Rooibos Shortage Raises Prices

Rooibos is enjoying a surge in popularity globally, but as stocks dwindle following a long drought, supplies have tightened, leading to record prices.

In its native South Africa, the caffeine-free herbal is found in restaurants, convenience and grocery outlets and vending machines. Half of the 14,000 metric tons of rooibos produced each year is consumed domestically, with 6,000 to 7,000 metric tons normally available for export. Domestic suppliers have first call, but demand is building globally and relationships with export partners are deeply entrenched. Germany is by far the biggest importer of rooibos tea, accounting for 31% of exports, with the Netherlands at 16% and Japan at 15%. While direct shipments to the U.S. are not likely to increase in 2016, shortages are unlikely because the U.S. and Canada receive much of their rooibos via Germany. Shipments to the U.S. were estimated at 585 MT in 2015, up by 40 MT compared to 2014. Volume through June 2016 totaled 272 MT. Last year, Canada received 6 MT, according to South Africa’s PPECB (Perishable Products Export Control Board), but it is well ahead of that total with 16 MT in rooibos shipments year to date (Jan–June). Much of rooibos landed in Canada finds its way to the U.S. Drawing down stockpiles will insure short-term availability, but price is a different matter. “The supply side of the rooibos industry is currently under severe pressure,” writes Arend Redelinghuys, Marketing Director at Rooibos Ltd., the largest South African exporter of rooibos and honeybush herbals. “Last year’s drought has resulted in many plantations (the 2012 and 2013 plantings) dying. The industry is currently experiencing a short supply of between 25–30%. Due to limited availability, producer prices have increased to new record levels,” he writes. Prices in the rooibos industry are prone to great variations depending on harvest, with highs exceeding $16 per kilo in 2004 and lows less than $4.50 per kilo five years later. Higher prices should encourage and motivate farmers to plant more rooibos, writes Redelinghuys. “There is however a two-year lead time before new plantings can come into production , which will mean that this new plantings will be harvested for the first time in 2018. All indications are that the supply side of the rooibos industry will continue to be under severe pressure in 2017,” he writes.

“The start to the year was much slower than expected, due to limited availability of raw material. I would expect to see that volumes will pick up during the second half of the year. I do however not expect to see any real growth in volume for this year, as we simply do not have the raw material available to help new potential customers,” he said. Yield is about 300 kilos per hectare (330 pounds per acre) and the loss from drying is about 3:1. The drought in 2015 greatly reduced yields and in some instances wiped out entire farms. Rooibos Innovation Redelinghuys, who attended World Tea Expo in June this year on behalf of DMH Ingredients, Rooibos Ltd’s official representative in the U.S., said: “I was impressed by the number of visitors and the wide range of rooibos products available in the U.S.A." Rooibos fits in perfectly in today’s healthy lifestyle, according to Redelinghuys. “It is also perfect to be used either on its own or as an ingredient in specialty teas, as a single herb, in herbal blends, medicinal teas, fruit or flower teas and also functional teas. In addition to this, there is also a huge interest from beverage companies to introduce more Rooibos RTD iced teas,” he writes.

Khoisan Tea (Pty) Ltd. grows its own 100% organic rooibos in the Cederberg area in the Western Cape of South Africa. Khoisan General Manager Tobias Gress said price increases will be less severe in North America because most of the rooibos sold there is blended, often with more expensive inclusions. "Recent price increases for raw tea might not have such a drastic effect on retailer prices as they do in other markets," he said. Innovation is important in the market, he explained. "Compared to other markets such as Germany rooibos in its various forms is offered as a premium, health or gourmet product rather than as a cheap staple drink," he said. Khoisan recently introduced an organic rooibos matcha. “After harvesting the organic rooibos, we send the leaves to Japan to get stone-ground into the finest powder, on specially designed granite stone mills like traditional matcha, using the whole leaf. Grinding the leaves is a slow process. The mill stones are kept cool so that the aroma of the leaves is not altered,” explained Gress. “This exclusive rooibos matcha can be used perfectly for cakes, ice cream, chocolates and other confectionery,” he said. Business Day reports that market research firm Insight Survey finds South Africa’s domestic tea-lovers are shifting toward a preference for rooibos rather than black tea. In its recently released South African Tea Industry Landscape Report 2016, the proportion of black tea consumers fell between 2011 and 2015, from 58.6% to 51.5%. However, the percentage of South African rooibos consumers rose from 29.4% in 2011 to 30.9% in 2015.

The Insight Survey used AMPS (all media and products study) to obtain an in-depth understanding of SA’s tea market, where more than 25,000 adults (15 years and older) were interviewed in both rural and urban areas from January to June 2015, and July to December 2015. Ernest du Toit, spokesperson for the Rooibos Council, told Business Day that although black tea still has a higher overall consumption than rooibos, it is experiencing a steady decline, whereas rooibos tea is showing growth both locally and even more so globally. Du Toit said the recently signed EU-Southern African Development Community (SADC) economic partnership agreement,not only extends the geographical indicator status or trademark protection of rooibos, but will also widen economic trade between Europe and SA, and the five other SADC states. Sources: Rooibos Ltd., Khoisan Tea, Business Day