Euromonitor TURKISH Tea REPORT - 2004

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4.         Tea

 

4.1          Sector Performance

 

2004 Headlines

·         Turkey is the second largest tea market in the world with volume sales going up by 5% in 2004

·         Fruit/herbal tea and green tea gaining popularity due to health benefits

·         Tea bags registered the highest growth

·         Value growth stayed ahead of volume growth due to the launch of value-added products

·         ÇAYKUR led the tea sales over the survey period

 

Volume sales of tea were up by 5% in 2004

 

Total volume sales of tea stood at 180,128 tonnes in 2004, up by some 5% over 2003. Of this figure approximately 10,000 tonnes was imported tea, the rest domestically produced. Retail volume sales of tea represented 60% of the total volume sales in 2004. Turkey ranked as the second largest tea market in the world. India topped the world’s sales of tea at 302,095 tonnes in 2004 and Russia ranked third place at 173,187. However Turkey has the highest per capita consumption7 of tea at 2.5 kg, followed by the UK (2.1 kg) and Morocco (1.4 kg).

 

In 2004, tea recorded value growth of 9% compared with 5% volume growth. Over the survey period, the value sales consistently exceeded the volume sales. The main reason for higher value growth was the launch of new and value-added products to the sector, especially under black speciality tea, fruit/herbal teas, and green tea. The launch of these products with higher unit prices and the demand of consumers for more sophisticated tea products increased value sales.

 

Tea bags registered the highest growth but sales remain small

 

Black standard tea accounts for the bulk of total tea volume sales in 2004, with 99% of this sold loose. This is the form that is the most established and people are used to this taste. Drinking black tea is an integral part of the Turkish life and culture.

 

Although traditionally the Turks prefer loose teas, towards the end of the review period tea bags increased in popularity. Tea bags are particularly popular among young urban consumers who have relatively higher levels of disposable income and perceive the bags to be more modern and easier to use. Between 1999 and 2004 volume growth of sales of tea bags (19%) largely outperformed loose tea (13%). Witnessing this trend towards tea bags, leading company ÇAYKUR launched its own tea bag product, Caykur Demlik Poset in 2002. Despite this, sales of tea bags remain substantially below sales of loose tea as the higher price of tea bags means that the majority of Turkish consumers still opt for traditional products.

 

Black speciality tea retail volume sales grew by 11% over the review period, reaching 7,434 tonnes in 2004. Black speciality tea benefited from the improving economic conditions in the country. Major players for speciality tea are foreigners including Unilever and Lotte. Unilever dominates the subsector and accounts for nearly 72% of retail value sales of speciality tea. Unilever’s Lipton brand has strong brand equity in Turkey, which is supported by an extensive distribution network in urban areas. Black speciality tea is consumed by urban middle-high income consumers, whereas rural consumers are still opting for loose standard black tea purely for economic reasons.

 

Increasing health consciousness helps to boost consumption

 

As is the case in other Western European markets, the health and wellness trend is also influencing consumers’ choice of beverages in Turkey. Fruit/herbal tea and green tea are the main beneficiaries of this trend.

 

Fruit/herbal tea was dynamic over the review period as a whole, with retail volume sales growth of approximately 12%, and growth of 4% in 2004 alone. Fruit/herbal tea is generally sold loose by the kilo to consumers in bazaars. However, during the review period, packaged sales of fruit/herbal tea increased. There are over 20 types of fruit/herbal tea, which are traditionally consumed by Turkish people. The most popular of these is ihlamur tea, which is made of flowers from a particular tree. Ihlamur tea is seen as good for reducing the effects of coughs and colds. As it is a natural product it is popular with older consumers and also purchased by mothers for their children.

 

The major consumers for packaged fruit/herbal tea are young urbanites. They consume these teas generally for their health and/or relaxation benefits. The major players for packaged fruit/herbal tea are local player Dogadan Gida Urunleri San ve Paz AS with its Dogadan brand and multinational Unilever Sanayii ve Ticaret with its Lipton brand. Dogadan Gida Urunleri is the biggest promoter of herbal tea. Towards the end of the review period trade press increasingly wrote about the health benefits of fruit/herbal teas, which played an important role in rising consumption.

 

Packaged green tea was first introduced to Turkey in 1999. Specifically, green tea is often referred to in the trade press as being good for health. Health-conscious Turkish women picked this up during the review period and started to consume green tea on a regular basis. It is claimed that drinking around four cups of green tea per day is good for preventing the premature ageing of the skin, stress and cancer. In 2004, Caykur, Dogus Cay, and Dogadan all launched green tea on the Turkish market, the first local green tea products ever. One trade expert stated, “Those people who do not like the taste of black tea may consume green tea”.

 

Competition from traditional, unpackaged and illegally imported tea remains strong

 

Throughout the review period sales of packaged tea were constrained by traditional, unpackaged and illegally imported products. Unpackaged tea continues to be sold in bazaars, allowing consumers to create their own blends. In rural areas people have always boiled herbs from their own gardens to make herbal tea for good health or as a cure to illnesses.

 

The illegal entry of tea from the neighbouring countries to the east and southeast of Turkey forms a serious barrier to the growth of branded tea in the area. Due to the strategic and socio-economic structure of the region, it is possible to bring illegal tea to the country through the Barier Commerce (an agreement between the neighbouring countries) in the form of gifts and other ways. Companies package some of this illegal tea, but a large proportion of it is sold in the region, and even in larger urban centres, unpackaged in loose form. In order to curb the consumption of illegal teas, sector leader ÇAYKUR launched a brand called GAP in 1997. The brand was specifically produced for the area, with a stronger taste to appeal to the local taste. However, thus far the brand has failed to win over consumers.

 

Tea traditions remain strong

 

Tea is a very traditional Turkish beverage and its consumption increased dramatically in the 1960s when locally produced tea was distributed throughout the country. Turkey is a tea producing country, with all of the country’s tea produced in the province of Rize and its villages. In 2003, total production amounted to155,000 tonnes of which nearly 60% of tea was produced by the state-owned company, ÇAYKUR. As tea is a consumer staple, the government regulates the tea industry. There is a grading system for tea among producers for their expensive and cheaper brands. However, the grade of tea is not printed on the tea packaging and therefore consumers are not aware of the system.

 

The VAT for tea stands at just 8% which is lower than most FMCG products. Import tariffs are generally high in an attempt to protect local production. However, producers state that importing tea from Asian countries is cheaper than getting it produced locally due to lower labour costs, particularly in Asia.

 

Local trade press reported that 90% of the Turkish population drinks tea at least once a day, with 33% of the population mixing different teas in order to create their own blend. Turkish consumers drink tea at home, at work, when visiting friends and at school. In every work place there is at least one person employed solely to make tea and coffee for employees. When visiting friends, the first thing that guests will be offered is tea in small traditional tea glasses.

 

ÇAYKUR led the tea sales over the survey period

 

In 2004, ÇAYKUR was the dominant company in tea with around 47% of total value sales, followed by Unilever with a 20% value share. The other local companies Dogus Cay and Ofcaysan AS had 12% and 7% value shares in 2004, up from the previous year due to their increased advertising and product innovation efforts.

 

ÇAYKUR was especially strong in the sales of loose standard black tea, whereas the Lipton brand (Unilever) was not strong in this tea subsector. One trade expert commented, “Lipton is not so strong in loose black standard tea because it mixes imported tea with Turkish tea. As the taste is not familiar to consumers, it is not too popular”. Thus, in 2004 a new product was launched under the Lipton brand named “Dogu Karadeniz”, meaning East Black Sea, which is the area where tea is produced in Turkey. This tea is made of 100% Turkish tea in order to attract the consumers who are looking for the familiar Turkish tea taste.

 

Private tea producers increased the quality of their teas

 

Tea was produced solely by ÇAYKUR (Cay Isletmeleri Genel Müdülügü), the government-owned tea company, until 1984. In December 1984, a law breaking this monopoly and allowing tea to be produced and sold by private companies was introduced. It was expected that the entry of new companies would lead to a competitive environment and, as a result, higher quality products at better prices, but this did not happen immediately. Initially, foreign producers did not want to enter this unknown territory.

 

Unilever’s Lipton was the first big player to try its hand in the Turkish market. Some other companies also emerged but these could not offer quality products to match those of ÇAYKUR and Unilever. Apart from ÇAYKUR and Unilever, prior to 2001 no other tea company present had the technology to produce tea to a high standard. Companies entered Turkey without conducting a feasibility study and only focused on the profitability of tea and ways of making the most profit. As a result, the liberalisation of tea did not initially bring any real benefits for the consumer.

 

Over the survey period, new companies entered tea because of its attractiveness as the economy stabilised. Dogus Çay, Ofcaysan AS, Sir Winston Tea and Balküpü Harman Çayi appeared on the shelves of supermarkets/hypermarkets following major advertisement campaigns.

 

Trade experts state that locally owned private companies now own the technology to produce high quality tea. Particularly, Dogus Cay increased its share considerably, from 9% in 2002 to 12% in 2004. The company invested in advertising and new product launches, and bought the technology to increase its production capacity.

 

RTD teas poses no threat to hot tea

 

RTD tea is not a competitor of hot tea. It is consumed as a soft drink. The consumption of these products increases during the summer, which is the time producers start advertising their products.

 

Forecast performance

 

Euromonitor forecasts that total volume sales of tea will reach 210,580 tonnes by 2009, up by 17% over the forecast period. Retail sales will represent 57% of the total volume sales, with the rest being sold to on-trade outlets such as bars and cafes. Tea is the most important of hot drinks, being as it is traditional for Turkish consumers. This will protect its leading position during the forecast period.

 

Loose black standard tea will continue to dominate sales over the forecast period. Despite the new launches of other types of teas, such as tea bags, speciality tea, fruit/herbal teas and green tea, loose black standard tea will preserve its share in the sector as it has a unique position due to cultural factors and the national taste. Sales of black standard loose tea will increase further if the leading companies invest in promotional activities in the East and South-East of the country where the consumption of illegal tea was dominant over the review period.

 

Fruit/herbal tea and green tea will be the most dynamic subsectors with 23% and 20% volume growth respectively. The growth in these subsectors will be driven by the increasing demand from women and young people who like to try different tastes and perceive these teas to have health benefits. New product developments and increased advertising expenditure will fuel the growth of product sales.

Summary              Tea: New Product Launches 2003-2004
Brand name	Company	USPs	Launch date
Dogadan Ginkgolu Yesil Cay	Dogadan AS	Green tea	December 2004
Dogadan Nane Limon	Dogadan AS	Fruit/herbal tea	2004
Dogadan Yasemin Aloe Vera	Dogadan AS	Fruit/herbal tea	2004
Dogadan Meyve Sepeti	Dogadan AS	Fruit/herbal tea – mixed fruits	2004
Dogadan Karisik Meyve Cayi	Dogadan AS	Fruit/herbal tea – mixed fruits	2004
Çaykur Yesil Cay	ÇAYKUR	Green tea	2004
Lipton Dogu Karadeniz	Unilever Sanayii ve Ticaret	Black standard tea	May 2004
Dogus Yesil Cay	Dogus Çay Gida Mad.Üret. Paz.Ith.AS.	Green tea	March 2004
Dogus Earl Grey Tea	Dogus Çay Gida Mad.Üret. Paz.Ith.AS.	Black speciality tea	2003
Dogus Ceylon Tea	Dogus Çay Gida Mad.Üret. Paz.Ith.AS.	Black speciality tea	2003

Source:           Trade press, company research, trade interviews

Note:               USP = unique selling point