Dubai is Now World’s Top Tea Re-Exporter

DUBAI, UAE

Dubai could not be further from the world’s tea gardens or more central to tea’s heartbeat.

In a global circulatory chart the arterial trade routes lead to this industrial city on the Persian Gulf where shiploads of tea from every region are enriched with value and returned to consuming nations.

The United Arab Emirates is now the world’s largest re-exporter of tea, according to The Ministry of Foreign Trade. During the past five years the country has garnered a 60 percent share of the $99 million global re-export market earning approximately $48 million in 2011.

Tea arrives unfinished and is returned packaged, polished and profitable.

Dubai seems at first an unlikely site. The nearest tea is grown thousands of kilometers away. But modern tea is a complex blend of Indian, Sri Lankan, Nepali, Kenyan, Tanzanian, Ugandan and Indonesian black tea amid a growing Middle East market for Chinese, Vietnamese, Indonesian and Japanese green tea.
Dr. Mattar Ahmad, head of the Ministry’s Analysis and Trade Information Department, found that the UAE is among the world’s top five tea importers, occupying second place from 2007 — 2011, with the exception of 2009, when it ranked third after the UK.

The Ministry’s study, which was conducted by economic advisor Dr. Abdul Hamid Radwan, was released at the recent International Coffee & Tea Festival.

The study shows that Russia remains the world’s top tea importer at $625 million, up 11 percent compared to 2010. Global tea imports were $5.704 billion in 2011, up 37 percent from 2010. As supplies tightened global tea exports in 2011 were around $6.35 billion, up by 3 percent from 2010 on a 5 percent decrease in quantity.

UAE tea imports rose almost 50 percent during the past five years, from $324 million in 2007, to $485 million in 2011. The country’s share of total global tea imports is now 9.4 percent.

Sri Lanka was the UAE’s top supplier providing 20 percent in 2010 but India shipped a sizeable 17,610 metric tons in 2011 and Kenya has shipped 13,912 metric tons through July 2012, according to statistics compiled by the International Tea Committee.

Sri Lanka is the world’s top tea exporter with 22 percent share with Kenya at number two with 18 percent.
Sri Lanka and India combined to make up 26 percent of the UAE’s total imports. The share is down from 30 percent in 2010 with Asian and African nations making up the difference.

China is becoming an important trading partner thanks to Unilever deals with black tea processors in Yunnan. Indonesia shipped 1,783 metric tons to the UAE in 2011.

Nearly 85 percent of UAE re-exports are sent to nearby destinations, with 81 percent going to Iran and 4 percent to Oman in 2011.

The country is aggressively seeking new markets to expand its standing in the tea trade.

Managing Director Richard Smyth
DTTC Managing Director Richard Smyth, far right.

 Dubai Multi-Commodities Centre

As the deep water ports Mina Rashid and Mina Jebel Ali became the crossroads of the re-export industry, the Dubai Multi Commodities Centre (DMCC) emerged as one of the world’s most important hubs for processing and finishing tea.

The DMCC’s Dubai Tea Trading Centre (DTTC) is a blending and packaging facility that today sends millions of finished 100 ct. cartons, tins and packets well beyond the Middle East.

The 260,000 sq. ft. trading center, built in 2005 and located in the Jebel Ali Free Zone, houses many tea companies and offers global tea producers and importers a wide range of services.

DTTC, which handled 10.6 million kilos of tea in 2010, is currently expanding its capability which includes a large tea storage facility, blending and modern packaging equipment.

The center’s modern “tasting unit” and its research and development laboratory evaluate tea arriving from 13 producing countries including six African nations Middle Eastern producers such as Iran and Asian countries including India, Sri Lanka, Nepal, China and Indonesia.

Producers conveniently store teas these countries in a warehouse with 5,000 metric ton capacity from for blending in a two metric ton drum before it is made into tea bags or placed in packets holding 50 grams to 1 kg of tea on vertical form, fill and seal machines. Teas are then packaged and labeled adding value with DTTC becoming an important intermediary between production and consumption.

Lipton Jebel AliJebel Ali Free Zone

Demand for tea in the Middle East is growing in double digits despite a year of political unrest and financial stress.

Consumption in the UAE was 5,700 metric tons in 2011 with a per capita tally of 3.5 kilos per person, comparable to the UK and Ireland and well above North American consumers.

The factory began operations in 1998 blending and packaging 5,000 tons per year for regional consumption and has since expanded to 30,000 tons. It is now the second largest tea blending facility in the world with plans to continue expansion. Capacity is currently 1.2 million teabags per hour.

Ships arriving from a dozen countries feed over 25,000 tons of tea per year into Unilever’s Lipton Tea Factory, located in the United Arab Emirate’s Jebel Ali Free Zone.  The tea is then blended and poured into 1.2 million teabags per hour, to be filled, wrapped and boxed.

And that’s just the bagged Black and Green tea — LJA also produces Loose leaf teas in carton packs as also flavored Specialty teas in this factory.

The Jebel Ali Tea factory is Unilever’s second largest in the world, with plans to overtake its largest capacity Tea factory, in England, in future.  Originally, it produced 5,000 tons annually for Middle Eastern markets.  Today, it supplies nearly six billion bags of tea to 47 countries – ranging from the Middle East, West Africa, Kazakhstan, and also including such faraway destinations such as Canada and Australia.   The United States has its own dedicated Tea factory in Suffolk, Virginia – which largely services North America.

“Tea arrives in 40-foot containers” explains Abdelaziz Salah, Plant Manager. Four hundred bulk sacks (of approximately 60 kgs each) of tea are packed into the 40-foot containers.  The plant processes tens of tons of kilos per day yielding, several million 100 count boxes of teabags, weighing 200 grams (7 oz.) each or 2 grams per teabag.

“While the bags are identical, the tea within is a complex blend customized for each region”, says Beverages Category Supply Chain Director, Kurush Bharucha.

“Teas from many tea growing countries in Africa, South Asia and South East Asia all find their way to Dubai,” he said. Each origin makes a unique contribution to the finished blend. “Teas are sought for specific characteristics, all of which are blended together and have an input contribution to the final product recipe’s flavor, astringency, body and color,” he explains.

“Tea is an agricultural raw material, whose quality endlessly varies with climate, soil, rainfall, altitude, temperature and season.   Collectively, all of these impact quality. Tea leaves picked even a week (indeed a day !) later, would result in a different end quality,” said Kurush, an expert Taster and Tea domain specialist.  

“While Tea quality is constantly variable, what our consumers expect from our brand is absolute consistency.”    Therein lies the challenge, which is best tackled through a process of Blending.     
“By blending, we manage that volatility,” adds Salah.   This can be challenging, as certain teas become unduly expensive or quantities are reduced due to drought and political upheaval. To achieve a consistent flavor, blends may contain from 20 to 30 components, he goes on.

Taste is the primary consideration but here, too, preferences vary widely.    Tea drinkers in the Middle East prefer a fuller and stronger brew, as compared to those in Western Europe who prefer a lighter, more delicately aromatic taste profile.
      
“While the end blend is always consistent, the input components are constantly varying and need to be expertly selected for blending suitability,” says Kurush. This is where the art, craft and magic of tea buying, blending and tasting comes together. There is no single recipe for Lipton Yellow Label. Recipes are tweaked for different regions, in line with consumer preferences, and pack formats, in such regions, he explains.
   
Within North America, for instance, while Canadians prefer more traditional forms of black teas, and drink their tea “hot” and “with milk”, American consumers typically drink their tea “without milk” and mostly drink it “iced”.  Across both markets, green teas are increasingly making further inroads. 
 
Unilever’s Lipton Tea brand is sold in more than 100 countries.

Unilever, an Anglo-Dutch conglomerate with a $62 billion turnover, has a large stake in beverages. Lipton is a major constituent of the refreshments division which grossed $11.5 billion in 2011, just under a fifth of the company’s total sales.

On a regional basis, tea accounts for about a quarter of Unilever’s $1.5 billion in the Middle East and North Africa, according to Sanjiv Mehta, Chairman of Unilever’s MENA headquarters since 2008.

“Tea is a highly penetrated category — nearly everybody drinks it,” Mehta explained to reporters in a September 2012 article published by Arabian Business. Unilever’s Lipton currently has about 70 percent of the tea market in the region, while products under the Lipton umbrella make up “one fourth” of Unilever’s portfolio in MENA.

Given the high penetration Unilever holds in the tea market, Mehta says the firm is intent on increasing profitability of existing products.

“If you were to peel the onion, it’s only 40 percent of our tea that is going in tea bags and 60 percent goes in packet [loose leaf] tea,” he continues. “We get a much higher value out of tea bags — it’s nearly a factor of three for every cup consumed.”

“If you look at this region, we have nearly 350 million people [and the population] is growing at about two percent to 2.5 percent per annum. So that’s 7 million people coming into our fold every year,” Mehta says. “It’s an economy that, depending on the oil price, can have a GDP up to $1.72 trillion. So, by any length, this is a very attractive market for us.”

Expansion Plans

Global transport is a key advantage. The Mombasa Tea Auction is now the second largest black tea destination in the world behind Colombo. Mombasa attracts a lot more tea than Dubai but Kenya’s port system is notorious for costly delays.

The East Africa Tea Trade Association (EATTA) estimates that “if all the tea produced is sold as value-added products, it would earn the country more than three times what it is earning today,” accordingto EATTA’s acting managing director Geoffrey Rimbere.

Kenya’s tea industry earned $1.13 billion in 2010 but packers there are not allowed to buy the produce from the auction. They buy the commodity from tea factories where they pay a value added tax of 16 percent. Investors have been slow to invest in value addition due to high costs, brought about in part by the hefty taxes levied on the activity, according to a report in the publication TradeMark Southern Africa. As a result much of Kenya’s black tea is processed in Egypt or Dubai.

Modern transport and progressive trade practices are an edge UAE intends to hone.

Port Jebel Ali, located 35 kilometers southwest of Dubai, has 67 berths and more than a million square meters of container yard including 960,000 sq. meters of open storage. It was constructed in the 1970s. The surrounding industrial complex of 134 square miles houses both the DTTC and Lipton facilities along with several other tea processing factories.

Jebel Ali is the world’s largest man-made harbor and the biggest port in the Middle East. It is currently undergoing an expansion that will take a decade to complete. The first of 15 stages was finished in 2007 when quay length was increased to 1,200 meters and storage and handling capacity was increased to 2.2 million TEU (20-foot equivalent units, the size of a standard container).

The entire project will conclude with 2.4 kilometers of new berths and a container yard capable of handling 55 million TEUs. The work is expected to be completed by 2030. At that time Jebel Ali will be the world’s largest container port, exceeding Shanghai and Singapore.

Source: TradeMark South Africa

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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.

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