Tea Market

Modern tea consumption is rooted in medicinal use in China five thousand years ago. Since, it has become the world’s most popular drink (after water), whose industry employs more than 13 million people around the world. Tea grows well at high altitudes and in mildly acidic lands and can therefore be cultivated in areas unsuitable for other crops. Tea is primarily produced in Asia and Africa, with China, India, Kenya, Sri Lanka and Turkey accounting for 76 per cent of global production. Unlike coffee and cocoa, the majority of tea production is consumed locally, in domestic markets. Nevertheless, 44 per cent of global production was destined for export in 2011, worth US$6.6 billion (Food and Agriculture Organization of the United Nations (FAO), 2013). About one-quarter of trade is destined for Russia, the United States and the United Kingdom (FAO, 2013) (see Table 14.1).

In 2011, 4.7 million metric tons of tea were produced in more than 45 countries on 0.07 per cent of the world’s agricultural land.1 Two million metric tons were exported during the same year through auctions (there is no stock and futures market for tea). The tea supply chain is characterized by vertical and horizontal integration, with a small number of companies controlling the entire tea supply chain, from packing to processing and consumer branding (Van der Wal, 2008).2 About 85 per cent of global tea production is sold by multinationals, three of which control one-fifth of the market: Unilever (12 per cent), Tata Global Beverages (formerly Tata Tea, 4 per cent) and Twinings (3 per cent) (Groosman, 2011). As a result, individual tea producers and/or labourers typically have little influence over the conditions of trade. In addition to this disadvantage, other sustainability issues associated with tea cultivation include labour rights, poverty, soil erosion, water management, pest management and deforestation. Major sustainability standards active in the tea sector include Fairtrade International, Organic (International Federation of Organic Agriculture Movements [IFOAM]), Rainforest Alliance, the Ethical Tea Partnership (ETP) and UTZ Certified. Together,3 these initiatives certified or verified 12 per cent of global production by 2011/2012 (see Figure 14.1). Approximately one-third of production is actually sold compliant with voluntary sustainability standards on the international market (or 4 per cent of global tea production and 9 per cent of exports). Kenya, India and Malawi were the biggest producers of standard-compliant tea by volume in 2011/2012. Figure 14.2 breaks this down by standard.

 

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1. [In 2011 the area under tea production was 4,911,622,000 hectares.] 2. [For example, of the main tea packers, Unilever owns brands Brooke Bond (United Kingdom) and Lipton (worldwide), and Tata Tea owns brands Tetley (United Kingdom, Canada, United States), Tata Tea (India) and JEMČA (Czech Republic), among others.] 3. [Excluding ETP.]