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Why Is Tea Going Up In Price?
December 10, 2016
Generally speaking, consumers around the world will always have a bit of a whinge or grumble about rising product prices; we all do it! Recently tea prices globally have been seeing some fluctuations in prices and, in some cases, record breaking high prices. But how many of us actually stop and think about why those prices are rising? Or do we just assume some large conglomerate is squeezing us for a little more?
I thought I would try to offer some explanation to tea drinkers as to why their favourite brew is probably costing a little more.
Well, I suppose the best place to start would be at the root of the subject, and those Camellia sinensis bushes. Even with our modern methods of cultivation; we can’t control the weather, and with the influencing factors of climate change; the weather is a bit – how do you say – unusual! This is creating major problems for tea leaf producers all around the world. Earlier this year many parts of China and India; lost in some cases up to 70% of their first spring picked leaf, and in some worst-case scenarios; bushes were completely lost due to heat stress. This was due to prolonged and unusually high temperatures, below average and late rainfall, which have created long periods of drought-like conditions. For some of these regions this has happened each year for the last few years; for others it was their first year to experience this. The first spring pick of leaves is; for many growers their profit making pick – and if you lose up to 70%; it’s certainly going to play havoc with your bottom line. And so, with a shortage of leaf and high demand, the price inevitably goes up.
Another demand which is having an effect on pricing and is growing all over the world, is the demand to produce cleaner, greener, organic, bio-dynamic, ethical, or sustainable crops. This all has cost implications for the grower, which may level out over time, but generally gets absorbed by the higher prices to offset the implementation of the requirements and legislation.
Next is the globally rising cost of labour which affects the whole tea chain from grower, to broker, to packer, through to retailer. And the rise in labour cost is assuming you can attract people to join your labour force. Many traditional businesses are struggling to encourage younger workers to join their employment, as many of these traditional forms of employment attract lower wages, less career development, hard intensive work, and sometimes difficult working conditions; whereas city life gives the impression of opportunity, bright lights, and success – no matter which country you are in. Many tea gardens suffer this very fate, and as older employees finish their working life, there’s not enough people to replace them and maintain that experience.
Unions and trade affiliated groups play a major part in raising working standards, wages, and work conditions, but sometimes a breakdown in negotiations can lead to conflict and create rising production costs. Recently in Darjeeling a dispute between one of the unions and the management of Jungpana Tea Estate resulted in a closure of the estate for at least a week (click here to read more as reported by Teabox). The management asserted that the demands were economically unviable, but after a week’s loss of business caved in to the union’s demands. Another example occurred in September when the West Bengal’s Small Tea Growers (STG) had disputes with the owners of the tea factories. These disputes again led to work stoppages, which led to loss of revenue for factories and growers alike. This dispute was over leaf quality, and as I write this blog a temporary understanding has been put in place to alleviate the problem (read ‘World Tea News’ report).
All of these factors have already affected the price of your cup of tea, and we haven’t even left the countries of origin. Once the tea leaves the factory, other costs now influence the final price; transport and its rising costs, global currency markets, customs and their restrictions, storage facility costs and the rising costs of retail premises. Another major cost that is incurred by your tea is the shear amount of so called ‘middlemen’. The tea trade has been built over hundreds of years, and much of it developed by the two colonial empires of Holland and Great Britain. The fact is that in many cases the systems they set up over two hundred years ago are still being used today. As new development is beginning to happen within the tea trade, less restrictive methods of business and minimal handling, should result in greater competition and, hopefully, more competitive pricing.
But, having said all of this, tea at the end of the day is a consumer-driven commodity. We need look no further than the recent purchase by three tea companies of a tea from Darjeeling’s Makaibari Tea Estate, when a record price was paid for 20kg of their Silver-Tips Imperial Organic tea, making it India’s most expensive tea. Global demand for quality leaf tea is certainly on the increase, and with that demand will come, combined with falls in supply, will lead to increasing prices. As long as we don’t go back to the bad old days of the late 1750’s in England, where tea was costing approximately US$17.50 per kilo – which may not sound bad, until you consider that the average wage for a labourer at the time was around US$1.00 per week!
Reading through this you can see there are many influencing factors that will create a rise in the price of your cup of tea, and I’ve barely scratched the surface. All we can hope is that there will be a few factors that will help keep down pricing. My suggestion would be more tea drinking and talking to help reduce global conflict. That wouldn’t be a bad place to start!