GACHOKI: Understanding the global tea marketplace

Tea is believed to be the most popular and consumed beverage after water. It is estimated that half of the world’s population drink tea daily. Since tea was discovered over 5,000 years ago in ancient China, its trade has continued to grow and excite the world. Tea supports livelihoods in over 60 countries, especially smallholder farmers.

All teas come from the same tea plant, camelia sinensis, with most of the difference stemming from the method of manufacture – black, green, white, orthodox, oolong, and others – much of which has to do with the degree of oxidation.

According to the FAO International Tea Market report, global tea trade was estimated at $9.5 billion (Sh1.2 trillion) by 2022. Kenya only took $1.3 billion (Sh167 billion) after accounting for 25 per cent of global exports that year. One would, therefore, wonder how the global tea market is structured. And what we must do to stake a bigger claim.

Kenya is the third leading producer of tea after China (49.1 per cent) and India (21.1 per cent), accounting for about 8.3 per cent of global production. While about 90 per cent of global production is controlled by only six countries, 94 per cent of global exports are controlled by 10 countries with the leading five producers controlling nearly 80 per cent as follows: China (20.6 per cent), Kenya (24.8 per cent), India (13.6 per cent), Sri Lanka (12.1 per cent) and Vietnam (7.7 per cent).

The global marketplace has changed significantly in the last 10 years. In 2022, the leading 20 tea-importing countries gobbled up 71 per cent of global imports, with the leading 10 countries taking up 55 per cent of all imports. These included Pakistan 13.6 per cent, Russia 7.9 per cent, USA 6.9 per cent, UK 5.7 per cent, Egypt 4.9 per cent, Morocco 4.7 per cent, UAE 2.9 per cent, Iraq 2.9 per cent, Iran 2.4 per cent and Poland 2.4 per cent.

According to the respected ITC Annual Bulletin of Statistics, in the last 10 years, the total tea imported grew marginally by only 0.9 per cent from 1,725 tonnes to 1,741 tonnes. During the period, the top 20 imports grew by 6.2 per cent from 1,166 tonnes to 1,238 tonnes with the top 10 importers' control of global tea imports dropping from 52.8 per cent to 43.7 per cent. Global production grew by 29 per cent. This we must pay attention to.

This is even more dire for the country as 73 per cent of all Kenyan tea exports go to some of these 10 leading importers. Tea plays a significant role in Kenya in foreign exchange earnings, employment and government revenue. Then there's the question of sustainability.

Some studies project global production to continue growing at a compound annual growth rate (CAGR) of 5.7 per cent from 2021 to 2026. However, imports to the traditionally top markets like Europe, the United States, Canada and Russia have been on the decline. There has been a bit of hope as new importers emerge in East Asia, Africa, Latin America, the Caribbean and the Near East, but their volumes are comparatively low.

Tea auctions still continue to play a significant role in global tea trade, and their prices serve as a benchmark for prices outside the auctions. While some of the key export markets have been going through economic and political challenges that have affected demand and value, it is the growth in production volumes of plainer-quality teas that is a greater concern contributing to global surpluses and depressed prices.

The prices of and demand for specialty teas remain high.

The emergence of Voluntary Sustainability Standards in the last 30 years to address sustainability challenges in the sector is a concern too. Many of these focus on building climate resilience, with some seeking to improve the prices and incomes of smallholder farmers.

While about a quarter of the world’s tea is produced in compliance with a Voluntary Sustainable Standard such as Rainforest Alliance and Fairtrade International and organic, the question still lingers whether this helps improve smallholder tea farmers’ earnings. New research from the International Institute for Sustainable Development reveals that so many tea farmers are struggling to make a living.

The global tea marketplace is troubled and badly needs technology as the driving force to overcome some of these challenges.