2019 Global Tea Market Report: strong growth amid rising challenges
Tea continues to thrive, with a robust growth of demand mainly in domestic markets and Muslim countries, but faces rising production costs, the burden of sustainability and social responsibility as well as climate change threats. By Barbara Dufrêne.
A wealth of data was displayed during the 23rd Plenary Session of the United Nations FAO Inter Governmental Group (IGG) Tea in May 2018, in Hangzhou, China and more statistics have become available since the International Tea Committee issued its Annual Bulletin of Statistics in October 2018. These data describe and assess the current state of the market and allow us to identify trends that have potential impact on future developments.
Status of Supply and Demand
World tea production has increased at an average annual growth rate of 4.4 percent over the past decade to reach 5.812 million tonnes in 2017. This significant growth in global output was mainly the result of China’s hugely expanded tea production, which has more than doubled since 2008 to reach 2.609 million tonnes in 2017 – 45 percent of the world’s teas. This massive expansion responds to an unprecedented growth in domestic demand, coming from more urban populations with more and more disposable income.
Production in India, the world’s second largest tea producer, also shows excellent growth with an output of 1.322 million tonnes in 2017, up by 35 percent since 2008. Output in the two largest tea exporting countries, Kenya and Sri Lanka, has reached 0.440 million tonnes and 0.308 million tonnes respectively in 2017, with Kenya displaying an increase of 27 percent since 2008, whilst Sri Lanka’s tea output has grown by only 3.5 percent, due to bad weather conditions and restrictive government rulings.
According to FAO IGG Tea estimates, black tea production shows an annual increase of three percent over the past decade, whilst green tea continues to secure an increasing market share with a growth rate of 5.4 percent per annum. World production of black tea is projected to rise annually by 2.2 percent over the next decade to reach 4.4 million tonnes in 2027, reflecting major output increases in China, Kenya and Sri Lanka – with this China would reach the output levels of Kenya, the largest black tea exporter in the world. Global output of green tea is foreseen to increase at an even faster rate of 7.5 percent annually to reach 3.6 million tonnes in 2027, largely driven by China, where the production of green tea is expected to almost double from 1.8 million tonnes in 2017, to 3.3 million tonnes in 2027.
Per capita consumption in tea-producing countries has continued to increase over the past 10 years, particularly in China and India, but also with a significant average growth in the other producing countries of Asia and Africa. In consumer markets, there is continued decline in mature big tea-drinking markets such as Russia and the United Kingdom, with the notable exception of the United States, where tea consumption continues to rise. The US ranked as the number three tea-importing market in 2017, with 0.126 million tonnes, preceded only by Pakistan with 0.175 million tonnes and Russia, with 0.163 million tonnes.
Whilst tea is becoming more expensive in China, most producing countries express concern about the farm gate price levels, which are too low to allow for sustainable tea growing. In the Western retail markets, mainstream tea continues to be the cheapest cup per serving, compared to coffee, juices, bottled water and dairy. This is in sharp contrast to the fast-developing premium segment, where knowledgeable consumers reach deep into their pockets for hand-picked, artisanal, organic and single estate teas.
Sustaining Lands and Workers
With tea production on a continued upward trend and demand growing steadily, there are issues on the horizon that will bring alterations and changes, according to Nigel Melican, president of the European Tea Society, which launched late last year. In his opinion, the most important external factors are population growth, land scarcity and climate change, which will exercise strong pressure on growing non-essential beverage crops, like tea and coffee. Internal elements are the ongoing changes that will affect the workers and the production process, the product and its positioning.
Melican’s data shows that with only one-third of the world’s land being farmed and of that surface two-thirds being pasture, this results in all the world’s food crop growing on about 28 percent of the available acreage; only about three percent is occupied by permanent crops, like orchards, vineyards and caffeinated beverage crops, coffee, tea, cocoa, and mate. Hence, these will eventually be considered as luxury crops, not to mention the huge amounts of nitrogen, potassium and phosphorus that are necessary for their conventional farming. If all teas were to be grown organically, then 100 million tonnes of fresh manure would be required every year, ie about 15kg of cow dung per year to produce one kilogram of made tea.
Also, rural labour is becoming scarce as many ageing farmers see their children move to the cities, which means that mechanization becomes unavoidable. Melican noted that China has 19 percent of the world’s population with only seven percent of the cultivated lands, but they feed them adequately, with agriculture today mechanized to almost 50 percent, compared to India, with 17 percent of the world’s population and 11 percent of the arable land to feed them, and struggling hard. He forecasts that by 2030 about 85 percent of the world’s tea will be harvested by machines, and only about 15 percent will be hand plucked for the premium and specialty market segment, fetching prices that will be 10 to 20 times more expensive than the mainstream teas.
Melican believes consumers will understand the state of their supply and pay for their choice. By 2050, industrial tea products will be mainly processed into RTD and other innovative extracts, substrates and products made from tea dust and the leftovers of the premium sector, which will cater to the mainstream demand.
With climate change threats and the challenges of securing an economically sustainable supply chain, the need for more science seems to become even more topical: higher yields of tasty leaf, pest, draught and frost resistant bushes, irrigation, nutrition, protection, plantation design in line with harvesting equipment in the fields; not to mention good roads for speedy transport to the factories and ports for shipping – a long list for possible improvements. Also, the need to take care of the harvest with environmentally acceptable state-of-the-art processing technologies, and to market the product with zero waste and in consumer-friendly packaging.
All the big producing countries have their Tea Research Institutes (TRI) and have compiled a wealth of knowledge, data and experience. Increased cooperation will foster progress through cross fertilization. Eventually tea will follow the example of coffee and build more global platforms for more global operations and implementations. For example, the Global Tea Initiative (GTI) launched by the University of California Davis, which ranks among the top ten of the world’s agricultural universities, held its 4th Annual Tea Colloquium in January. Furthermore, not only is UC Davis undertaking research to generate clinical evidence of the widely acknowledged health benefits of tea, there has also been a recent agreement signed for cooperation with the world’s oldest TRI, in Tocklai, Assam, India.
Consumption Trends Remain Diverse
With the stressed urban consumers on the constant look out for a beverage that picks you up without jitteriness, that supplies hydration and functional benefits together with authentic flavours, hence, no need to add sugary calories, tea has increasingly become the cup/mug or can/bottle of the younger generations. The past decade has seen a significant rise in premium teas and there is an increased awareness about environmental and social sustainability attached to these quality and origin teas, that offer better rewards to the farmers through more added value.
According to London, England-based global intelligence firm, Euromonitor International, market surveys show the growing popularity of the cold-brew process for coffee has started to spread to tea. In 2017, ITO EN launched a range of ice-steeped cold brew ready-to-drink (RTD) teas in the US reportedly using the authentic Japanese cold brew process called Mizudashi, which is commonly seen in Japanese tea houses. In spring 2018, Nestlé Waters introduced a sparkling San Pellegrino + Tea, Starbucks Teavana has added a sparkling version to its fast-selling RTD iced teas, whilst Coca-Cola’s Fuze Tea together with Honest Tea have introduced several new flavours of sparkling tea. An alternative to carbonated sodas these sparkling RTD teas are perceived as healthy, low or zero calorie refreshment beverages. Currently, the top three cold tea markets by total RTD volume are China, Japan and the USA, but the trend is spreading fast to many other markets.
“Tea has found a way to enter all of the major occasions for packaged beverages: from hydration to refreshment, indulgence to nourishment and functional energy. This gives the tea category, in some form or another, a place in the consumer basket at all times of day, making tea into a resilient retail product in uncertain times,” according to the Euromonitor report.
Although consumption habits are changing and follow new and diversified patterns, from hot to cold, from black to green tea, from brewed to RTD, tea has positioned itself as a drink that is good for the mind and the body, with a rich cultural background. The strong increase in teas blended with herbals increments the functionality of the beverage. Furthermore, tea is harvested from a bush that absorbs CO2 and is considered as a poverty-relief crop. The coming years are expected to see even coffee shops carrying a quality tea selection, because many consumers will want to choose freely between either of these invigorating drinks during the day.
Barbara Dufrêne is the former Secretary General of the European Tea Committee and editor of La Nouvelle du Thé. She may be reached at: b-dufrêne@orange.fr.