Canadian Market Overview

Presentation by: Louise Roberge,

President, Tea Association of Canada

AGENDA

Introduction

Market Place Overview

Trends & Opportunities

Barriers

Tea Association of Canada Programs

Tea Imports

Market Share by Country of Origin

Consumption

Grocery Sales

Foodservice Sales

MARKET PLACE OVERVIEW

Tea Imports Volume Metric Tons (000,000)

Source: International Tea Committee

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007

GreenTea

BlackTea

Tea Imports 2007 Category Percentage

Black

Green

22%

78%

Source: International Tea Committee

Imports from Major Producing Countries 2004-2008

0

500

1000

1500

2000

2500

2003 2004 2005 2006 2007 2008

India

Sri Lanka

Kenya

China

Producing Country Canadian Market Share Black

0

1000

2000

3000

4000

5000

6000

2003 2004 2005 2006 2007 2008

India

Sri Lanka

Kenya

China

UK

USA

Producing Country Canadian Market Share Green

0

200

400

600

800

1000

1200

1400

1600

1800

2003 2004 2005 2006 2007 2008

China

Japan

UK

USA

Imports $

0

20000

40000

60000

80000

100000

120000

140000

160000

2001 2002 2003 2004 2005 2006 2007

Black Tea

Green Tea

Total

Black Tea Imports Volume

0

1000

2000

3000

4000

5000

6000

India SriLanka

Indo China&HK

Japan VietnamKenya Malaw i UK Germany oEU US ARG PapuaNew

Guinea

Other

2003

2004

2005

2006

2007

Black tea Imports $

0

10000

20000

30000

40000

50000

60000

70000

India

Sri La

nka

Indo

nesia

China

&HK

Japa

n

Kenya

Mala

wiUK

Ger

man

y

Oth

er EU

USA

Argent

ina

Oth

er

2001

2002

2003

2004

2005

2006

2007

Green Tea Imports Volume

0

200

400

600

800

1000

1200

1400

1600

1800

China & HK Taiwan Japan Other Asia UK US Other

2001

2002

2003

2004

2005

2006

2007

Green Tea Import $

0

2000

4000

6000

8000

10000

12000

China &HK

Taiwan Japan OtherAsia

UK US Other

2001

2002

2003

2004

2005

2006

2007

Litres Consumed Per Person

Series1 42 61 51 63 68 73 71 73 75 67 62 70

1 2 3 4 5 6 7 8 9 10 11 12

Consumption

1991 1993 1995 1998 1999 2001 2002 2003 2004 2005 2006 2007

Canadian Beverage Consumption Share of Throat

(Litres per Person)

86 82 81 84 86 88 87 89

101 109 111 117 114 110 103 95

97 99 9799 102 105

102 104

4256 49

68 73 7367 70

2222 29

27 27 2828 28

0

50

100

150

200

250

300

350

400

450

1991 1994 1996 1999 2001 2003 2005 2007

Alchohol Soft Drinks Coffee Tea Juice

Tea Sales by Category(Dollars)

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

450,000,000

1997 2002 2003 2004 2005 2006 2007 2008

Hot Tea

RTD

Total Tea

TOTAL READY-TO-DRINK SALES 1997-2008 CANADIAN DOLLARS

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

1997 2002 2003 2004 2005 2006 2007 2008

Ice Tea Mixes

RTD (ex cans)

TRD (cans)

Tea Sales Yearly Trend (2003 – 2008)Dollars (000,000’s)

Regular Tea Bags Specialty Tea Bags

0

20

40

60

80

100

120

National West East Ontario Quebec

Total Tea Sales Maritimes 2008

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

1

Hot Tea

RTD

Total Tea

0

2

4

6

8

10

12

14

2004 2006 2008

Total RegularTea Bags

Total SpecialtyTea

Green Tea

Herbal Tea

Flavoured incl.Decaf

UnspecifiedSpeacialty Tea

Tea Sales (Hot) MaritimesTea Sales (Hot) Maritimes

Tea Sales (RTD) Maritimes2008

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

5000000

1

Ice Tea Mixes

RTD (exc. cans)

RTD (cans)

Total Tea Sales Quebec 2008

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

1

Hot Tea

RTD

Total Tea

Tea Sales HOT- Quebec

02468

101214161820

2004 2006 2008

Total RegularTea Bags

Total SpecialtyTea

Green Tea

Herbal Tea

Flavoured incl.Decaf

UnspecifiedSpeacialty Tea

Tea Sales RTD Quebec 2008

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

1

Ice Tea Mixes

RTD (excl canx)

RTD (cans)

Total Tea Sales Ontario 2008

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

1

Hot Tea

RTD Tea

Total Tea

0

5

10

15

20

25

30

35

40

45

2004 2006 2008

Total RegularTea Bags

Total SpecialtyTea

Green Tea

Herbal Tea

Flavoured incl.Decaf

UnspecifiedSpeacialty Tea

Tea Sales - OntarioTea Sales - Ontario

Total Sales RTD Ontario 2008

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

1

Ice Tea Mixex

RTD ( excl cans)

RTD(cans)

Total Tea Sales West 2008

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

1

Hot Tea

RTD Tea

Total Tea

0

5

10

15

20

25

30

35

40

2004 2006 2008

Total RegularTea Bags

Total SpecialtyTea

Green Tea

Herbal Tea

Flavoured incl.Decaf

UnspecifiedSpeacialty Tea

Tea Sales – Western CanadaTea Sales – Western Canada

Tea Sales RTD West 2008

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

1

Ice Tea Mixex

RTD(excl cans)

RTD (cans)

Avg. # of Items

Avg. # of Items

Avg. # of Items

$/Avg. # of Items

Total Tea Bags 71.0 106.6 109.7 $1,271,167

Total Regular Tea 11.0 18.1 17.6 $4,017,706

Total Specialty Tea 60.0 88.5 91.3 $742,998

Flavoured Black Tea 16.0 16.7 18.6 $551,820Green Tea 6.0 18.4 21.2 $950,105Herbal Tea 36.0 41.6 40.1 $640,917

2005 20061999

Tea rebounded in shelf presence at Grocery retailers driven by Green Tea and Flavoured Black Tea SKUs

Source: ACNielsen MarketTrack, National Grocery Banner - Latest 52 Weeks Ending January 20, 2007

Penetration is growing faster among households who associate

Hot Tea with health benefits

61.6

35.0

61.7

40.2

Total Tea Drinkers Health Associated

2006 2007

Source: ACNielsen Homescan – 52 wks to July 7, 2007 vs YAG

Household Penetration(Home Purchases)

Total Tea

Regular Black 35.3 35.4 +0.1 19.9 22.8 +2.9

Specialty 43.5 44.3 +0.8 25.3 29.7 +4.4

Green 20.2 22.9 +2.7 12.2 15.8 +3.6

+5.2

Note: Health Associated penetration is a percentage of total Hot Tea Drinkers household penetration

Foodservice Sales

Restaurants in Canada served 406,459,000 cups of Hot Tea in the past 12 months

Hot Tea sales at Restaurants in Canada were approx. $609,688,000 * in the past 12 months

*Based on AEC multiplied by servings

YE May 2007 Total Canada Preliminary Data Subject To Change

$

0

10000

20000

30000

40000

50000

60000

70000

80000

MAM'07 JJA'07 SON'07 DJF'07 MAM'08

Tea-HotRegular

Tea-HotSpecialty

Servings Volume Hot Tea (000’s)

Regular Tea in slight decline while Specialty Tea experiencing strong volume gains on the year

CREST® YE May 2008 Total Canada Proprietary & Confidential for NPD clients

Tea occasions outside the home peak in the afternoon whereas evening is the

peak for inside the home.

39%

59%

74%

28%

45%41%

0%

20%

40%

60%

80%

100%

Morning Afternoon Evening

Inside the home Outside the home

Tea Consumption (Time of Day) - % Inside versus Outside the Home

Base = Hot tea drinkers, N=11,234

Almost ¾’s of respondents

consume tea at home in the

evening

30

30

27

21

13

7

6

Workplace

Familyrestaurant

Coffee/donutshop

Fine dining

Specialty shops

Fast food

Tea room

Thinking about the last three months, where have you consumed Hot Tea when you are outside of your home?*

Three out of ten hot tea drinkers have consumed hot tea at the workplace or

family restaurant.

Base = Hot tea drinkers that drink hot tea outside of their home, N=7,497 *Multiple mentions Source NPD Group Canada

Who is the Hot Tea Consumer?

18 to 24 Year Olds

9%25 to 34 Year Olds

15%

35 to 44 Year Olds

15%45+ Year Olds

57%CREST® YE May 2008 Total Canada Proprietary & Confidential for NPD clients

Snapshot of the Hot Tea consumer:

Specialty Tea Regular Tea

38% between ages 45-64

61% Females

30% under the age of 34

59% Females

35% consumed at Supper 38% consumed at Morning Meal

Friday is the most popular day of the week to consume

Hot Tea!

Key Learning's For Tea in Commercial Foodservice…

Key Trends in Commercial Foodservice:

Ethnic

Health

Snacking

Tea, more so than any other beverage, can capitalize on these influential trends

Trends & Opportunities

Green Tea Tea as an ingredient in cooking

and cocktails Tea as a health and beauty aid Fancy Tea bags Cause related Tea Organic Tea & foods in general

Size of the Tea Market in Canada

91% Increase in 11 years 1997 2008DOLLARS $(000’s)

IMPORTS 77.1

SALES HOT 115.2

REGULAR 73

SPECIALTY 42.2

SALES RTD 70.4

RTD (excld cans) 10.9

RTD Cans 35

Ice Tea Mixes 24.5

TOTAL HOT & RTD 185.6

SALES FOODSERVICE (est.)

340

TOTAL 602.7

DOLLARS $(000’s)

%increase since 1997

IMPORTS (ITC 2007) 137.5 78.3

SALES HOT 191.3 66

REGULAR 89.2 22

SPECIALTY 102.1 142

SALES RTD 217.1 208

RTD (excld cans) 98.8 806

RTD Cans 69.4 98

Ice Tea Mixes 48.8 99

TOTAL HOT & RTD 408.5 120

SALES FOODSERVICE (est.)

609.6 79

TOTAL 1,155.5 91

Size of the Tea Market in Canada

11% Increase over last year 2007 2008DOLLARS $(000’s)

IMPORTS 123.7

SALES HOT 181.4

REGULAR 88.8

SPECIALTY 92.6

SALES RTD 207.1

RTD (excld cans) 92.2

RTD Cans 65.7

Ice Tea Mixes 49.1

TOTAL HOT & RTD 388.5

SALES FOODSERVICE (est.)

527.5

TOTAL 1,039.7

DOLLARS $(000’s)

%increase

IMPORTS 137.5 11

SALES HOT 191.3 5.4

REGULAR 89.2 .4

SPECIALTY 102.1 10

SALES RTD 217.1 4.8

RTD (excld cans) 98.8 7

RTD Cans 69.4 5.6

Ice Tea Mixes 48.8 -.6

TOTAL HOT & RTD 408.5 5.1

SALES FOODSERVICE (est.)

609.6 15.5

TOTAL 1,155.5 11

Health Claim

• After a period of extensive review, Health Canada as granted us with a health Claim for Green Tea:

• The consumption of green tea helps to protect blood lipids from oxidation

• Green Tea increases antioxidant capacity in blood

• Green tea has an antioxidant effect in blood ( blood lipids)

• We are pursuing to have a similar claim for Black tea

Barriers Regulatory IssuesMEDIUM Priority HIGH Priority

LOW Priority On the Radar

PESTICIDEMRL’S

Health &Safety Act

MANDATORY NUTRITIONLABELLING

Healthy Living

Allergen Regulation

Organic regulation

Stewardship Ontario

Codex

WHO report

NHP’s Product SpecificHealth Claims

CBSA-CFIA

Generic Health Claim

Caffeine Labelling

Pest Management Regulatory Agency (PMRA)

•Canadian MRL’s (default 0.01 ppm)

•We are actively pursuing our efforts for Global Harmonisation with the Pest Management Regulatory Agency keeping them inform of the progress from the Global Initiative Working

New Regulations

• New Organic Regulations will be in effect in June 2008 • www.inspection.gc.ca

• New Allergen Regulation:The proposed amendments to the Food and Drug Regulations- Enhanced Labelling for Food Allergens, Gluten Sources and added sulphites was published in Canada Gazette, Part I on Sat. July 26th.   They are available at  the Canada Gazette website: http://canadagazette.gc.ca/partI/index-e.html.   

•  Labelling regulation Guide to Food Labelling and Advertising for CFIA contacts for other labelling enquiries

–

Organic Regulation

• Organic Products Regulations:• CFIA Website: www.inspection.gc.ca• Canada Gazette Website: www.canadagazette.gc.ca

• Organic Production Systems Standards:• Canadian General Standards Board Website:• www.pwgsc.gc.ca/cgsb

• Contact: • Michel Saumur, Manager, Canada Organic Office• (613) 221-7165 msaumur@inspection.gc.ca

Future Challenges

• Consumer 2012

• Health and well being

• Higher Quality and premiumisation

• Stronger convenience

• More demanding

• More out-of-home consumption

• Greater environmental awareness of products

• More experience driven

• Price led value

• Exploring new tastes

Industry 2012 • Health and nutrition• Growing importance of

environmental and social factors• Constant innovation• Continuing industry consolidation• The rise of the hard discounters• An even tougher regulatory

environment• Service excellence• Technology and value chain

integration• The role of private equity