Tea Market Analysis

Tea has a rich heritage, with its first use dated back 5,000 years ago. Every subsequent year, the demand for tea keeps growing as new markets emerge such as in the US. Consider that from 1993 to 2010, the consumption of tea jumped by 60%. Now, about 35 countries cultivate the crop, where it contributes immensely to the job market, as well as export earnings.

Production

In the international market, tea exists in three variants (Black, Green, and Instant). The tea production has increased by 6 percent to 5.07 million tons in 2013. China is currently the largest producer, with a total output of 1.9 million in 2013. In the same year, India produced $1.2 million tonnes, followed by Kenya with 436 300 tons and Sri Lanka 343 100 tons. Other producers in 2013 included: Vietnam (185 000 tons), Indonesia (152 700 tons) Bangladesh (66 200 tons), Uganda (58 300 tons), Malawi (46 500 tons), Tanzania (32 400 tons) and Rwanda (25 200 tons) according to data from FAO.

Top Largest Markets

Tea is the most consumed manufactured drink overshadowing both coffee, chocolate, and soft drinks combined. It is second after water. Currently, trends indicate that its consumption is increasing because it is becoming popular with young people. Another cause of increased use is due to the rapid growth of economies such as China and India, where income levels have subsequently increased.

India has the most tea consumers in the world, with about 1 million tons consumed in 2013. However, based on per capita consumption (per person), Turkey leads the pack followed by Ireland, United Kingdom, Russia, Morocco, New Zeeland, Egypt, Poland, Japan, Saudi Arabia, South Africa, and the Netherlands.

Prices

The global prices of Tea have increased significantly over the years, with prices reaching a record high of USD 3.18 per kg in September 2009. However, since then prices declined to an average of 2.65 per kg in 2014. According to the World Bank; tea prices at all the different auctions averaged $2.64 per kilo in 2016. The average auction price in April was $3.12. In 2017, prices have slightly increased. One way to find the latest weekly auction prices are through Van Rees.

Note that Sri Lanka and Kenya have the best tea varieties in the world, owing to their excellent climate and soils in growing regions.

FAO Predictions for 2023

According to FAO’s predictions, black tea production will grow more rapidly than in the previous decade. In 2023, tea production annually may reach 4.17 million tons. However, green tea is projected to grow at a faster rate than black tea to reach about 2.97million tons by 2023. For black tea, the major exporters will remain the same.

Challenges Facing the Tea Industry

Although exports are projected to grow, many tea-producing countries will start drinking their tea, as highlighted during the forum for “The Future of Tea” held back in 2014. Other challenges identified include climate change, competition for land, resource changes, the emergence of new business models, and demographic changes among others.