Coffee’s rise has tea companies scrambling to rebrand the region’s favorite drink
JAKARTA Businessmen clad in batik shirts tap on laptops and smartphones, while women in designer Muslim garb chat over pots of hot chai and browse menus listing hundreds of teas, from the exotic (Yellow Gold Tea Buds from China) to the commonplace (English Breakfast). This crowd, a mix of old and young and mostly well-to-do, has made the TWG shop in the Pacific Place mall in Jakarta a lively meeting point in the city.
With dozens of these boutique tea shops across Asia offering fine dining and veneered furnishings, Singapore’s The Wellbeing Group, known as TWG, is trying “to bring a new era of tea appreciation” in the region, said Trixie Anindita, the group’s communication and operation manager in Indonesia.
That Asians need to be educated about tea might seem strange given that the region is home to seven of the world’s top 10 tea-growing countries and billions of tea sippers. But in the last decade or so, the Starbucks-driven explosion of coffee culture that began in Western urban centers in the 1990s has spread to Asia, leaving the tea industry scrambling to develop the kind of premium offerings — and cool cachet — that have driven coffee’s rise.
“They have engaged consumers across young and traditional demographics,” Dilhan C. Fernando, CEO of Sri Lankan brand Dilmah Tea, says of the coffee industry.
So far, cozy tea settings like TWG in Jakarta are rare in major Asian cities. Across the region, malls are the preferred gathering place for people escaping the muggy heat and treacle-slow traffic outside, and the shopping mall coffee shops have become wildly popular. Indonesia is home to coffee shop chains such as Anomali, Liberica and Tanamera, all of which have outlets in Jakarta and in some of the archipelago’s other major cities. There has also been a proliferation of stand-alone coffee shops, many with the faux-factory decor that has become a coffee shop staple.
In the Grand Indonesia mall in the center of Jakarta, U.S. coffee giant Starbucks has two outlets less than 50 meters apart, an upstairs-downstairs arrangement separated by an escalator. The same mall has two more coffee outlets on either side of those cheek-by-jowl Starbucks — a Krispy Kreme donut shop and a popular local coffee brand called DJournal. The Coffee Bean & Tea Leaf has a shop on the next floor up, and, inevitably perhaps, there’s a third Starbucks higher up still.
Visiting Jakarta on a work trip from Bandung, Indonesia’s third-biggest city, Amalia Amalia was making her first visit to a TWG outlet. “I go to coffee shops frequently, but I would not say I am a coffee drinker, only now and then, and it is mostly just to socialize,” she said. “Like all Indonesians, I am a tea drinker. We drink tea since we are kids.”
Many in the tea industry believe plush tea shops can become an alternative to the region’s ever-multiplying coffee joints, given tea’s status as the world’s most widely consumed beverage. In India, the world’s second-biggest tea producer and consumer market, a range of hangout tea shop brands such as Chai Point are springing up.
Sensing an opportunity, a trio of tea industry veterans launched TWG in a Singapore mall in 2008. The city-state seemed like the perfect place to establish a niche Asian tea shop because it is “a hub surrounded by tea producers,” Anindita said. Nearly a decade later, TWG has 64 shops across Asia and in Western cities such as London, Munich and New York, as well as outlets in two of Jakarta’s higher-end malls. Premium retailers such as Dean & DeLuca of the U.S. and Harrods in London sell TWG’s teas.
A region steeped in tea
Asia is, of course, steeped in tea, a drink with a nearly 5,000-year history. Last year, China, India and Pakistan were the world’s three biggest tea drinkers in absolute terms — with China and India also the world’s top two tea producers — though measured per capita the world’s three biggest tea consumers are in Turkey, Ireland and the United Arab Emirates.
In China, the total area covered in tea plantations stretches over 2.72 million hectares, slightly bigger than the land area of Israel and maybe a big field or two smaller than Haiti. China’s plantations are mostly dedicated to producing green teas, as well as delicacies such as the rare and expensive yellow tea — a hard-to-procure Sichuan specialty that can cost nearly a thousand dollars for half a kilogram.
Asia’s major tea growers include two countries much better known for their coffee. Vietnam, the world’s second-biggest coffee grower, is the sixth-biggest tea producer. Indonesia is the world’s fourth-biggest coffee grower and seventh-biggest source of tea.
Despite the coffee surge, the global tea market is on the up. According to Euromonitor International, a global market research company, the world consumed 2.9 million tons of tea in 2016, up from 1.6 million in 2002, with consumption forecast to reach 3.3 million tons in 2021.
Tea consumption is projected to grow faster than coffee between now and then — at 15% compared with 11.3% over the five years through 2021. In the Asia-Pacific region, coffee consumption still lags behind tea and is much lower than in the West — $4 per capita in 2016 versus $42 in western Europe and $38 in North America, according to Euromonitor International.
But much of tea’s growth is coming from the popularity of so-called ready-to drink, or bottled, tea, including brands such as Japan’s Ito En green teas and Thailand’s Ichitan. Coca-Cola and other big beverage brands are also competing in the bottled tea market, especially as soda sales plateau in developed countries. But some in the tea business see opportunity at the higher end of the market, too.
“I have definitely seen a growth in the luxury tea market not just across Asia, but globally. This trend, often referred to as the ‘premiumization’ of tea, is expected to continue developing significantly in the coming years,” said Maranda Barnes, co-founder of TWG.
It makes sense that tea companies would want to follow the coffee industry’s lead in premium pricing. While tea is more widely consumed, coffee commands a far higher price — raking in close to $80 billion last year, compared to $42.6 billion for tea, according to Euromonitor.
“Premium tea companies that can innovate and introduce new and unique flavors will be able to garner the attention of millennials who care about ‘experiences’ and are always interested in trying something new,” said Nainika Singh, a consumer analyst with BMI Research.
Oolong way to go
In Jakarta’s Chinatown, close to the whitewashed Dutch colonial buildings around Kota Tua in the north of the city, sits the Pantjoran Tea House. Its airy upstairs dining room and meeting spaces are partitioned off with wooden panels decorated with Chinese symbols.
With its history and ornate setting, the building, once a well-known pharmacy, is a popular venue for cultural and literary events. During a lunchtime visit, however, Pantjoran was empty — a welcome contrast to the thronged coffee shops inside the city’s malls.
“Drinking tea has its own way and unique traditions,” said Ronald Dani Heriawan, Pantjoran’s operations manager, appreciating the brief calm. “We are busy on Friday nights and all day Saturday and Sunday.”
In Indonesia and across Asia, tea is so widely served — often for free at streetside food stalls — and is so ingrained that it is almost taken for granted. In contrast, gourmet coffee is relatively new in the region.
Coffee shops have proliferated in tandem with Asia’s expanding economies and growing middle classes, who have spare cash to spend on a foamy latte or jolting espresso. BMI’s Nainika Singh said that “the hipster culture surrounding coffee came as a result of consumers willing to pay higher prices for premium and better-quality coffee.”
Another challenge for nascent tea shop brands is the fact that tea drinkers can go to coffee shops to hang out with friends and drink tea if that is their preferred tipple. “About 30% of our sales is tea, No. 3 after coffee and chocolate drinks,” said Ryo Limijaya, marketing manager at Anomali Coffee, a popular Indonesian roastery and coffee shop chain.
But even some tea buffs concede that coffee’s hip trappings could be difficult for tea to transcend. Emeric Harney, marketing manager at Harney & Sons, a Connecticut-founded tea blender that sources tea from Asia, said that “tea will always struggle against the branding image that coffee has.”
Coffee shops emphasize the variety and earthiness of their beans, their links to fair trade movements and to “sustainable” farming. In many coffee shops, baristas are not only trained to carve an ornate decoration onto the head of a frothily Instagrammable latte, but to be fluent in coffee patois.
“The barista should understand about the different single-origin coffees, so if the customer says, ‘I would like a medium-body coffee,’ the barista can explain the different origins, such as Sumatra, Papua, Flores,” said Ryo Limijaya.
New wine, new bottles
Part of the challenge for tea is to emulate these aspects of coffee culture — and in turn persuade consumers that a drink as mundane and ubiquitous as tea is worth the extra expense, often for the variety of tastes, aromas and colors created when fruits, spices and herbs are thrown in.
Tea, too, can aim at the more indulgent customer, the would-be connoisseur. Compared with coffee, “The art of tea is slightly more laborious, and for some of us, we find that more rewarding,” said Harney.
Also, with Asia’s swelling middle class becoming increasingly concerned about obesity and other lifestyle-related diseases and more interested in health and fitness, tea arguably has a niche in waiting.
The tea-as-tonic variant is already gathering steam in Asia, where cold bottled-tea drinks are expected to surge in the coming years as a healthy alternative to fizzy, sugary cold drinks, while every second day there seems to be a new study or story about the health benefits of tea or specific tea drinks.
Kristina Richens, director of sales (or minister of commerce, to use the in-house title) at The Republic of Tea, an organic and luxury tea brand from California, arguably ground zero for what some cynics sneer at as the wellness cult, said, “We have observed that the branding and the premium flavor combinations are found to be intriguing in Asia.”
And brands targeting Asia could look to North America for some pointers on how to exoticize a drink that is both ancient and familiar to most Asians.
Unlike in Europe, tea in North America is not seen as “a grocery store commodity,” according Kevin Gascoyne of specialty tea group Camellia Sinensis. Rather, the image is of a “healthy tonic with all the foodie allures of an exotic product from a distant terroir.”
“Asian consumers are green tea drinkers historically, but recently they have been in search of new types of tea and new flavors,” said Guilaine Azam, director of communications at Kusmi Tea, a French luxury tea brand that is hoping to increase sales of its boxed tea across Asia.
It all means that big and specialized tea brands are hopeful that the tea market in Asia could be on the cusp of change along the lines of the West four decades ago, when wine went from being seen as an after-dinner formality to something sipped or slugged after work, sometimes at home, or in alfresco bars and pubs.
“In the 1970s, wine underwent a major revolution that opened up where and how people consumed wine, and I think that we are in a similar state in the world of tea,” said Harney.