Quality and Prices
Improvements in yields and manufacturing methods has brought an increase in the amount of tea being produced each year and with a very small growth in consumption around the world, it could be argued that it is this oversupply that has led to lower prices? Nigel Adams says that “the worst thing about the tea trade is its inability to raise the price of tea. The consistent oversupply has ensured that tea remains a low cost commodity and so the rewards available to everyone in the chain, from plucker to packer, have been limited.”
Joe Wertheim would like to see “more emphasis on quality. Basically tea consumption is inelastic to price. Lowering the price to the ultimate consumer does not sell more tea. It may have a temporary effect on a brand’s market share. We should put more effort into broadening the market by emphasizing quality and the good value connected with the product.”
And Peter Kühn’s dream would be “to see a world wide higher tea consumption and as a result higher prices in favor of the tea planters and their employees. Instead the industry in the countries of origin unfortunately suffers.”
As far as the actual trading of tea is concerned, Kühn knows that the creation of the European common market has helped the actual movement of tea, “But this common market does not mean that tea trading is easy at all. The whole market situation has been influenced by various incidents - for example, the war between Iraq and Saudi Arabia which pushed tea prices up.”
Mohammed Anverally said he “would like to see the tea trade in Sri Lanka become more open and free for trade intervention of the forces here allowing us to import and export any quantum, of tea from anywhere in the world, thereby making Sri Lanka a trading center for tea. This would encourage price competition, foreign investment and would create more jobs in the industry. Trading should not be tightened down to minimum quality standards. Because of this, Sri Lanka has lost so many markets….. There has to be some advantage to open out the economy. By looking at markets such as Germany, the UK and the UAE, which have an open economy in tea trading, these changes would definitely help the industry.”
William McMelville’s concern for the trade is that, “one constant that has plagued our entire industry, and the same is true for most other industries - that is the merger mania which seems to swallow up even what we consider the biggest among us. This trend seems unlikely to cease in the years ahead of us.”
Changes Around the World
In Sri Lanka, Maxwell Fernando explained that 1920 and 1921 were decisive years for the Ceylon tea industry. After rapid expansion at the end of the 19th century with the denuding of primeval forests, loss of mountain topsoil, the silting up of rivers and paddy fields and overproduction, the industry faced virtual destruction. But, Fernando says, in 1920 and 1921, the planters’ “determination once again saw them through, but the rush into tea by the Ceylonese entrepreneurs slowed down during this difficult period. However, this as short lived and the remarkable recovery of the plantation industry that followed created a great sense of self-satisfaction among the business community in the island.” Twenty or so years later, there was another important development: “Tea tasters, who were not known during the period 1867 to about 1945, suddenly came into prominence and acquired recognition in the fields of trade and commerce. It was an indication that the tea industry had attained maturity and was going to play a major role in the economy of the country. This was the time when frustration set in among the enterprising young Ceylonese who were denied access to this area where only the Europeans were considered eligible for entry. Unfortunately for the Europeans, this coincided with the period of strong stimulus created towards Ceylonization in all spheres of commercial activity. The first break came in June 1945 when the first Ceylonese was selected for training in tea tasting. In a matter of just four decades, the entire tea-tasting fraternity came to be dominated by Ceylonese.”
In the more recent past, Fernando highlights the following as crucial changes: “The governments privatization program of regional plantation companies where state assets were transferred to the private sector could be considered as one of the most perceptible happening that the country face during 1996…. Privatization in today’s context is the password to profitability.”
Mohammed Anverally pinpointed a current problem for Sri Lanka: “Due to supply and demand patterns around the world, Sri Lanka has lost vital markets like Egypt, Pakistan, U.K., etc. This is due to the consumer change, marketing, advertising, and pricing. Sri Lanka was at one time the largest shipper of tea to these three destinations and trying now to get these markets back would be a difficult task. Consumers are now used to different tastes by way of CTC blends.”
In the U.S., William McMelville pinpoints the following as major events in the past 100 or so years of tea: “Our successful effort in 1897 to get Congress to pass the Tea Act, the earliest consumer protection bill at a time when much damaged and adulterated tea was being shipped into our market. For almost a century, it worked well. Shortly after, in 1899, The Tea Association of the USA was founded and has done yeoman’s work all these years. With a small professional staff and volunteers contributing hours of expertise, we have a united voice to address any problems or opportunities that may arise…. In 1901, William H. Ukers first published the Tea and Coffee Trade Journal, the oldest continuously published trade magazine in our history.” McMelville also recognizes the importance of a major development in 1950: “Very high on my list of important events was the formation of The Tea Council of the USA for the establishment of a joint fund contributed by tea producing countries and American tea trade members for the promotion of tea generically. As a result of these efforts, over all the years since 1950, millions of dollars have been used for advertising and a tremendous amount of free publicity in all media, Americans have been taking tea and finding they like it. This program has been a proven winner for tea and goes forward with vigor.”
In the U.K., some commentators see the influence of the large supermarkets as having a very negative effect on the tea trade. They are constantly pushing price down without regard for quality and value for money. Shoppers now expect to be able to buy their weekly boxes of teabags from even less money and so demand for and appreciation of specialty, quality teas has been reduced even further. It has to be recognized that in the 1950s, a good deal of poor quality tea was being blended and sold to the British working classes for low prices. But there were some very good teas on the market as well. Today, there is a contradiction in the fact that generally the British public is more affluent but seems to care little for quality and is driven mainly by low prices. As with so many aspects of society, there has been a general lowering of standards, a “dumbing down” of the quality of life and of everyday commodities. Some people I spoke to are disappointed by the apparent lack of drive and energy from within the U.K. trade to fight the increasing power of the big supermarket chains and also to attempt to counter the onslaught of coffee’s very high profile in our high streets.
For William McMelville, the introduction of iced teas was a turning point. He was impressed by the amazing way in which Snapple iced teas and flavored iced tea drinks in attractive bottles and labels, created a whole new market niche for tea. With very imaginative radio and TV commercials, it took very little time to reach large supermarket shelves and soon was ubiquitous wherever young people gathered. In less than a year, every major brand of tea was connecting with major bottlers to get their products into the markets as well as entrepreneurs from all over the map. We all know the story these few years later. Tea in this new form is on everyone’s lips. Score a big one for innovation in our industry. In 1979, McMelville wrote in Tea and Coffee Trade Journal, “Our tea industry is living up to its reputation as being one of the greatest innovators, and supplies our basic product in increasingly divergent forms. For the so-called purist, this has always been a hard fact to swallow, but we have only admiration for the way more and more consumers have been added to the rolls through this expanding horizon for our product. Our industry’s willingness to capitalize on the new and different technological advances will continue to keep the American tea business vibrant and expanding.”
The next 100 years?
When asked how they saw things developing in the years ahead, most of my interviewees saw further rapid change. Nigel Adams thinks that “the next one hundred years will hopefully see more rapid change. The developing world will drink more tea initially but as incomes increase, the same peak to consumption will occur as has happened in the first world already. The trade will develop more varied ways to encourage tea consumption. We have seen the recent growth in specialty teas, green teas, and now “healthy” teas. We will see more use of tea extracts in drinks and non-drink products. There will be more varied delivery systems and, hopefully, an instant hot product that is indistinguishable from real hot tea. We will see the producers innovating on a scale never seen before, producing more varied products on the bush, adding value at the very start of the supply chain. The trade will continue to consolidate leaving only a handful of large, global players both in production and packing - but in a 100 years’ time, there will most likely be an advert for a Trainee Tea Taster at Tetley!”
Peter Kühn said that he would “predict a more complicated trade, for instance, in regards to gene-technology, as I assume that it will even find its way to tea, and considering all technical improvements in general. A further development leads to a registration of tea characters in order to protect individual creations. Should this be a common behavior in the future, it will lead to a blockage of the free tea trade and will effects the world wide tea industry.”
Mohammed Anverally predicts that “with the invention of decaffeinated tea, iced tea, flavored teas, etc., and now the tea tablets, tea will be a faster-moving commodity and it will become easier to prepare, cheaper to buy and healthier to drink. With new discovers in tea, results relating to tea and health, I see tea being used as a medical product in the near future.”
Joe Simrany expects that “there will be more consolidation, mechanization and computerization of the growing end. This is all to the good of the industry as long as it does not have an adverse effect on the quality of the final product.”
Mike Bunston says, “there will obviously be more efficient machines to process tea, and it is highly likely that there will be an increase in mechanical plucking. On the transport side, sooner or later some tea will be carried in bulk. Experiments have already been carried out with the ‘Big Bag’ and this will surely be a reality at some stage. There is talk of more tea being blended and packed at origin, but I do not see this as being a serious proposition for the majority of proprietary blends.”
Tea International talked to the following people: William McMelville, Formost-Friedman Co., and ex-director of the Tea Association of the USA; Joe Simrany, Tea Council of the USA; Mike Bunston, Wilson Smithett, UK; Mohammed Anverally, Anverally & Sons (Pvt) Ltd., Sri Lanka; Maxwell Fernando, retired from the Ceylon tea industry after 40 years; Nigel Adams, Tetley, UK; Peter Kuhn, Wollenhaupt Tees & Vanille, Germany; Olav Ellerbrock, Halssen & Lyon gegr. and hon. Chairman of the German Tea Association, Germany.
Jane Pettigrew would like to apologize to those whom she approached but who were unable to offer comments because of the very short amount of time allowed.