package.

“In line with these trends, we are working to offer 100 per cent sustainable products, with recyclable or compostable packs: we have almost abandoned the packaging used on the market until now, consisting of dissimilar materials and therefore not recyclable to allow the disposal of our packaging in their cycling circuits, so to avoid waste creation,” Peyresblanques added.

  • Vladislav Vorotnikov is Moscow-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Private label brands enjoy rising popularity in Europe https://www.teaandcoffee.net/feature/30053/private-label-brands-enjoy-rising-popularity-in-europe/ https://www.teaandcoffee.net/feature/30053/private-label-brands-enjoy-rising-popularity-in-europe/#respond Mon, 09 May 2022 11:22:20 +0000 https://www.teaandcoffee.net/?post_type=feature&p=30053 Private label coffee and tea products are quite well established in Western European retailers, but now their presence is growing is Eastern European retailers as well and moving beyond the ‘lowest price’ option with which they were once primarily known.

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Private label coffee and tea products are quite well established in Western European retailers, but now their presence is growing in Eastern European retailers as well and moving beyond the ‘lowest price’ option with which they were once primarily known. By Vladislav Vorotnikov

Changing consumer habits and the development of grocery retailers are shaping up the private label segment of the tea and coffee market across Europe. The growth potential in this segment is yet to be exhausted, especially in the eastern part of the continent, where market players are now catching up with Western trends.

Over the past few years, private label coffee has been increasing its presence in the European market. Numerous European supermarket chains put their own brands on the shelves, such as Perla from Dutch supermarket Albert Heijn, E.Leclerc’s L’origine du goût in France, and Tesco Finest and Marks & Spencer in the United Kingdom.

Private label tea at Netherlands-based grocery store, Albert Heijn. Image: World Brand Design Society Website

Nowadays, it is believed that the share of the private label tea and coffee products is the highest among discounters, and they could drive growth in sales in Europe even further.

“Private label genesis and evolution are impossible without developed modern grocery retailers. Further penetration of discounters, especially in Eastern Europe, brings more space for private label moves and initiatives,” commented Julija Poliscuk, senior analyst of London-based market research company, Euromonitor International. “This is the main factor for healthy dynamics of retailers’ own brands across hot drinks. Channel shift transforms private label to comprehensive and trusted brands,” she added.

The entire European market is currently under an influence of the rising production costs, which affect all links in the production chain, and change consumer attitudes, Khansaa Ruiz, export manager of the Alicante-based coffee factory Burdet Coffee said. “There is a major crisis. Roasting factories are suffering at the moment because of the increase in coffee prices. We have been struggling to keep business going. The coffee prices have escalated tremendously due to the Covid-19, then due to the transport problems, and now due to the war. So, it’s a bit chaotic.”

“As for the private label coffee the trend is towards higher quality coffee, or at least this is our business, and we do see an increase here,” Ruiz said. She explained that there is a relatively high demand for new brands on the market. In general, many small businesses and people are looking for small business opportunities, and the market witnesses a very important increase in small businesses, including those wanting to create online websites to sell coffee.

“As for the quality of the coffee, we see that more and more a single-original coffee is being sold better. [This concerns] pure coffee, such as Colombian, Ethiopian, Guatemalan, Costa Rican, etc. People are starting to appreciate the meaning of good quality coffee,” she added.

Alberto Lusini, head of Northern Europe at Massimo Zanetti Beverage cited New York-based consultancy, Nielsen, estimating that private label share in the European coffee market is between 10 per cent and 25 per cent. “This data has had a relatively constant growth in past years. Private labels in the mass market and food service are no longer synonymous with entry-level pricing,” he explained.

The private label segment developed an important evolution in terms of innovation and improvement in quality, typical of the branded business, Lusini said, explaining that trade labels are answering the needs of consumers for additional transparency, and traceability, in case of single origins, and sustainability. “The increased sales of coffee beans is proof of a trend to bring the barista experience at home,” he added.

Poliscuk said that another reason why private label coffees are so popular is that there is more variety. “Most supermarkets offer several quality options and coffee from different origins. Many supermarkets have entered the premium segment and are expanding their range of certified coffee products. Retail sales of organic-certified private label brands are increasing. Examples of organic private label brands in Europe include REWE Bio in Germany, Carrefour Bio in France, and Waitrose Duchy Organic in the UK.

Covid-19 as a game-changer?

The coronavirus pandemic has reshaped the European grocery-retail landscape tremendously. With restaurants, cafés, and bars remaining largely closed in most countries during at least the first wave of the pandemic, consumers rushed to stock up on groceries.

The out-of-home coffee market was greatly affected during the Covid-19 crisis, said Utrecht, Netherlands-based consultancy ProFound-Advisers, in a post shared by the Dutch Centre for the Promotion of Imports from developing countries. Many coffee shops closed, and people worked and drank coffee at home instead. Coffee sales at supermarkets went up, which benefitted private label brands, and created a trend.

“Early in the Covid-19 pandemic, consumers around the world rushed to supermarkets to stock up on products. Retail sales went up a lot. Retailers also developed online sales and delivery solutions for consumers. This made supermarkets the main source of food and beverages during the pandemic,” the Dutch analysts added.

MZB says the demand for private label coffee is growing across Europe. Image: Massimo Zanetti Beverage

Lusini agreed, adding, “The Covid-19 pandemic and, even further the strong inflation on raw materials from Q4 2021, has pushed consumers towards private labels. In particular, the inflation driven by the strong price increases in green coffee has polarised the consumers towards entry-level prices on one side, and premium products on the other. Private labels could possibly take advantage of this.”

However, it is yet to be said that the Covid-19 pandemic has been a game-changer for the hot drinks market in Europe. Poliscuk explained that financial hardship caused by the pandemic forced consumers to re-think their spending, so value for money embodied in private label quickly became a priority, but that trend is primarily related to soft drinks. “Branded products remain important within hot drinks, due to their indulgence and rituality essence, in addition to the request for quality differentiation. Neither tea nor coffee of retailers’ owned brands did not gain share in 2020,” she added.

The European market is uneven

Private label hot drinks’ presence in Europe is not homogeneous and differs regionally and from country to country.

In 2021, almost 16 per cent of value sales of coffee and 14 per cent of tea in Western Europe were under retailers’ house labels. Meanwhile, in Eastern Europe this indicator does not reach 5 per cent for coffee and is 7 per cent for tea, Poliscuk said.

“The significantly stronger presence of private label in the Western part of Europe is explained with strongly developed chains of modern grocery retailers and already earned trust to own brands. Eastern Europe is only catching up with Hungary, Czech Republic, Poland, and Slovakia pursuing a Western model, with the strongest share of retailers’ brand overall and in hot drinks too,” Poliscuk noted, adding that these countries successfully adopted international – or developed their own – discount chains.

Single origin coffee is making its way into the private label segment. Image: Burdet Coffee

Different levels of development of store-owned brands define the way companies raise these products’ awareness. Thus, Eastern Europe usually puts the focus on low cost. More advanced chains enter the mode of portfolio expansion and product range broadening. Eastern Europe has already witnessed the evolution of basic needs’ satisfaction to catching up with expertise from brands they mimic, Poliscuk said.

Rising beyond the low-cost segment

As the popularity of private label products in Europe promises to gain traction in the coming years, this segment starts playing an increasingly important role for market players.

“We have a long-standing experience in private labels, both in mass market and food service. The management of private labels is part of our ongoing relationship with the trade at the global level and it represents one-fourth of our total turnover. We leverage our strong expertise in green coffee and the roasting capabilities of 18 plants located all over the world to support our PL clients,” Lusini said.

Poliscuk said that further projected penetration of modern grocery retailers and especially discounters will support the development of private labels across Europe with the highest dynamics in its Eastern part. “Private label in Western Europe is entering a new era where penetration of modern grocery and a developed omnichannel allow them to evolve towards something new and unique. Retailers’ own brands are ready to rise beyond low-cost, wide assortment and segmentation,” she said.

Currently, these brands target specific consumers’ needs and higher expectations with little or no sacrifice in terms of product quality. Poliscuk is confident that this will result in more private label coffee pods and fresh coffee beans with the underlined origin and technology of roasting, and private label tea will be able to offer more varieties and added value via functionality.

“As modern consumers are eager to buy sophisticated, premium organic or sustainable products, even price-sensitive private label [will be able to] enter the niches,” Poliscuk shared, adding, “It’s worth mentioning, that ever-continuing expansion of e-commerce with forms of dark stores and delivery services will draw new horizons for coffee and tea private label across Europe.”

  • Vladislav Vorotnikov is a Moscow-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012

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