Global Tea Industry Faces Diverse Challenges

DUBAI, UAE

Middle Eastern and Asian tea executives were resolute in the face of diverse challenges identified last week at the biennial Global Dubai Tea Forum.

The group of 390 executives welcomed back into the fold their colleagues from Iran, the world’s fourth largest tea consuming nation per capita and a significant exporter in the years prior to global sanctions imposed by the United Nations. The sanctions were lifted in late 2015.

“What sanctions did to us was to reduce the ease of transfer and increase prices. We were not able to obtain suitable machinery. Now there will be an easing of trade all around the world and we are going to have modern technology,” said Mitra Mobayen, who manages Iran-based Tala Tea Co.

Another noteworthy development was the announcement that the Dubai Multi Commodities Centre (DMCC) will launch a premium tea brand called Shay Dubai.

WTN160411_GDTF16_Ahmed Bin Sulayemedit

Ahmed Bin Sulayem, executive chairman of the DMCC

The Global Dubai Tea Forum was hosted by the DMCC’s Tea Centre, a trading arm of the government of the United Arab Emirates (UAE) an alliance of seven sheikdoms with a population of 9.5 million. This was the 6th edition of Talking Tea.

Ahmed Bin Sulayem, executive chairman of the DMCC, told attendees the brand is not positioned to compete with Lipton: “Shay Dubai is DMCC’s very own signature high-end tea brand. We’re excited to share a first look at this new product here,” he said.

Flavors include Khaliji Blend, Dubai Spirit, and Arabic Breakfast but were not available for sampling.

The DMCC Tea Centre is now the world’s largest re-exporter of tea, processing 41 million kilos in 2015 (90 million pounds) which is more than triple the 13 million kilos processed in 2013, according to Tea Centre Director Sanjeev Dutta.

Globally demand continues to outpace supply with auction prices at lows last seen in 2008. Civil wars and social unrest continue to weigh heavily on the business of tea. Economic doldrums globally and the depressed Russian and CIS tea markets received a lot of attention.

WTN160411_GDTF16_ITC Tea PricesThe market for tea exports is weak, reported Manuja Peiris, chief executive of the International Tea Committee. The average price for tea was $2.40 per kilo last year, down from a high of $2.65 in 2012 and slightly below the recent recession-year averages of $2.42 per kilo. Demand continues to rise and while tea growers produced 5.2 million metric tons in 2015 — domestic consumption in the producing countries left only 1.75 million metric tons or 34% of the total harvest for export. The availability for export is down from 2006 when 43% of the annual crop was exported. India alone consumes 911 million kilos annually — 19% of the world’s tea.

“India operates in a cocoon with international tea trends only marginally affecting price behavior,” said Sangeeta Kichlu, president of marketing with Assam Company India, Kolkata.

India is experiencing setbacks due to changing weather patterns that reduce yield at a time when demand is rapidly growing as a result “India is expected to become a net importer of tea.” Leading international packeteers “are eying India for their future growth,” she said.

WTN160411_GDTF16_ITC Tea ExportsKenya in 2015 accounted for 25% of global exports, China’s share of exports rose to 18%, Sri Lanka fell to 17% and India exported 12% of the world’s tea. Sri Lanka continues to lead the exporting countries with a three-year average price of $4.66 per kilo, the price of Chinese tea averages $3.86 per kilo; Indian exports averaged $3.26 per kilo and Kenya’s three-year average price for the tea it exports was $2.67 per kilo,  according to ITC which is celebrating its 80th anniversary. Prices are FOB.

Middle Eastern imports are way down at 218,470 metric tons compared to 226,930 in 2014. Five years ago Middle Eastern countries imported 250,000 metric tons of tea annually. The Russian Federation imported 3,000 fewer metric tons in 2015 and imports to the CIS countries fell by 4,000 metric tons with Ukraine and Kazakhstan showing the greatest declines in the past year.

WTN160411_GDTF16_ITC Russian-CIS ImportsTwo developments: the re-entry into the export market by Iran, a major producer of tea and tea growth in the United States market were upbeat. The U.S. last year was the only major tea consuming country in the world to report increases in consumption and tea imports. Ready-to-drink tea, which holds the largest value share in the U.S. tea market was up 6.1% last year, according to the Beverage Marketing Corp.

Yu Lu with the China Chamber of Commerce for Import/Export of Foodstuffs provided key insights into the growth of the country’s tea industry. Production was 2.28 million metric tons in 2015 growing at a compound annual rate of 9.2%. Exports are growing as well at 1.4% to 325,000 metric tons in 2015. “Export value is growing steadily to $1.38 billion in 2015,” she said. China is no longer seeking to compete with countries like Vietnam on the low end of the market. The three-year price of exported tea averages $1.64 per kilo in Vietnam. In China the three-year average has increased to $3.86 per kilo. China imported 23,000 metric tons of tea in 2015 indicating a brisk upsurge of 13.2% but paying only $110 million U.S. China’s tea imports are up 15.7% CAGR.

Domestic consumption was 1.72 million metric tons. Only 33% of the population drinks tea daily, according to Yu Lu but the base grew from an estimated 443 million in 2014 to 471 million, up 6.3%. China has a population of 1.367 billion people. Tea for home use is still relatively expensive for much of the country. Bulk tea is sold at prices ranging from 400 to 1000 RMB per kilo ($62 to $155 per kilo).

Iran’s Mitra Mobayen, told attendees annual consumption of 1.4 kilos per person in the country of 78 million was sufficient to sustain the domestic industry. It will take some time to modernize and secure traditional export partners who long ago turned to other suppliers. During the past 10 years the “harvest and cultivation unfortunately has been decreased due to climate and economic efficiency” but he predicted a return to global prominence.

In my presentation I reported that nearly half of America’s tea drinkers ordered iced tea at a restaurant/cafe in the past 30 days and 21% ordered hot tea. RTD tea is consumed by 36% of all adults, much higher among 18-34s. The US is now the world’s third largest tea importer, closing in on Pakistan. During 2010-14 the aggregate value of imported tea rose 17% to average $3,439 per ton. But the volume of tea imported into the US rose only 2% during the 2010-14 period, according to Packaged Facts. Hot tea is prepared at home by 54% of tea drinkers followed by iced tea at 51%. Single serve capsules account for 13% of dry tea sales. Last year RTD tea generated $5.56 billion in sales.

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Dan Bolton

About Dan Bolton

Dan Bolton edits STiR Tea & Coffee Industry International. He was formerly editor and publisher of World Tea News and former editor and publisher of Tea Magazine and former editor-in-chief of Specialty Coffee Retailer. He is a beverage retail consultant and frequent speaker at industry seminars and conferences. His work has appeared in many beverage publications. He was a newspaper reporter and editor for 20 years prior to his career in magazines. Dan is the founding editor of Natural Food magazine and has led six publishing ventures since 1995. He lives in Winnipeg, Canada.