• john snell

ICED TEA, COVID 19 AND PLATO


I am probably not alone at viewing the growing COVID19 statistics in the US and feeling somewhat perplexed (ok , I am being polite) at the brazen attempts to open up an economy which is being hit harder than any other country on the planet. However, if there is one thing you can say about the land of the Brave and of the Free is that the latter descriptor is in their DNA; curbing this is American political suicide, however prudent.

So why this start? Well, I want to imagine what this dichotomy, of interest, is going to do for fresh brewed iced tea consumption in the 50 states. I want to know this for a number of reasons and most of all for an origin that is dear to me, Argentina, whose tea industry relies heavily on this ubiquitous American drink.

If we consider where fresh brewed iced tea is consumed it is primarily out of home. Yes, people make their own at home but this is a small portion of the overall market. Whether it be gas and convenience, QSR or more formal dining this is where the millions of gallons of amber tea has an audience.

Within one of these, at least, is the secret consumer “the free refill” which never gets “dinged” into a cash register so is blind to the statisticians but makes up a huge consumption number so, any attempt at understanding the potential impact of COVID19 should be done with the understanding that any calculation will be on the low side.

We all know that, during lockdown, hardly any of the 3 major channels mentioned above were active and Food service operators said as much, with reports of 70-90% downturn in sales. But what of the recovery, will everything spring back immediately or are we looking at a long road to recovery? We all know the answer and the below graph from Statista suggests that it will be hard to lure Consumers back.




Logically, one could argue that QSR, non-seated take out services, will bounce back reasonably strongly (we are already seeing this) but how social distancing can be executed within the thin margined restaurant industry is a challenge.

OK, so let’s take a stab, a wild guess job (don’t hold me to this) that we will see a 60% reduction in restaurant engagement over the next 18 months (Allowing for the here and now and slow opening up going forward). This represents some 70% of iced tea consumed and therefore a 42% drop in overall consumption. I accept that grocery is selling a lot more and people will increase home consumption but others will not. Younger demographics will lean harder into RTD’s or diversify into other beverage categories, while others may stay true to fresh brewed BUT the free refills have gone!!

For Argentina, who export about 50MMkgs of tea to the U.S, this would equate to approximately 20MMkgs or about 25% of their annual crop, a body blow for any origin.

The silver lining to this story, which is not unique to Argentina and iced tea, is that for many tea producing nations, changing demands, away from that which they have traditionally produced, has not elicited a dramatic response to case harden their industries against further Consumer disinterest. In fact, in many instances, it just makes them focus on producing more efficiently, to survive the decline longer.

COVID19 and other watershed moments can provide the environment to shake one from this singular focus and indeed, I have faith that the Argentine Producers, along with other Global Producers, understand the potential of Camellia Sinensis well enough to create new ways to support their beautiful crop, while traditional markets heal.

Plato said it best, “Necessity is the Mother of invention”!

Stay safe and keep drinking healthful tea!!

35 views

Recent Posts

See All