Last year was a tumultuous ride for many involved in the production of tea around the globe. In fact, as Queen Elizabeth II once said, it was an “annus horribilis” (or horrible year), a phrase that’s fitting for the Camellia sinensis trade in which we are focused.
You may be reading this and thinking, “What’s he going on about?” as many on the sales side of tea have had a bumper time of it (an exceptional year), with the COVID-19 pandemic actually helping consumption of tea, as people stayed home and consumed healthier beverages. And, for the same reason, more people shopped online than ever before, which supported tea sales. Indeed, these two clarion bells sounded out for entrepreneurs and the number of new tea companies that launched online has never been so large.
However, at the other end of the industry (i.e., production), things have been far from pleasant for many. And while the turmoil may not be readily visible yet, the endemic issues for an industry out of step with consumers and coupled with bad politics (is there good politics?) makes for a wicked undercurrent on which our “industry duck” paddles furiously just to stay in one place.
Two Sub-Universes Served by the Same Global Tea Industry
Overall, consumption for tea is still vibrant in tea producing nations with China importing more and more black teas as its younger consumers trend towards milk tea and other less traditional offerings. This adds to an incredible tea-drinking habit, which should expand as COVID-19 restrictions are lifted in the region.
In other traditional markets – including Pakistan, the Middle East and Russia – growth in consumption continues, but the same cannot be said for many developed markets, including Europe and North America, where nearly every new “tea” range is rarely led by Camellia sinensis products but more “healthful” (allegedly) botanicals, which changes the perception of what tea is for the populations of relevance (i.e. those with spending power and a tea drinking habit). However, this is not all bad, while market surveys may suggest a decline in black tea drinking in general, obviously, “tea” is finding new targets as imports are on the rise.
The gap between reported consumption data vs. imports suggests that changes to the point of purchase may not be as visible as traditional retail. Nevertheless, one thing remains clear: The expectations of what Camellia sinensis teas should deliver is changing as traditional brands lose ground to better quality regional and international offerings. Some would define these two sub-universes as “commoditized” and “specialty” tea markets, yet they are served by one and the same industry – and one that is slow to change, which is reason for concern.
A Look at Some of the Major Tea Producing & Exporting Origin Countries
Having painted a general picture of the global tea landscape, let’s take a whirl around major producing and exporting countries to see what bright spots and dangerous undercurrents exist, as they’ll certainly affect 2023 and beyond.
But, let’s first recognize two tea origin countries that should be in the hearts and minds of the global tea industry – Mozambique and Malawi. After cyclone Freddy tore through both countries, the death toll has surpassed 500 and will no doubt grow. This event, while not uncommon, was unique in its severity and is a cautionary tale of climate changes that can drastically impact on our industry.
These two origins – Mozambique and Malawi – are ones to watch for orthodox and organic tea movements abound. If their new origins to some of you, then let the centenary of Satemwa Tea & Coffee Estate in Malawi educate us to the prevailing fortunes of tea in Southern Africa [Note: Wouter Verelst will be at the 2023 World Tea Conference + Expo, representing Satemwa at the event’s Ri Ra Tea Experience].
The Tea Industry in Türkiye
Türkiye is another nation that has had its fair share of tragedy, and the global tea industry wishes the people and nation a speedy recovery from the awful earthquake last month.
This mega tea consuming nation (more than 3 kgs per person per year) is coming off a slightly lower crop year in 2022, but the country can expect a full recovery in 2023 – climate contingent, of course.
The issues of the past two years, for the country, including loss of migratory labor during the tea harvesting season (due to COVID-19 lockdowns) and the impact of fertilizer costs because of the war in the North, impacted production heavily but should be, largely, in the rear view mirror now.
What’s exciting for this beautiful black sea tea-growing region is the divergence of output from traditional Cay to greens, whites and other specialties, as home grown artisans flourish and new access to markets (thanks e-commerce!) introduce more of us to the potential of Türkiye.
The Tea Industry in Vietnam
Vietnam – a similar sized producer to Türkiye (larger in fact) – is a dark horse in the world of tea exports, as much of its produce finds its way north, across the border into China, escaping export recognition. This raw tea is lower value and undergoes final processing, once imported. Of more significance has been the black tea exports from this country, which have competed aggressively on the world market, especially in the wake of the turmoil felt in Sri Lanka.
Expect a continued and expanded export drive in 2023 from Vietnam.
The Tea Industry in China
China – the behemoth of the tea world, both in production and consumption terms – is expecting a normal cropping year. However, the first three months of the year suggest that the global economic downturn may change the complexion of those sales, from higher priced to lower priced products. Overall, volumes should do well and, as freight rates and COVID-19 restrictions are fully lifted, we can expect smoother port operations and importing/exporting processing.
The Tea Industry in Argentina
In Argentina, the season – which started off very poorly – has recovered but not the trade overall. Stories continue to be reported on – of farmers giving up tea for yerba mate and other crops, while the failure of processing companies has been a painful reality of Argentina’s financial crisis and exacerbated by global energy cost increases, which impact the majority of cost of production in this highly mechanized origin.
Business too has been slow for Argentina, especially after North America’s iced tea consumption slowly recovers after COVID (Argentina is a predominant component in iced tea blends in North America), but stocks are very high, as out of home consumption trickles back to normal, and demand for new shipments remains low.
The Tea Industry in Sri Lanka
Sri Lanka, one of the largest exporters of tea, is emerging – albeit with glacial speed – out of a political and connected debt crisis that saw their ability to buy fertilizers reduced with the obvious effect of reducing their tea and foodstuff (rice) crops.
Sri Lanka’s 2022 tea crop will end just shy of 50 million kgs, down on the year before with two disastrous yet obvious impacts. Prices at auction screamed upwards as availability dropped below that required for traditional markets, primarily in Russia, central Asia and the Middle East. The upshot of this was that traditional Sri Lankan consumption markets were forced to look elsewhere to close the needs gap at prices that were acceptable. India, Vietnam and East Africa were decided beneficiaries of this, as were others.
While the crops will return for Sri Lanka, their traditional markets may never have quite the same dogged attitude towards buying Ceylon tea, as they have tasted the alternatives and found them to be acceptable, opening the door for competition from anywhere capable of orthodox manufacturing.
The Tea Industry in India
India – a benefactor of the Sri Lankan crisis – has its own woes. While Assam may have produced more orthodox, it’s been feeling the effects of climate change for years now. With incidents of pests on the rise, it’s becoming harder and harder to satisfy ever more stringent consuming market MRLs (maximum residue limits) on teas, restricting the marketplaces into which they can sell.
Luckily for India, they have a massive and growing domestic consumption which is, currently, occupying their focus. However, the issue remains in Assam of a two tier system – 1) the organized sector (plantation companies), whose obligations to workers and families runs to almost 70 percent of the cost of production vs. the bought-leaf sector, and 2) factories, who receive smallholder leaf and have few of these social costs, making them all the more competitive but jeopardizing the safety of product and personnel within this corner of the industry.
Added to the plantation sector attrition is that owners are rarely invested only in tea, and shareholder pressure have seen many divest out of plantations or, in some cases, be forced to sell as other parts of their business fail catastrophically.
Currently, the largest Assam plantation company is in such a predicament and – unlike their dogged attitude to being export compliant, for historical and structural reasons – the new owners are unlikely to harbor such sentiment, further reducing export quantities.
In other parts of this mega producing nation, Darjeeling has been the pawn in a political game, which has seen strikes on a regular basis and the loss of crop due to an aging bush population and a lack of returns for the output of this “Champagne” region for tea.
Yes, first and second flush teas still fetch handsome prices for the Darjeeling region, but this is far from enough as rains teas (those produced after the quality period and the majority of production) sells below COP (cost of production), particularly tea-bag grades. In fact, this small region spells out the inevitable fact of production for many in the tea industry to ponder – should “specialty” grade teas sit side by side with “commoditized” tea grades (if that satisfies your lexicon), an uneasy symbiosis that those selling into one or another of these loosely-defined categories are reticent to acknowledge.
The Tea Industry in Nepal
Next door in Nepal, the smallholder sector is starting to gain some notoriety, with teas of interest being developed closely aligned to Darjeeling. Some, as we know, finds their way into Darjeeling or compete with it in the market places at lower costs, due to similar issues as Assam; the legacy costs and agreements in Darjeeling are a death by a thousand knives.
The Tea Industry in Kenya
Across the Indian Ocean in Kenya, the issue has been less about cost of production as selling prices, but this has been a self-fulfilling prophecy, the result of political interference focusing purely on increasing productivity for “voting” smallholder farmers, without a thought for the imbalance that continued expansion of mediocre tea would have on markets.
The last two years have seen a continued witch hunt for those “cartels” making money from the poor farmers when, like the Emperor who wore no clothes, they could not see the truth, believing wholeheartedly that the world was crying out for more East African tea.
Much blame has to be placed on multi-nationals and programs set up in conjunction with certifiers, which led to an efficiency drive and more output – a blinkered and irresponsibly short sighted approach to issues surrounding commercial sustainability.
In 2022, political manipulation of the market was attempted with the setting of a minimum auction price for teas, regardless of quality, which has seen “out lots” (those teas that did not sell in auction) double if not triple week on week. With all this interference, it is a welcome fact that more independent farmers and producers are starting to deviate from mediocre manufacturing and produce some extraordinary teas, both CTC and orthodox. Long may it continue! Of course, it should also be noted that Kenya is not alone in this matter – there are others. Rwanda springs to mind, which has not deviated from a focus on quality and reaped the benefit of this dogged stance.
In general, the growth of smallholder production continues worldwide, and it’s seen as a positive movement, moving away from the organized plantation sector of which there have been recent horror stories in the press, relating to investments in Kericho (Kenya). But we have to balance this with proactive consideration of what is lost by such a move. On the plus side, the eradication of colonial parochial business models is to be applauded, but not without a thorough understanding of the benefits that this model provides.
Correctly applied, central skilled management of everything from agronomy to production, social welfare, environmental protection and legislative compliance is attractive for all in the industry, but creating this within a smallholder production base is difficult and requires all our efforts to ensure these values are not lost during transition.
Tea Remains a Welcome Constant in 2023 and Beyond
As for an overall market prognosis – expect to see a pretty soft market in 2023 with quality the only hot spot in this statement. It is likely that production will be healthy in most areas, but that consumption from some quarters will not be as predictable as in 2022.
Consider overstocking, lack of funds in Iran and other Middle Eastern states, the continued war in Ukraine (impacting but not stopping trade in Russia), and the change in consuming habits (formats and channels) to impact demand. Among all this turmoil, tea remains a welcome constant, and we can be assured that while micro and macro factors will continue to impact the markets, the soothing sound of the leaf being plucked will continue to be heard in the beautiful origins that grow this crop.
Editor’s Note: Hear more from John Snell at the 2023 World Tea Conference + Expo. He’ll present one of the insightful educational sessions at the event, which takes place March 27-29, 2023 in Las Vegas.
John Snell, NMTeaB Consultancy, has spent 40 years in the tea industry, working with everyone from global brand leaders to traders and private label packers, in management of procurement, development and sustainability. His day job is now consulting for those that “do not want to spend 35 years trying,” in his words, and work ranges from product development and GTM strategies to international development projects. Snell has spent the last 27 years in North America, where he has been an active member of the trade, sitting on the board of the Tea Association of the USA and as a regular speaker at North American Tea Conferences. He sits on the Canadian Tea Association’s grading panel and is a regular contributor to World Tea News. If you ask him what “floats his boat” (a relevant analogy given his earlier days in the Royal Navy), it is always about empowering others to arrive at responsibly derived beverage solutions that deliver outstanding results for the companies he works for. He is clear that sustainably sourced and produced products are more profitable. To learn more, visit nmteab.com.
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