Tea Supply Chain UK Impact Sandy Morrison

8/19/2019 Tea Supply Chain UK Impact Sandy Morrison

1/27

THE OVERALL TEA SUPPLY CHAIN & ITS

COST STRUCTURE

• The Starting Point – Historical Tea S!!l"

• A loo# at the U$ Tea %ar#et

• rea#'o(n o) the Pac#er*s Cost Strctre

• A co+!arison o) Retail & Action Prices

• A )e( Concl'ing Co++ents

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,• Re+in'ers This is a-erage 'ata

This a-erages all Pac#ers .ata

This loo#s at A-erage Action Prices

A!ril /001 .ata +ainl" )or /002 & /003


2/27


COST STRUCTURE

• The Starting Point – Historical Tea Supply





• Re+in'ers This is a-erage 'ata



.ata +ainl" )or /002 & /003


3/27

Tea Price has )allen 45 !a in Real Ter+s

67389/002

Note: Prices are based on London Auction Prices to 1998 and then for o!bassa auction price" #for $est P%1&'enyan(


4/27

:orl' S!!l" has contine' to rn ahea' o)

.e+an'

Sorce; ITC an' L%C International


5/27


COST STRUCTURE


• A loo) at the *' Tea ar)et







.ata +ainl" )or /002 & /003


6/27

U$ .e)initions & ass+!tions

• Retail !rices e


7/27

/003 U$ Tea Sales B" Vol+e

Sorce; L%C International

The !ar)et is do!inated by

T+A$A,S

-./ 90


8/27

Pac#er*s A-erage In9Store Prices !er #g


9/27

U$ Retail Prices are -er" stea'" inconstant +one" ter+s



10/27


COST STRUCTURE



• $rea)do2n of the Pac)er3s 4ost Structure






.ata +ainl" )or /002 & /003


11/27

The %a#e9! o) the Retail Price


12/27

Pac#ers A-erage Cost Strctre /002 D+F

158


13/27

%arginsDPro)it as 5 o) Sales F


14/27


COST STRUCTURE


• A loo# at the U$ %ar#et


• A co!parison of 6etail 7 Auction Prices





.ata +ainl" )or /002 & /003


15/27

/003 9 A-erage Action !rices B" seg+ent !er #g



16/27

/003 A-erage Prices Action as a 5 o) retail !rice


Econo+

"Pro'cts


17/27

Action Prices -erss RetailG Prices in /003 !er #g

G Net o) !ro+otions Sorce; L%C International

=17=6/

8=01

2=12 2=44


18/27


COST STRUCTURE


• A loo# at the U$ %ar#et



• A fe2 4oncluding 4o!!ents




.ata +ainl" )or /002 & /003


19/27

Tea Vale Chains

!er #g*pgrading toSpeciality

should be thefuture drier

for change=

Re'ce !lain

teas=


20/27

%ain reasons )or .i))erences in

Pac#er*s In9Store Prices

• A'-ertising & Pro+otion costs

• Pac#aging costs

• .i))ering S!!l" Chain E))iciencies

• Econo+ies o) scale

• %ar#et !o(er (ith S!er+ar#ets

• %argin Strateg" DVol+eValeF


21/27

CUSTOMERSWAREHOUSE

PACKERSFACTORIES

ARRIVALPORT

SUPERMARKETSTORES

UNLOADINSPECTSAMPLEQC CHECK

DOCUMENTSCLEARCUSTOMS

CERTIFICATION

(WAREHOUSING)

RECEIVEREPAIR (?)(RE-)PALLETISESAMPLESTORE

TASTECREATEBLENDS

PICK PALLETSBLENDING

PM PURCHASE

TEA MACHINESPACKING OPSCODING

DESPATCHSTORE

UNLOADING

UNPACK

STACK ONSHELVES

PROMOTIONAL

DISPLAYS

TRANSACTIONSYSTEM

SALES DATAANALYSIS

RE-ORDERING

RECORD &RECEIVE

QC CHECK

STORE

RE-PACK (?)

PICK PALLETS(?)

DISTRIBUTIONROUTEPLANNING

DESPATCH

FINANCE &MATERIALSCHARGES

FINANCECHARGES

IT COSTSWASTE

FINANCECHARGES

T R A N S P OR T

T O P A C K E R S

T R A N S P OR T

T O C U S T OME R S

RETAIL TEA SUPPLY CHAIN: UK Po! - !o - S"#$%'$!S$*

T R A N S P OR T

T O

T HE

S T OR E S

PORTHANDLINGCHARGES

QA COSTS & TEA LOSSES

TASTING

E+PERTISE

TRANSPORTCOSTS

HI>H LAOUR COSTS


22/27

CUSTOMERSWAREHOUSE

PACKERSFACTORIES

ARRIVALPORT

SUPERMARKETSTORES

UNLOADINSPECTSAMPLEQC CHECK

DOCUMENTSCLEARCUSTOMS

CERTIFICATION

(WAREHOUSING)

RECEIVEREPAIR (?)(RE-)PALLETISESAMPLESTORE

TASTECREATEBLENDS

PICK PALLETSBLENDING

PM PURCHASE

TEA MACHINESPACKING OPSCODING

DESPATCHSTORE

UNLOADING

UNPACK

STACK ONSHELVES

PROMOTIONAL

DISPLAYS

TRANSACTIONSYSTEM

SALES DATAANALYSIS

RE-ORDERING

RECORD &RECEIVE

QC CHECK

STORE

RE-PACK (?)

PICK PALLETS(?)

DISTRIBUTIONROUTEPLANNING

DESPATCH

FINANCE &MATERIALSCHARGES

FINANCECHARGES

IT COSTSWASTE

FINANCECHARGES

T R A N S P OR T

T O P A C K E R S

T R A N S P OR T

T O C U S T OME R S

RETAIL TEA SUPPLY CHAIN: UK Po! , !o - S"#$%'$!S$*

T R A N S P OR T

T O

T HE

S T OR E S

PORTHANDLINGCHARGES

QA COSTS & TEA LOSSES

TASTING

E+PERTISE

TRANSPORTCOSTS

HI>H LAOUR COSTS

TH+

S*P+6A6'+TSA6+ S*++;N,

TH+ PA4'+6S

A6,;NS


23/27

BUYERSWAREHOUSE

.ESTAT

E

.EST

ATE

PRODUCERSWAREHOUSE

MANUFACTURE E+PORTING

MANUFACTURESAMPLEQC CHECK PACK MARK PALLETISESTOREPICK PALLETS

DESPATCH

RECEIVEREPAIRPALLETISESAMPLESTOREPICK PALLETSDESPATCH

INSPECTIONSCERTIFICATESCLEARCUSTOMSPORT LEVY THC ORIGINB/L ISSUE

LOADSAILINSURE TO FOBCESSESASSOC CHARGE

RECEIVEREPAIRPALLETISESAMPLEQC CHECK STORERE-PACK MARK

FUMIGATEPICK PALLETSCONTAINERISEDESPATCH

AUCTIONCHARGES

FINANCECHARGES

AUCTIONCHARGES

FINANCECHARGES

BUYINGCHARGES

T R A N S P OR T

L OT S

T R A N S P OR T

L OT S

RAW TEA SUPPLY CHAIN: M0"*1!"$ , A"1!2o0 -FOB

T R A N S P OR T

C ONT A I NE R


24/27

BUYERSWAREHOUSE

.ESTAT

E

.EST

ATE

PRODUCERSWAREHOUSE



DESPATCH

RECEIVEREPAIRPALLETISESAMPLESTOREPICK PALLETSDESPATCH



RECEIVEREPAIRPALLETISESAMPLEQC CHECK STORERE-PACK MARK

FUMIGATEPICK PALLETSCONTAINERISEDESPATCH

AUCTIONCHARGES

FINANCECHARGES

AUCTIONCHARGES

FINANCECHARGES

BUYINGCHARGES

T R A N S P OR T

L OT S

T R A N S P OR T

L OT S

RAW TEA SUPPLY CHAIN: M0"*1!"$ , A"1!2o0 -FOB

T R A N S P OR T

C ONT A I NE R

TH+ PA4'+6S A6+

S*++;N, TH+T+A P6?>*4+6S

T? $+4?+ ?6+

+%%;4;+NT


25/27

.ESTAT

E

.EST

ATE

PRODUCERSWAREHOUSE



DESPATCH

RECEIVEREPAIRPALLETISESAMPLEQC CHECK STOREFUMIGATEPICK PALLETS

CONTAINERISEDESPATCH



FINANCECHARGES

SELLINGCHARGES

T R A N S P OR T

L OT S

RAW TEA SUPPLY CHAIN: M0"*1!"$ - P23!$ S$ -FOB

T R A N S P OR T

C ONT A I NE R

%AINLY YTA$IN>

COST OUT

O? THE

SUPPLY

CHAIN


26/27

%ain Conclsions

• Pac#ers +argins are lo( D295F• Retailers +argins on Bran'e' are also lo( D35F

• Retailers )inal +argins are higher on their o(n

laBel D/05F

• .e!en'ing on !ro'ct t"!e & co+!onents@ 209

105 o) the Retail !rice is Pac#ers costs

• Reall" onl" Tea Estates +a#e +one" ot o) ?air

Tra'e= ?airtra'e re+ains niche & is otsi'e the

Action %ar#et %echanis+=


27/27


COST STRUCTURE

• 6e!inders This is aerage data

This aerages all Pac)ers >ata

This loo)s at Aerage Auction Prices

>ata !ainly for @005 7 @00

TH+ +N>

April @00B

Tea Supply Chain UK Impact Sandy Morrison

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