When considering the price of tea and if consumers should pay more (thus, supporting tea farmers and workers), I have a strong desire to write the shortest article ever written. That article would simply say: “Retailers should pay more.”
There is little doubt that some teas are sold for outrageously good prices – and many of them deservedly, too – but there is also no doubt that a vast number of people at the top of the tea supply chain do not earn a living income from the tea they produce.
The hue and cry comes largely from non-government organizations (NGOs) and other social enterprises, as it is indeed considered a human right to be paid a living income; however, this is largely academic without commercial supply chain investment.
Populist Responsibility and Deflection at Retail
With growing calls for grocery store companies to be more responsible to their supply chains, many have signed on to beneficial systems, including Oxfam International’s Global Supermarket Scorecard. Yet, the fact remains that the populist responsibility – which looks after necessary “in vogue” areas of concern, such as gender equity and transparency, among others – has deflected focus from retailers’ commercial practices.
As such, retailers continue to post record profits – far in excess of inflation – and this suggests that the squeeze on CPG [consumer packaged goods] companies and those below them is still on. From Oxfam’s own findings, from 2018 and 2022 scorecards: “Four years on, all supermarkets are still failing to demonstrate what changes they have made to their buying practices, to align with their human rights commitments.”
The Onus Is on the Trade
Rightly, many have pointed out that, on the whole, there is just too much tea of the wrong type being produced and oversupply is the issue rather than the pricing at retail. This is an easy statement made from the comfort of one’s armchair and with all the reports available via The Food and Agriculture Organization of the United Nations (FAO), International Tea Committee and other great resources. Of course, it’s not so easy for a farmer who has little control as to how his leaf is used, or for a producer who’s invested in a perennial crop and who doesn’t have the financial and/or legal capacity, to transition out of that crop.
An FAO report of the twenty fourth session of the InterGovernmental Group on Tea (July 13-22, 2022) stated: “Over the past decade, tea prices expressed in real terms have been declining steadily, creating a challenging economic environment for smallholder producers. Coordinated actions are needed to bring about a permanently improved balance between supply and demand.”
While this basic economic principle of “balance” is key, there is no mention of the nuance of tea – that from one commodity “leaf” there are a myriad finished articles produced (some more attractive than others). In addition, the “leaf” is outside the control of those at the top of the supply chain.
So, revisiting the initial question: If consumers buy a tea company’s product and it does not deliver a living income to everyone in the supply chain, then, “yes” consumers should pay more. This only works, though, if there are mechanisms in place to guarantee the disbursement of those funds in an equitable framework – a system that honors the principle of a living income for all in the supply chain. However, the tea industry is a long way from managing this.
The Price of Tea Is Actually Not a Consumer Issue at All
So, while consumers are the ultimate arbiters of what is valuable across all tea and beverage categories, they are not responsible or able to influence what is produced in any great measure… yet.
The issue lies in the buyers (mainstream retailers and CPG companies) of wholesale product from farms and producers and the lack of any requirement or open-source mechanism to ensure they’re paying a price that’s commensurate with the cost of production. When a market is in imbalance, then the price paid is just the highest bid at a particular point in time. This will not change until populist responsibility gives way to good ol’ common sense. Why should a farmer, who cannot put food on the table, due to poor returns, correct the many other social and sustainability issues that developed markets impress upon them?
This is not an issue that’s peculiar to tea. In fact, the same problems exist in all food sectors, but it is particularly difficult to tackle in ones where the primary product (in this case, leaf) undergoes various processes by various players (processing, blending, flavoring, extraction, etc.), and whose costs are accepted as proprietary, making an exploration of total-cost-to-market a difficult one.
The cocoa industry, for example, is no different. From the cocoa executive summary, the Cocoa Barometer 2022, comes this, only too familiar, statement: “Too often, sustainability decisions are made far from the reality of cocoa growers. Decisions are made by those in power, ensuring that these decisions are in line with their interests. As such, decades of calls for higher prices have so far not been answered. Instead, approaches have been pursued focusing on what the farmer needs to do differently, such as higher yields and diversified production.”
These are cases of “ethical colonialism,” and they need to be brought to the fore and reimagined.
Specific to tea, THIRST – The International Roundtable for Sustainable Tea notes: “Tea workers are trapped in poverty despite working hard to provide a globally valued commodity. We believe that the system – which was set up in the19th century – prevents workers’ and farmers’ human rights from being respected. All actors in the tea value chain are operating within this ancient system. That is why we need all actors to work together to bring about systemic change.”
The Averaging Problem
Fact: The proceeds of the tea category need to be greatly inflated if the industry is to continue at current output – with the same mix of type and quality – and be economically sustainable to all.
Reality: There is a vast amount of tea being produced that is not competitive or in a fight for “share of throat” (that which we choose as consumers to quench our thirst), and that “undesirous product” drags on the average returns for producers and farmers.
The reasons for substandard tea production is a tome all on its own, but misplaced efficiency agendas by CPG companies and NGOs, coupled with political interference and opacity within the supply chain, has stymied any plans that are focused on commercial sustainability and that support monoculture and the oversupply of mediocre product.
Aided and Abetted by Sub-Categorization
The growth of the specialty trade has been a significant benefit for the overall tea industry in that it revived a lackluster category and made it attractive to younger generations – but it has its problems.
The desire to differentiate from the past launched an important sub-categorization of tea – “specialty” and “commoditized” (or “commodity”) tea, which can actually distort views of the industry and does not inform consumers as to the commercial reality and their impact on it. Indeed, this is not the consumer’s fault; their source of information is often the Internet and statements like the ones below.
I asked ChatGPT for a definition between “specialty” and “commodity” tea and these are the answers I received:
- The price difference between specialty tea and commodity tea can be attributed to several factors. Specialty tea is produced in a unique manner, ensuring that the leaves are picked and processed with care. This higher grade of tea results in a slightly higher price tag, but the quality and flavor are well worth the additional cost.” [Reference: Nepali Tea Traders]
- When comparing cheaper and more expensive teas, it’s helpful to think of a bag of chips. At the top of the bag, you’ll find whole chips that are “perfect, beautiful and uniform.” As you move toward the middle of the bag, the chips become slightly broken, and at the very bottom, you’ll find mostly dust. Similarly, as whole-leaf teas are produced in factories, dust particles fly up in the air and fall to the ground. These particles are typically reserved for traditional paper tea bags. [Reference: HuffPost]
- Whole leaf teas retain essential oils, amino acids, catechins, and flavonoids within their whole leaves. These compounds contribute to the taste and potential health benefits of tea. [Reference HuffPost]
- Mechanical processing techniques increase yields but can decrease quality and nuanced flavor. In contrast, traditional whole leaf teas are more highly valued than commodity-grade teas because they have been treated in a way that ensures the integrity of the leaf has been maintained…” [Reference HuffPost]
These online statements are Infuriatingly misleading but, no doubt, a fair reflection of the “noise” that’s created by those that gain by the differentiation. But, let’s get back to the question at hand.
The fact remains that value is in the eye of the beholder and where domestic consumption in tea growing origins is significant, this may be defined by shortest and easiest route to cash rather than best quality for the best price.
Tea Price and Production Realities
If we look at a regular orthodox factory producing OP (orange pekoe tea), absorbed readily by specialty traders, it cannot avoid producing smaller grades from the same leaf. These may sell at a fraction of the price of the larger leaf grades, not because the quality of liquor is inferior but because the market/channel for these grades is different.
Further, add in seasonality, where first and second flush Darjeelings (for example) are rightly heralded as specialty teas but only represent a very small percentage of the overall production from the same leaf, plucked by the same farmers and processed in the same factories.
In both of these cases, the consumer buying the OP or first flush Darjeeling is paying a generous price that should (market mechanisms and intermediate actors willing) deliver a substantial income to the top of the supply chain; yet, it is well documented that the Darjeeling industry is close to bankruptcy, and not because consumers do not pay enough, but rather that the industry cannot conjure up a valuable market/channel for the majority of what they have to produce.
These issues and others create a common “averaging down” of returns for farmers and producers alike. And while it is not for consumers to carry the burden, it should also be acknowledged that these links between specialty and commodity tea exists for the majority of production.
Nothing Is Ever Valued When It Is Given for Free
So, should consumers pay more for tea? The answer is that consumers have shown that they are willing to pay more for tea and this needs to be tested by retail pricing linked to minimum price guarantees for the supply chain.
And yes, the tea industry needs to stop being so negative about the ability of the industry to accept change and create the right mechanisms by which this exchange – quality tea for a living income – can be nurtured and lead to growth.
Tea production can be an open, transparent and socialized economic supply chain that encourages the production of desirable teas, benefiting those that heed the call to focus on quality.
The fact is that good tea is special and is worthy of a greater “share of throat,” but it needs to be valuable not value. It is flavorful and healthful and yet remains woefully undervalued against other beverages. And, as the adage goes, “Nothing is ever valued when it is given for free.”
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John Snell, NMTeaB Consultancy, has spent 40 years in the tea industry, working with everyone from global brand leaders to traders and private label packers, in management of procurement, development and sustainability. His day job is now consulting for those that “do not want to spend 35 years trying,” in his words, and work ranges from product development and GTM strategies to international development projects. Snell has spent the last 27 years in North America, where he has been an active member of the trade, sitting on the board of the Tea Association of the U.S.A. and speaking at World Tea Expo and the North American Tea Conference. He sits on the Canadian Tea Association’s grading panel and is a regular contributor to World Tea News. If you ask him what “floats his boat” (a relevant analogy given his earlier days in the Royal Navy), it is always about empowering others to arrive at responsibly derived beverage solutions that deliver outstanding results for the companies he works for. He is clear that sustainably sourced and produced products are more profitable. To learn more, visit nmteab.com.
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