Supply chain challenges built the market for tea in the West. The scarcity of early teas making their way back from China to Europe is part of what made them desirable. Later, the reality of long ocean voyages shaped European demand for black tea, which held up better over the months it was at sea than the green teas Europe first fell in love with. In this way, early tea merchants were not brand-builders; they were supply chain people – piecing together difficult and unreliable steps on the long journey from farm to cup.
Today, the immense complexities of getting tea from the farm to the cup are taken for granted – at least until they start to break down. In the early days of the COVID-19 worldwide pandemic, shipping came to a full halt for many importers. Couriers in China were affected by lockdowns and ships were turned away at the docks. Slowly but surely, volume came back, and today docks are working harder than ever before.
Then what’s all this we hear about supply chain breakdowns, shortages etc.? Iconic pictures of dozens of cargo ships waiting to unload in Los Angeles fill our news feeds. Despite appearances, the truth is, port velocity is up. It’s never been higher. Imports are being processed faster than ever before and at higher volume than ever before. You can’t blame the shippers here.
But you know what’s up even more? Purchases.
Demand has skyrocketed over the last year. For the Port of Oakland alone, imports are up more than 14 percent from 2020. Now, 14 percent might not sound crazy, but keep in mind that most companies aren’t keeping more than 14 percent of their projected annual sales in inventory at any given time. A spike like that above expectations wipes out the backstock of goods in the country.
Meanwhile, local carriers like USPS, Fedex and UPS can’t hire fast enough to fill the demand. Even The White House has had to step in to work with the docks on expanding truck pickup hours to 24 hours a day. With every importer competing for the same trucks, the same warehouse space, and the same couriers, prices are up across the board.
Expect to pay double this year for import, with twice the wait. Expect domestic shipping costs to be up, too.
The thing is, these are all surmountable challenges, but the trade off is planning way further ahead and being willing to spend way more money to bring in tea. When you are competing for cargo space with TVs and computers being rushed in for Black Friday, you’re going to see a willingness to palate much higher prices than normal from every importer.
Other Factors to Consider
The Great Resignation plays a role in all of this, too. People around the country are rightly re-evaluating their desire to work for less than a living wage in environments where they are not valued – from truck drivers and fulfillment staff to white collar positions across every industry. Mid-size and smaller businesses find themselves navigating staffing challenges just as logistics continues to pinch their supply chain, and this balancing act is pulling many away from the core of their business.
When cost and complexity goes up, it is tempting to outsource logistics, buying from catalogs of tea available from importers within U.S. stock and contracting fulfillment to 3rd party warehouses. This combination of factors has the alarming potential to reduce the tea industry to what essentially amounts to a lot of empty “brand presences” – resellers backed by the same 3rd party supply chains.
While inflation caused by this shipping crunch is affecting every industry, the e-commerce tea industry has a lot more to lose than margin. The reflex to rely on distributors at both the import level and the shipping level means the potential to lose access to fine teas entirely, lose relationships with farmers, lose fresh seasonal offerings, and lose customer relationships.
The Death of Seasonality?
Pricing pressures and shipping complexity make it tempting to rely on distributors to build the tea supply chain, but the extra layers of warehousing and shipping can make it nearly impossible to deliver tea in the season it was harvested. When traditional ocean shipping is backed up for months, only going direct to the source and leaning on expensive air shipping right now can preserve seasonality. Faced with a choice of what to cut in the face of rising costs, the tea industry should not cut service and quality from the supply chain. Instead, we can cut out the extra layers of distribution, even if that means taking more complexity onto the shoulders of the tea merchant.
Tea consumers will need to take extra care in 2022 and beyond when it comes to issues of freshness and shelf life. Expect consumers to be on the lookout for teas that are transparent about their picking dates as they work to make sure they are not buying old tea.
For tea businesses to face this challenge, importers will need to make arrangements well before the harvests are picked. Even better – make sure that you have a robust presence in the country where your tea is picked so that it can be packaged at or near the farm and shipped out ASAP. Expect two-month ship times, and be ready to pay triple for trucking and container pricing.
For direct-to-consumer e commerce – give up margin and air ship for freshness. By taking on the role of distributor and final seller, you have responsibility for product freshness and viability, and you can’t pass off old tea on customers without risking damage to perceptions of the whole industry.
The Future of Customer Relationships
Higher costs to get tea across the ocean on one side and higher costs to ship parcels to customers on the other means “scale or die” for small business. Without Negotiated Service Agreements with carriers, retail pricing spikes could make free shipping harder to offer than ever. Faced with raising prices or seeking other options, many turn to 3rd party fulfillment, Amazon fulfilment etc.
The risk here is two-fold: loss of control and loss of service. Successful direct-to-consumer ecommerce is about relationships with real people. Customers are not a metric – they are people who love tea as much as you or I, people who are trusting you with their business. Every grower I’ve met, given the choice, prefers to brew their tea for prospective buyers and get to know the buyer's taste. Representing this aspect of tea as hospitality culture is important to preserve for any final retailers in the tea industry – whether it’s picking out samples for each customer or just getting to know an individual’s taste and history.
Third party fulfillment throws this all out the window. An order is just a pick list with no care beyond contractual obligation. To foster growth of interest in tea, tea retailers need to be an educator. Tea businesses that do not actually produce the tea people drink need to take on a real role in the supply chain to preserve their value. Part of this is managing customer relationships on behalf of the people (tea farmers and craftspeople) producing the tea.
The special tea industry needs to rally – remembering that our industry exists to solve logistics problems. If something’s got to give, it should not be product integrity or customer relationships, and it certainly should not be the quality of the tea. Instead, we can find opportunities for success in cutting out layers of distribution and in taking a look at parts of the business budget that do not directly serve the customer or the producer (like Adwords and Facebook).
Adapting to the New Normal
Will shipping ever return to normal? Yes – timelines will get faster eventually, but pricing is unlikely to come back down. At this point, pricing has stayed high long enough that most businesses have already adjusted their models to account for it. Shippers are not going to add capacity and invest in cost-cutting unless downward pressure exists, and until US demand drops, I don’t see that downward pressure coming.
Given this new reality, it is up to each business to adapt. We can embrace the original role of the tea merchant as supply chain expert, cut out the extra layers and buckle down, or we can leap from logistics into a purely brand-presence role and leave the supply chain to contracted experts. For the sake of passionate tea farmers and craftspeople looking for support, and for tea lovers looking for both fresh teas and dedicated educators, let’s choose the former.
David Duckler is co-owner of Verdant Tea, a collaboration with tea farmer He Qingqing and Shandong-native Ren Weiwei. The partnership was founded over a decade ago to advocate for small family tea farming in China, representing over a dozen farmer families and teaware artists. Verdant Tea believes in transparent sourcing and supporting farmers who champion biodiversity and sustainability through innovative farming, dedicated craft and community leadership. Duckler – with a background in research and translation – has over a decade of experience in tea import and logistics, RTD beverage manufacturing, and consulting for tea and beverage startups. He works to represent small family tea producers across China through Verdant Tea. To learn more about Verdant Tea, visit VerdantTea.com.
Plan to Attend or Participate in the
World Tea Conference + Expo, March 21-23, 2022
To learn about other key trends, issues and hot topics within the global tea community, plan to attend the World Tea Conference + Expo, March 21-23, 2022, celebrating its 20th anniversary. World Tea Conference + Expo will be co-located with Bar & Restaurant Expo, creating unique opportunities and synergy. Visit WorldTeaExpo.com.
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