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Tea Extracts<br />
Update Tony Barcroft<br />
The tea extracts<br />
business is doing very<br />
well worldwide, with<br />
excellent volume<br />
growth in North<br />
America and Europe.<br />
The cause of this is<br />
quite simple. Ready to<br />
drink (RTD) teas are<br />
seen as a natural and<br />
healthier alternative to carbonated drinks<br />
and so, each year, as demand grows at the<br />
consumer end, it filters back to increased<br />
demand for our products. This is likely to<br />
accelerate even further as the major<br />
beverage companies have started to push<br />
this trend even harder, with a record<br />
number of new products being launched<br />
this year.<br />
Additionally, the range of speciality tea<br />
products is increasing, with green, white<br />
and Rooibos teas being particular<br />
favourites amongst the launches this year.<br />
Another trend that you might have seen is<br />
the steady growth in what we call<br />
“functional” teas – those that make health<br />
claims. Obesity is a major and growing<br />
Beverages<br />
UK Update Neil Willsher<br />
I am delighted to report<br />
that a year of varied<br />
challenges for Finlay<br />
Beverages, has<br />
continued to progress<br />
well.<br />
The company’s main raw<br />
inputs, tea and coffee,<br />
saw prices moving<br />
higher during the year, albeit for entirely<br />
different reasons. Tea purchased under a<br />
traditional auction system saw prices<br />
doubling at the end of 2005, as a result of<br />
the well publicised drought experienced in<br />
Kenya. These increases were passed on in<br />
part to the customer in August, when tea<br />
prices rose throughout the UK retail<br />
industry. These moves assisted in resolving<br />
an unsustainable situation which was<br />
negatively affecting our bottom line. Simply<br />
put, tea was being sold to our customers at<br />
a lower price than the price for which it<br />
was purchased. The situation has improved<br />
although prices remain stubbornly high<br />
with, at the time of writing, all eyes on<br />
whether the Kenyan short rains would<br />
arrive in November. The coffee market rose<br />
to seven year highs in September for<br />
entirely different reasons. Coffee is traded<br />
as a commodity on the futures markets. As<br />
such its price is subject to speculation<br />
which may or may not be based on accurate<br />
information. In 2006, fund speculation,<br />
issue in the Western world and tea contains<br />
a group of chemicals called Catechins that<br />
accelerate fat burning. Thus it is no<br />
surprise that we are seeing RTD tea<br />
products with high Catechin content<br />
coming onto the market, claiming weight<br />
reducing properties. We expect this trend<br />
to continue and gather momentum.<br />
We are working hard to develop our<br />
technology to be able to give our<br />
customers products which are rich in<br />
these “functional” chemicals.<br />
Historically, <strong>Finlays</strong> has focused on Western<br />
markets, with a strong and growing<br />
business in North America and Europe.<br />
However, it is imperative that we start to<br />
move our sights more towards markets in<br />
Asia. The reason is quite simple.<br />
By 2010, China and Japan will together<br />
consume eight times the volume of RTD<br />
tea as North America and ten times the<br />
volume of Europe. In the next issue of<br />
<strong>Finlays</strong> Magazine, I will be explaining<br />
more about what we are doing in Asia<br />
to accelerate our progress.<br />
As this is my first review of the Tea<br />
Extracts business since becoming Managing<br />
based upon dubious volume estimates from<br />
Vietnam and Brazil, in combination with<br />
huge rises in oil and copper positions,<br />
drove prices higher.<br />
The UK market for private label packing in<br />
which we operate, consolidated in late 2005<br />
with Apeejay becoming the new owners of<br />
Typhoo tea and subsequently joining forces<br />
with Gold Crown. These changes will result<br />
in further challenges due to the alteration<br />
in the competitive dynamic within the<br />
industry, especially when the continued<br />
battle of the brands is taken into account.<br />
It is pleasing to report that Sainsbury’s, our<br />
largest customer, continue to reap the just<br />
rewards resulting from the successful<br />
implementation of their turnaround plans.<br />
The new Asda business, which commenced<br />
in April, progressed well following its<br />
seamless integration into our normal<br />
operations. The growth achieved in 2006<br />
has established Finlay Beverages as the<br />
largest packer of private label tea in the UK<br />
retail market. We continue to work with our<br />
employees and customers in striving to<br />
remain the partner of choice within the<br />
industry.<br />
This growth in our business, combined with<br />
a fundamental belief in the need for<br />
continual change and improvement in order<br />
to sustain our operations, resulted in a<br />
decision being taken earlier this year to re-<br />
Director in April 2006, I should like to take<br />
the opportunity to introduce myself and<br />
explain something of my background.<br />
After studying Chemistry at the University<br />
of Sheffield I spent the early years of my<br />
career as a scientist with Glaxo Smith-Kline<br />
(pharmaceuticals) and Courtaulds (paints). I<br />
then moved over to marketing, spending<br />
nine years with Procter & Gamble, running<br />
businesses ranging from detergents to<br />
beauty care products, in the UK and<br />
Europe. This was followed by 14 years in<br />
the retail bakery business, as Managing<br />
Director of a large UK business, turning it<br />
from a loss-maker into a solid, profitable<br />
concern. After a spell in consulting for<br />
Wolseley (an International building<br />
products company) I joined Finlay Tea<br />
Extracts as Managing Director.<br />
In conclusion, I want to say that I am very<br />
proud to be involved with <strong>Finlays</strong>. I think<br />
we have a great business, with excellent<br />
hard working people and good future<br />
prospects. Our best years are yet to come.<br />
organise the tea factory. The project, due<br />
for completion in 2007, will increase<br />
capacities and efficiencies, whilst<br />
introducing innovative flexibility to both<br />
our processes and product.<br />
Underpinning all the progress achieved to<br />
date are the changes brought about within<br />
our culture. Key focus has been placed<br />
upon teamwork, support and respect for<br />
one another, knowledge sharing,<br />
communication and expertise. The positive<br />
consequences of our actions to date have<br />
seen improved employee motivation and<br />
morale.<br />
There have been some interesting<br />
developments during the course of the year<br />
within the areas of Corporate Social<br />
Responsibility and Ethical Trading, where<br />
greater consumer awareness has been<br />
reflected in initiatives by our retail<br />
partners. This has always been at the heart<br />
of the Group’s businesses, with<br />
commitment to employees, communities<br />
and the environment paramount; they are<br />
areas we feel well placed to address.<br />
The changing environment in which we<br />
operate with both its competitive and<br />
ethical dimensions will remain a key<br />
challenge, creating in turn both new and<br />
diverse opportunities for both Finlay<br />
Beverages and the group as a whole.<br />
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