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Russian Thirst for China-sourced Tea Blends Remains Largely Unslaked

Amid Russia's love affair with tea, new opportunities are emerging for the sale and distribution of Chinese varieties.

Photo: Tea by the Ounce: One of the many specialist retailers catering to the Russians’ love of their daily cuppa.
Tea by the Ounce: One of the many specialist retailers catering to the Russians' love of their daily cuppa.
Photo: Tea by the Ounce: One of the many specialist retailers catering to the Russians’ love of their daily cuppa.
Tea by the Ounce: One of the many specialist retailers catering to the Russians' love of their daily cuppa.

While Russia has enthusiastically embraced coffee culture in the past 20 years, it has not given up on its love of tea. Despite the plethora of Costa Coffee and Starbucks outlets that line Russian high streets – alongside the many homegrown franchises, most notably Coffeemania, Coffee House and Skololadnitsa – tea still remains very much part of the national identity.

In fact, the consumption of tea remains pretty much ubiquitous. It is sipped while enjoying a sauna and traditionally marks the end of a weekend family dinner. It also serves as self-medication in times of flu, while its sweet hot lemon incarnation is an inevitable part of any wintertime breakfast. Black tea, though, is the drink of choice and has been since the beverage became an everyday necessity some 150 years ago.

Despite this, 2015 saw the level of Russian tea production fall by 5%. Overall, though, the country remains the world's largest net importer of tea, with virtually all of Russia's producers largely re-packaging teas imported from India and Sri Lanka.

It is the poor state of the rouble, however, that is to blame for much of the market contraction over the past three years. Many of the principal players – including Orimi, Straus, FES Product, Santi, Kuban Tea and the Yakovlevskaya Tea Factory – managed to stave off the worst of this thanks to the support of Russia's growing number of specialist tea shops. In Moscow and St Petersburg alone, there are now more than 500 such establishments, with about half of them run and branded by one of the major chains, most notably Ounce, Kantata, Chainyi Dvorik (Tea Court) or Zavarka (Brewing).

The formats of these teashops vary considerably in line with the preferences of each individual establishment's target market. The outlets found in the majority of shopping malls, for instance, rarely carry any of the more exotic teas. Typically, 30% of their range is given over to flavoured teas, with a number of novel varieties often available, including strawberry cream and winter cinnamon. Few of the widely acclaimed China teas are conspicuously on sale, with only a small number of everyday shoppers having much regard for Oriental tea culture. Such teas, however, may be available on request.

There are also an increasing number of outlets, however, that do pride themselves on offering a good selection of high quality teas and coffees. Not even in Moscow or St Petersburg, let alone the more provincial cities, though, has any store ever managed to survive by selling quality teas alone. This is despite the benefit of a variety of sales and marketing campaigns, healthy advertising budgets and innovative promotional tactics.

This has seen a semi-official product matrix emerge as the key to maintaining a successful teashop in Russia – 30% mass-market flavoured teas, 20% coffee sourced from Ethiopia, Brazil or Italy and 35% assorted China teas, with the remainder made up of teas from India, Taiwan or Japan.

At this higher end of the market, though, one of the keys to success is choosing the right assortment of China-sourced teas. There are around 200 varieties on offer and frequently these represent the most profitable products in any typical tea shop's range.

In terms of revenue, 25g of Bai Hao Yin Zhen – a white tea produced in Fujian province – sells for about US$6, while the same amount of Yabao Oolong – a delicate white tea from Yunnan – costs $7.50. The more exotic and less commonly available teas can fetch as much as $25 per 25g.

With standard advertising and marketing campaigns having proved unsuitable and too costly in the premium tea sector, most tea shops rely on word-of-mouth and social media approbation to build up their customer base. Typically, it takes about a year for any such shop to become profitable. Some 20 sales a day, with an average receipt of $20, will give such an outlet a gross annual revenue of about $150,000 and a net monthly profit in the region of $1,200.

With more Russians now visiting China and gaining a greater appreciation of its tea culture, the demand for traditional Chinese teas is certain to grow. As there are no specific restrictions on imported teas in China – such as specified hygiene requirements – suppliers are free to approach teashop proprietors directly. At present, most of Russia's independent teashops rely on informal links with China-based Russian nationals to source their chosen blends of mainland teas.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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