Tea market in Russia (off-line and on-line market)

Tea drinking is a traditional leisure activity for Russians historically and nowadays. Russia was one of the first countries to be introduced to tea in the mid-1600s. The Chinese ambassador to Moscow made a gift of several chests of tea to Tsar Aleksey Mikhaylovich. During this period, Russia was attempting to establish trade with China and tea soon became one of the desired imports.

9Tong Frank (2015, June 23). Re: Alibaba says its Aliexpress.com is the leading retail site in Russia. [e-commerce intelligence portal]. Retrieved from:

https://www.internetretailer.com/2015/06/23/alibaba-says-its-aliexpresscom-leading-retail-site-ru

Tea was appealing to the Russian life-style because it was a warm and hearty brew. Russians have always preferred a strong, dark brew, which is sweetened with sugar, jam or honey.

To this day, tea and vodka are the two primary beverages in Russian society.

Russia is home to one of the world’s biggest tea market. In fact, the statistics are showing that 94%

of all Russians are tea drinkers. The nation is the world’s second biggest tea market and the eighth

largest coffee market globally¹⁰.

According to a presentation at the 2015 World Tea Expo, Russian retail sales of tea totalled

$4 billion in 2014. According to the report from the International Coffee Organisation tea makes up two thirds of Russia’s entire hot drinks sector.

Traditionally tea has been an integral part of Russian life since XVII centaury. The figures show that even of economic conditions fail to blunt Russian appetites for this particular beverage. Euromonitor suggests Russia’s tea market will grow at a steady 1% annually for the foreseeable future. Small

The 2015 saw Russian businesses import a total of 170,5 tons of tea worth $645.7 million. The share of black tea constituted 91.6%, meanwhile the share of green tea was 8.4%. For context, 168,5 tons of various teas were imported in 2014 at a value of $638.5 million. The figures are showing the huge desire for tea amongst Russia’s many millions of consumers.

The share of black and green teas in the market has been stable for a decade, since 2006. The share is 90%to 10%. The green tea is popular, but not as popular as black tea, it has been defined by two factors: the main export comes from Sri-Lanka, Kenya and India (the countries that mostly produce

10Sichev Michael (2015, May 10). Re: Review of Russia tea and coffee market. [Online magazine survey]. Retrievedfrom: http://www.foodmarket.spb.ru/current.php?article=2151

black teas) and also because the green tea share is manly comes from the premium part of the market, high quality, not tea bags packaging¹¹.

Figure 3.11 Tea import dynamics in Russia from 2001 to 2015 (thousand tones) from http://ab-centre.ru/news/rynok-chaya-rossii-v-2001-2016-gg

Regarding import, three nations dominate Russian tea imports, accounting for nearly 70% of total volumes shipped. Sri Lanka comes out on top, supplying 29.91% of tea imports, followed by India with 23.52% with Kenya rounding off the big three by shipping 15.57% of total tea imports to Russia in 2015.

Black tea is the most popular variety on the market, as 86% of Russian consumers take their tea this way. Green teas hold a 9% market share while herbal varieties are not very popular. Just 1%

of Russians regularly consume herbal teas.

11CHIN-RU (2015, June 19). Re: Russia tea market survey. [Online company survey]. Retrieved from: http://chin-ru.com/rynok-chaja-v-rossii/

While loose tea seems to rule the market, packaged tea and tea bags are seeing their popularity rise.

As such, bulk imports of tea are set to rise as domestic brands seek to match demand.

Some chain shops opening tea and coffee shops that sell packaged tea. But the quality of tea sold in those is very low. Those chain shops mainly constitute the 10% share of Russian green tea market.

But the demand for exotic Chinese tea obviously exists in Russia. The Russian has got a great interest for the exotic, products from Asia, to be more specific from China.

Russians have always had international tastes – you cannot move in Moscow for sushi restaurants – but now suppliers of more exotic products are seeing Russia as an invaluable market. For example, the first cargo of buffalo meat from India hit the shelves in Russia in March 2015, and South African farmers signed deals at the WorldFood Moscow exhibition directly after the import bans to export ostrich meat to two Russian clients.

Judging from the data gathered through Yandex Wordstat (the analogy for Google Adwords) the popularity of green tea in Russia is enormous and there is great potential for the on-line trade in this area.

Yandex Wordstat shows search query statistics for searches on Yandex that include the words or phrases one entered and other searches made by Internet users. It shows the interest to a given product in the Internet. The acceptable number for Russian regions and Moscow is above 3000-5000 queries. For “green tea” query the result in Yandex Wordstat is 166 286, “Green tea buy” - 11 385,

“Milk green tea” - 10 947, “Chinese green tea” - 9 597, “Oolong tea” – 22 511 etc. So there is a solid interest in the product in the Russian market.

Table 3.2 Yandex Wordstat data on “Green tea” key words in numbers from Yandex Wordstat Internet, on-line shops that’s how Russian market tries to meet the existing demand in Russia

There is a great number of blogs and on-line shops selling authentic Chinese green tea. Google shows up to 5 million search results for “Chinese Tea Shop”.

Russian Internet differs a lot from the civilised “western” Internet. One can find lots of one-day online tea shops or tea shops that sell low quality tea products from China. There are also many websites that are organised chaotically and look old and ill-organised. Many of them don’t actually work. So there is a great potential for an online shop platform that provides accurate, cultural and historical information on tea product.

There is, though, a popular online shop website in Russian selling tea from Mainland China. In this work I’ll devote a chapter to analysing the website business model.

3.6 Summary

The domestic e-commerce market in Russia increased from 560 billion roubles in 2014 to 650 roubles in 2015. It now accounts to 2 percent of the total retail industry in Russia, so there is still great growth potential. And while the domestic market is slowing down, cross-border purchases

About 160 million small packages and parcels were sent to online consumers in Russia in 2015, which is an increase of 10 percent compared to 2014. The domestic online retail market increased by 16 percent to reach 650 billion roubles or 7.32 billion euros. So everything indicates that e-commerce has been growing rapidly in Russia.

The share of food and drink e-commerce is not that big at the moment and constitutes only 2%, but there is an obvious potential for the growth in this area. There are several indicators for this growth.

First of all, Russia has always traditionally been a tea drinking country and the off-line tea retail figures prove it. Traditionally tea has been an integral part of Russian life since XVII centaury. The figures show that even of economic conditions fail to blunt Russian appetites for this kind of drink.

Secondly, there is a sufficient presence of on-line Chinese tea shops in Russian internet and a great number of blogs devoted to the product. but sadly that can’t fulfil the demand of the market for the low-quality reasons.

Lastly, judging from the data gathered through Yandex Wordstat the popularity of green tea in Russia is enormous and there is great potential for the on-line trade in this area.