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EXPORTING TEA │ THE SMART EXPORT SERIES
Exporting Tea to Australia
Where’s the opportunity?
Australia’s tea market is valued at $1.2 billion with an annual compound growth rate of 3.5 percent. There are many opportunities for overseas businesses as the majority of tea in Australia are imported, and domestic tea production remains relatively small. The tea market has evolved away from the conventional tea such as black tea to more unique speciality blends. Traditionally, exporters wishing to enter the market would need to match the large production scales and range of existing players to remain competitive. However changing consumer demand presents opportunities for businesses operating within niche and premium product segments. The growth in this segment has reduced barriers of entry, allowing small manufacturers to break into the market without the need for considerable capital investment. On the other hand, some challenges for exporters in the current industry climate include supply chain disruptions spurred on by the COVID-19 pandemic. With an appropriate cost benefit analysis, we think there are some promising opportunities for some exporters thinking of entering the Australian market.
Product
Our analysis shows favourable growth prospects in niche product segments. Black tea consumption has fallen over the last 12 months while speciality tea sales grew by 4 percent. Among these, green tea, fruit tea and herbal tea are emerging as popular choices. Health and wellness herbal teas are currently experiencing the highest growth rates among various categories of tea. Young tea drinkers are becoming increasingly interested in low caffeine products – often opting for fruit or herbal teas. While niche players are not expected to offer the same extensive product range as large competitors, having at least 4-5 products in its range can help brands a strong presence in the market. Brands should also think about how they can be more environmentally friendly through using biodegradable and recyclable materials in their packaging.
Price
Premium tea price range varies in the Australian market. Planting Organics (Chillax tea) offers loose tea at $2.92 for 10g. The Rabbit Hole (Sweet Dreams) has price point of $8.32 at 10g for its unique blend of local Australian ingredients. Popular Australian brand, T2 offers $3.4 for 10g for its loose leaf (Sleep Tight) product.
Promotion
Tea drinkers are becoming interested in high quality products with a great story. Niche brands can focus on their origin story behind the scenes of harvesting and processing its tea, as well as the people behind the business. This can help drive the premium value of the brand as well as establish a greater proximity of the brand with its customers. Businesses should also focus on market education particularly on its exotic and unique blends of tea products.
Place
Traditional retailers for tea in Australia include the supermarket chains such as Coles, Woolworths, and ALDI. These suppliers can be especially difficult to break into for new brands. Exporters of niche brands should consider speciality tea retailers or cafes and other beverage stores.
Our Strategic Takeaways
We see some promising signs for exporters entering the Australian market. The tea industry in Australia is in a transitionary period as we start seeing an increasing number of niche brands emerging in the market. Sustainability and wellness will be key value propositions for exporters to attract local consumers. Exotic blends of tea with unique stories will also be a key factor for players to differentiate themselves in the market.
