Quality pays dividends
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CTA. 2006. Quality pays dividends. Spore 122. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/48019
Internet URL: http://spore.cta.int/images/stories/pdf/old/spore122.pdf
It is hard for tea producers to reverse the decline in world prices. But improving quality and highlighting the marketing appeal of locally grown teas could help the best varieties to stand out from the rest...
It is hard for tea producers to reverse the decline in world prices. But improving quality and highlighting the marketing appeal of locally grown teas could help the best varieties to stand out from the rest. All the analysts agree on one issue. The price of tea is not about to go up at any time in the near future. According to the World Bank, prices fell by 44% in real terms between 1970 and 2000. As for producers, after taking inflation into account, they are now earning less than half what they did 30 years ago. It is true that, in 2004, the precious leaves of Camellia sinensis enjoyed a 2% price rise on the total global output of 3.2 Mt. And tea, whether it be black or green, continues to be the most popular drink on the planet after water. The West, which has traditionally consumed black tea, is drinking more and more green tea, attracted by its health-giving properties. But the price of tea, which depends to a large extent on the quality and quantity demanded by consumers, is suffering as a result of growing competition from other beverages. Forecasts from FAO put global production at 3.68 Mt for 2014, whilst consumption is expected to be no higher than 2.67 Mt. ACP countries account for about 14% of global output, and some 30% of exports, with Kenya as the world s leading exporter (294,000 t). Exacerbating the situation is the fact that tea remains the only commodity to be sold at auction. This system does little to benefit small-scale producers, who have no control over the prices they receive. In 2004, the Kenya National Chamber of Commerce and Industry called for these tea exchanges to be shut down, not least because collusion between brokers is all too common. Complaints of price-fixing are regularly made at Mombasa (Kenya), home to the biggest outlet for tea in ACP countries, the other main auction centre being in Limbe (Malawi). Auction sales A few years ago, some producers, especially in ACP regions, decided to try using the internet to short circuit the middle men. Electronic markets should, in theory, lower the cost of transactions, as well as cut both payment and delivery times. At present, these virtual markets are most commonly found in India. But they tend to rule out small- and medium-scale producers who do not have access to information and communication technologies (ICTs). In the absence of on-line exchanges, there are, however, a number of cyber-shops for tea. Some of these even specialise in electronic sales of fair trade tea, both wholesale and retail. For the time being, however, the bulk of the market is dominated by a handful of multinationals, and it is left to the producers themselves to invent new strategies. Here too, Kenya is proving a driving force by planning to take advantage of the opportunities offered by Geographical Indications (GI), which have been recognised by the WTO since 1994 (see Spore 116). Tea is one of the products that Kenya intends to add to the list of GIs, which is currently restricted to wines and spirits. Label of origin teas The initiative aims to protect teas marketed according to their place of origin, from unscrupulous practices by intermediaries, such as mixing them with lower quality teas or making fraudulent use of existing labels. To take one example, the Gathuthi factory in Kenya produces about 2,500 t of tea per year, but an estimated 5,000 t per year is sold using this brand name. Agnes Nyaga, a representative of the Kenya Tea Board and vice president for Africa of OriGIn, an organisation which protects GIs, believes that African planters will be the first to benefit from GIs. Their advent will help tea producers to make the transition from being raw material producers to exporters of differentiated products which are easily identifiable in the market , she observed at a WTO round table in 2004. Highly sought after, label of origin products fetch a higher price. The fair trade sector is already producing promising results, with some teas now being distributed at the international level, albeit in modest quantities. About 40% of this ethically produced tea comes from small-scale planters, many of them in ACP countries. To date, varieties from Kenya, Tanzania, Uganda and Zimbabwe have won the right to the Fairtrade label, which is an implicit guarantee of a decent price for producers, as well as environment-friendly production methods. Partner plantations receive a fairtrade premium , which can be as much as 0.5 per kilo for leaves that are torn and crushed or mechanically processed, and 1 for large-leafed teas which are processed by hand, using the so-called orthodox technique. In the field, this premium helps fund development projects. In Tanzania, the Mufindi Tea Company, which employs 2,500 workers, 60% of whom are seasonal, has been able to invest in a kindergarten on the plantation premises, and expand the nursery school for workers children. The European Development Fund (EDF) is also supporting the tea sector. In 1960, it helped launch Rwanda s first tea-producing unit, in Mulindi. Today, the factory is undergoing privatisation. More recently, in Uganda, the EDF supported a 20 million Smallholder Tea Development Programme. As a CTA publication on tea remarks, this initiative should help smallholder tea farmers make their business more profitable, and in so doing increase their real income.
SubjectsMARKETING AND TRADE;
- CTA Spore (English)