Issue link: https://read.dmtmag.com/i/491359
STiR tea & coffee industry international 43 Anji Bai Cha garden in early spring. ulate the multi-national verticals. This collective also holds the coveted export licenses that insure govern- ment control over exported goods. Exports can be restricted or prohibited to meet demand in the do- mestic market and "protect the national economy." The license is mandatory for shipping goods valued at more than RMB 1000 ($160) except for goods carried by an individual or mailed abroad (which are subject to China's Customs regulations). Supply Chain Efficiency The legacy of colonial tea is efficient sourcing across the entire supply chain. "They make it easy to buy. Almost everyone speaks English and there are few cul- tural barriers," said importer and retailer Hodge. The tradeoff is consistency and a selection of mostly black tea. "They want a pre- dictable product and so they concentrate on a very narrow spectrum of tea that is similar in taste. They can pick up little nuances in this tiny spectrum and create Lipton tea which is always the same despite hundreds of variables," said Hodge. "Now picture a giant rainbow representing every kind of tea. The plantation sys- tem is a sliver, a very small band," he said "The only way to broaden the selection is to blend and add flavor." In contrast, China is the only country to offer every style and type of tea. "The ultimate goal for Chinese tea producers is to achieve tribute level quality," said Hodge. In the West the goal is quantity and consistency. The Western model depends on large numbers of unskilled laborers at low wages. China relies on skilled labor at every level of production. Turnover is low in China since wages exceed those paid to harvest and process other crops. In the West a few large corporations control production from planting to packaging while China supports 100,000 manufacturers, 70,000 export companies and almost four million growers. The plantation system is showing signs of strain. Relying on unskilled low-wage la- bor is not sustainable, especially as the local economy grows, said Hodge. The Chinese system has been in place for thousands of years, he said. "Which is more sustainable?" he asks rhetorically. Producers Squeezed Once a suitable source is identified, negotiations are influenced by cost. Soaring fuel for transport and processing, fertilizer and labor expenses have in- creased the cost of growing tea in some regions by as much as 94% in the past five years. During that same period (2006-11) the market price paid for green leaf increased only 25%. Meanwhile in the heaviest consuming markets, like Britain, the price of tea in supermarkets has risen only 3.8%. Living costs have rocketed with the worldwide cost of food increasing by over 137% in the last five years. As a result, growers are getting squeezed according to Ca- féDirect, a British supplier of Fairtrade Certified tea and coffee. "To offer tea at the low prices seen on UK supermarket shelves, compromises have to be made," according to "RealiTEA", a report published in June 2013 by Café- Direct. "These compromises usually come at the expense of the farmers at the begin- ning of the supply chain and directly impact on the quality of tea that ends up in the cup." Findings in the report are based on a series of small holder interviews in Kenya, Uganda and Tanzania with supporting research on food prices from the Food and Agriculture Organisation of the United Nations and Oxfam International which pub- lished the report Understanding Wages in the Tea Industry. Opaque market Unlike most commodities, tea is not traded on the futures market. Pricing is opaque and fluctuates widely. In key producing countries including Kenya, Sri Lanka, Malawi, Bangladesh, Indonesia and India prices are largely set at auctions by regional brokers who then sell to international brokers who then sell to brands. In a digital age many auctions remain open-cry which limits participation. In regions where plantations and large estates dominate, growers strive to achieve greater yields at lower cost per kilo Plantation China Tea Styles & Manufacture Narrow spectrum Broad range Prices Set by commodity brokers Set by market Labor Cheap and unskilled Skilled well compensated Sourcing Efficient Inefficient Output Quantity and Consistency Tribute-level quality