STiR coffee and tea magazine

STiR coffee and tea 39 "Oversupply does several things," writes con- sultant and brand owner John Snell. It forces prices downwards, cutting margins and reducing opportunities for investment in products, process- es and people; and it reduces product quality as producers and packers try to increase throughput to cover fixed costs." "In short, the industry is locked into a down- ward spiral of commoditization,"says. There is a better answer than halting planting and plucking writes Snell in a March 2024 blog post titled: Is there room for new tea origins in a world awash with tea? He cautions, "Do not enter the market unless you can answer the following questions. • Have you identified a market/consumer need that you can fill uniquely? • If not uniquely, have you assessed the global demand for such a product and its availability? • Will the value pay for your investment and deliver the expected returns when supply exceeds demand by 20%? "A new planting enterprise is not for anyone; in fact, I would go as far as to say it is not for nearly everyone," he writes. Ethiopia is a case in point. Commercial growers planted Ethiopia and Kenya in the late 1950s, "but we are not where Kenya is now," explains Isayas Kebede, general manager of EthioAgri-CEFT, Ethiopia's largest tea-producing conglomerate. An estimated 325 smallholders cultivating 4,650 hectares of tea sell to EthioAgri, which processes 85% of the tea consumed in Ethiopia. The domestic tea market is estimated at $1.6 million. In contrast, Kenya's 600,000 smallholders produce 54% of the coun- try's 450 million kilos of tea harvest. Kenya's domestic market is valued at Ksh 22 billion ($173 million). Kenya Tea Exports (2019-2023) Billion Shillings | Million USD Earnings from tea exports rose by 15% to Sh188.27 billion in 2023 Source: KNBS(Kenya National Bureau of Statistics) Sh 113.6 billion $863.9 million 2019 2020 2021 2022 2023 180 160 140 120 100 80 60 40 20 Sh 188.3 billion $1.43 billion Sh 163.3 billion $1.24 billion Sh 130.9 billion $995.5 million Sh 130.4 billion $991.6 million Kenya's domestic market is valued at KES22 billion ($173 million). Ten years ago, Ethiopia cultivated only 5,000 hectares of tea. It now produces around 6,000 metric tons of tea annually. Seventy-five percent (4,500 metric tons) is con- sumed in-country. Exports increased to 950 metric tons for the first 11 months of the country's current fiscal year and may exceed 2000 metric tons, predicts ECTA. Sales in FY2023/24 totaled $2.1 million, with 99% of tea exports shipped to the UK. ECTA writes that there is ample room for market diversification and growth. Neighboring Uganda is taking a very different approach, closing nine money-losing tea factories in February and shifting its focus to improving quality over quantity. Tea exports rank fourth in agricultural revenue, but the price per kilo of Ugandan tea is the lowest in Africa. A massive surplus forced Kenya to abandon a government-initiated price floor. There are reports that the Kenya Tea Development Agency is holding more than 200 million kilos of unsold tea. In July, the East African Tea Trade Association (EATTA) offered 300,000 packages at its largest sale on record, a third of which were previously offered but still need to be sold. The offer amounted to 18.5 million kilos, with 47% unsold. There needs to be more warehouse space or Mombasa auctioneers will soon be forced to mulch or burn unsold tea. Africa is Accelerating Production African tea is not produced for consumption locally but for trade. Kenya's crush, tear, and curl tea (CTC) is a global staple. Production was 350 million kilos in 2012, which rose to more than 560 million in 2020 and is projected to hit 600 million kilos. Kenyan bulk black CTC is shipped to 50 countries, mainly for blending. Production across Africa has increased 36.4% since 2014 and is accelerat- ing. Africa's 13 tea-producing nations contributed 12.7% of the world's tea in 2022, processing about 795,600 metric tons. Exports account for about 39% of the world's trade by volume, but according to data from the International Tea Committee (ITC), Africa's tea consumption is considerably lower than its production levels. Unlike India and China, which sell most of their tea in huge and fast- growing domestic markets, tea consumption in Africa accounts for a small percentage of global consumption. The available data do not explicitly detail a precise volume, but it is implied to be low. For example, tea consumption per capita in Kenya is 5% of total production, approximately 320 grams per per- Production volume of tea in Africa from 2010 to 2020 (in 1,000 metric tons) Source FAO © Statista 2024 1,000 800 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 619.89 837.49 772.19 725.77 732.74 730.8 692.56 678.71 677.52 653.07 615.82 Additional Information: Africa;2010 to 2020 Production volume in thousand metric tons Africa's 13 tea-producing nations contributed 12.7% of the world's tea in 2022, processing about 795,600 metric tons. Exports account for about 39% of the world's trade by volume.

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