Too Much Tea - Economic disequilibrium in global black teamarkets?

Weather patterns highly influence short-term availability, which has recently been aggravated byuncertainties arising from climate change. Periods of oversupply are traditionally short-lived partly becauseof natural disasters, from unprecedented deluges that cause flooding and landslides to heatwaves anddroughts that lower yield.

Tea rebounds quickly in times of scarcity – too quickly, it appears, as rising stocks of black tea have createda price-paralyzing surplus in Kenya and other bulk black tea growing countries.

No one can do much about the weather, but they can influence demand. Global tea consumption has risensteadily for decades, and isexpected to continue at a projected 2% growth rate through 2030.

Tea’s compound annual growth rate (CAGR) is currently 2.74%, driven mainly by increasing affluence,expanding population, and rising health awareness, illustrated by the double-digit spike in sales during theCovid-19 pandemic when relieving stress and fear led to health and wellness beverage preferences thatfavored tea.

Tea prices have been static for 15 years. The wholesale price paid for tea hasroughly doubled from $1-$2 per kilo in the 1960s to $2.75 per kilo in the 2020s.

A futures market for tea has been studied, but wagering on predictable price swings has little appeal.Establishing an OPEC-like organization for tea resurfaces periodically. The organization would coordinateand unify tea production. Member country policies would stabilize tea markets and secure an efficient,economical, and regular supply of tea with a fair return on capital to those investing in the industry. But unlikeoil, you cannot switch the tap on and off for tea.

Grocers eagerly stock tea.In developed countries, 80% of tea is sold in supermarkets, where fierce competition and steadyinnovation keep a lid on tea prices. Grocers chafe when accused of forcing down prices, denying growerstheir due. The truth is that specialty and finegrade tea in tins, tea bags, and sachets generate highturnover in sales at good margins.

Demand has risen steadily for decades, and production has kept pace, but tea is challenged by innovativebeverages vying for its enviable share of throat. A study explains how to energize price growth bymarketing quality tea both as the original, affordable, plant-based drink and as a specialty crop grown forspecific culinary and beverage uses, from artisanal hand rolled high-priced Orthodox (loose leaf and inbottles) to concentrates and powders used in cosmetics, supplements, and functional blends.

Source: STiR Coffee & Tea (Extracts), Courtesy: Tea Exporters’ Association Sri Lanka