CHAI LATTE BUSINESS

IN UK
April 2016

Market Research

Chai Latte Market - Introduction

Chai Latte was born some time around the early

20th century
Entered the west in the 1960s and was introduced
by Starbucks in the 1990s as a chai tea latte
Came to the UK in the early 2000s
Chai latte launches increased by 20% globally in
the 12 months to September 2015, driven
predominantly by launches in Europe
Today Chai tea latte is the most popular beverage
after water in the world and it follows a trend

Sources: The Guardian and

Mintel

Chai Latte Market Insights - Germany

Germany has been at the heart of the growth of chai lattes in Europe
It accounts for about a quarter of all products launched in the last
four years, making it by far the most innovative market globally
Almost four out of five German women say they enjoy trying different
tea flavours
Female consumers aged 16 to 24 are more likely to pay extra for
specialty teas, such as vanilla chai
The Ready-to-drink format of chai latte is popular and considered
trendy
Powdered chai latte blends account for the majority of chai latte
development in Germany
The rise of the coffee shop culture has elevated consumer
expectations of hot beverages, leading to more chai latte brands
incorporating indulgent flavours. Chocolate appeared as a flavour on
7% of chai latte launches in 2015, up from just 3% in 2012/13
Source: Mintel

Chai Latte Market Insights - UK

Within UK, Chai Latte is growing 30% year

on year (YOY)
It is particularly popular amongst young
consumers and office workers, for whom the
availability in ready to drink form is an
attractive proposition
The Chai Latte flavour profile in UK is
currently valued at 3.2m in grocery
Chai latte brand Drink Me recorded 100%
export growth in a year (2014-2015)
Source: Drinks-InsightsNetwork

Chai Latte Future Prediction

Promising market for next few years expected to at least

double in the next decade

Healthier version with less/controlled sugar is the key

Sale of chai latte in cafes, ready-to-drink format and

powdered chai latte sold in groceries is all expected to grow
in coming years

2016 will witness enormous growth, more than 20-30%

yearly growth seen in 2015

It is preferred as compared to coffee as it is a healthy

substitute, the marketing team should focus on this as the
USP

Fruit/flower flavours, as a substitute to sugar are expected

to evolve in the market

Updates

European Tea Market Segment

Basically, the tea sector is divided into two

segments

in-home consumption - Retail, sales to consumer for

in-home consumption, is the main tea market segment
and (supermarkets, grocery stores, (internet) speciality
shops) account for 91% of tea consumption
out-of- home consumption - (coffee bars, restaurants,
work place) accounts for 9%
In addition, a small proportion of tea is processed into
ingredients for the ready-to-drink market (such as icetea) and into extracts for cosmetic and food
applications.
Source: CBI

Tea Consumption Statistics

Tea Consumption, EU (2010-2014)

Tea Consumption, EU Member States

(2014)

In 2014, EU countries consumed 212 thousand tonnes of tea

The United Kingdom is by far the largest tea consumer in the EU (accounting for 51% of
all tea consumption in the EU), followed by Germany (15%), Poland (6.6%) and France
(6.1%)
Between 2010 and 2014, tea consumption in the EU decreased by 3.4% per year. The
volume of tea consumption was particularly influenced by the economic crisis,
especially at the high end of the market. Tea is also facing increasing competition from
other beverages, including herbal infusions, specialty coffees and other hot and cold
beverages (e.g. fruit juices).
Source: CBI and Statista

Expected Market Trends till 2019

Source: Euromonitor

Tea Trends - UK

Tea is important and can be served at all times in the UK. The British
tea market is both significant and traditional.
Three out of eight units of liquid drinks consumed by the British are
tea, of which 96% is sold in teabags.
Most teas are sold to consumers as blends: mixtures of teas from
several different origins to achieve a certain flavour profile.
Most branded teas in Europe use 20 or more origins to achieve their
desired taste and price level. However specialised tea (and coffee)
shops are increasingly selling single origin teas
About 90% of the tea drunk in the UK is black tea, of which more
than half is produced in East African countries
Almost all British people drink their black tea with milk, i.e. about
98%. Sugar is sometimes added as well.
165 million cups of tea daily or 60.2 billion per year. Whereas, the
number of cups of coffee drunk each day is estimated at 70 million.
Sources: CBI and Tea Co.

Future Trends

Source: Telegraph

Promising Market for Specialty Tea/Chai

Despite the 22pc drop in tea

sales by volume over the past
five years, the value of the tea
market declined less steeply,
falling just 6pc over the past five
years to 654m, buoyed by
increasing popularity and higher
prices of novelty varieties.
While 425m-worth of ordinary
teabags were sold in 2014, a
drop of 13pc from 2012, sales of
green tea jumped by 50pc to
36m, fruit and herbal tea sales
grew 31pc to 76m and the
value of specialty teabags
such as earl grey, chai and
assam sold increased by 15pc
to 63m.

Source: Telegraph

Tea Consumption during the day

Tea Preferences in the UK

Source: Statista and Slideshare

Tea Consumer Demographics for UK

An average British person drinks a 876 cups of

tea a year (2.4 per day)
18 to 24 year olds drink eight cups a week
Over-55s drink an average of 21 cups a week
25% of young people and 50% of over 55s are
likely to turn to a cup of tea when feeling sad
33% females and 16% males have tea when they
feel unwell
49% employees prefer drinking tea at workplace

Sources: Metro and YouGov

Population to Target

British South Asians (total of Indian, Pakistani and Bangladeshi census

categories) - 3,078,374 (2011)

Regions with significant populations (figures are total of Indian, Pakistani

and Bangladeshi categories) (2011) England2,944,498 (5.5%),
Scotland85,875 (1.6%), Wales40,172 (1.3%) and N.Ireland7,829 (0.4%)

25% of them are below teenage and so we leave them out for our
calculation.

2.3 million Asians most of who have tea with milk (98% of overall
population in UK). They arent inclined towards Chai Latte (mentioned in
2 articles) and consider it to be an excess of spices and UKs own
version of a masala tea which is neither authentic nor tasty.

A recent research revealed 20-25 spoons of sugar in a chai latte product

sold by leading brands. This has led to dissatisfaction amongst the
healthy crowd who moved from coffee/black tea to chai latte coz of the
benefits associated with milk and spices. This group should also be
targeted while branding original masala tea.

Sources: Wiki and The Guardian

Prices of tea from different

producing countries (2010-2014)
In case it is to be imported

Source: CBI

References

http://www.statista.com/statistics/290301/tea-types-most-consumed-great-britain-uk/

http://www.statista.com/statistics/527226/uk-consumers-beverages-consumed-regularly/

http://
www.slideshare.net/mysticmediapublishing/innovation-in-tea-5th-global-dubai-tea-forum
-by-dan-bolton
https://www.tea.co.uk/tea-faqs

https://yougov.co.uk/news/2013/09/25/big-work-survey-reveals-uks-workplace-trends/

http://metro.co.uk/2015/04/18/the-average-brit-drinks-876-cups-of-tea-a-year-enough-tofill-two-bath-tubs-5155831
/

http://
www.mintel.com/blog/drink-market-news/germany-at-the-heart-of-chai-latte-innovation

http://
www.theguardian.com/lifeandstyle/2016/feb/19/chai-latte-the-all-conquering-beverage-ca
using-a-storm-in-a-coffee-cup
http://
www.drinks-insight-network.com/news/newsdrink-me-chai-targets-uks-ready-to-drink-mar
ket-with-iced-chai-latte-4867834
https://www.cbi.eu/sites/default/files/channels-segments-europe-tea-2014.pdf

https://www.cbi.eu/sites/default/files/trade-statistics-europe-tea-2016_sb.pdf

http://www.slideshare.net/Euromonitor/euromonitor-world-tea-expo-final