Like many farmers, tea producers are grappling with two dynamic hurdles: a changing climate and evolving international tensions.
Nagesh Manepalli, consulting director at FutureBridge, tells Just Drinks average global tea prices have increased 50% in the last year, around 34% in the last three months alone. “It’s a massive increase across the sector and it is the major challenge in the industry right now,” he says.
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The second-most-consumed drink globally after water, the FAO estimates 6.4 million tonnes of tea were consumed globally in 2021, with around 13 million people employed in the sector, nine million of which are thought to be smallholder farmers.
Yet factors outside of farmers’ control – attacks in the Red Sea, heatwaves and the rising price of hard-to-come-by fertilisers – are complicating tea production, compounded by changing demand from younger consumers.
Tea supply-chain disruptions
Tea is grown in over 60 countries, the majority of which are in the Asian and African continents. China is the biggest producer, providing 47% of the world’s tea in 2022, followed by India, Kenya and Sri Lanka.
Attacks by the Yemeni Houthis in the Red Sea have disrupted traditional supply chains over the past six months, forcing ships to redirect around the southern tip of Africa. With between 11% and 15% of global maritime trade volume passing through the Red Sea, rerouting has caused problems.
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By GlobalDataThe Red Sea makes up part of the shortest maritime route between Asia and Europe, and diverting the journey can add up to three additional weeks of travel. This spells slower delivery times and higher costs which, in turn, means rising prices for tea.
Speaking to Just Drinks, a representative from UK tea brand Birchall says working directly with growers allows them to speed up the shipping process. “We work closely with tea growers in East Africa and buy direct from the source, which means, despite various shipping challenges, we are well prepared to meet the growing demand for Birchall Tea,” it says.
It’s not only shipping disruption that has found tea producers somewhat at sea, however, and the Russia-Ukraine war has generated additional obstacles.
A shortage of fertiliser
A shortage of fertiliser is also causing headaches for tea growers. Russia is one of the largest producers and exporters of fertilisers globally, accounting for 14% of trade in urea and 11% of trade in phosphate in 2020; when combined with Belarus, it also comprised 41% of global trade in potash, according to the International Food Policy Research Institute (IFPRI).
Fertiliser prices saw a significant spike when Russia invaded Ukraine in February 2022. While sanctions did not specifically target fertilisers, they did complicate the processing of Russian trade, and 400,000t of fertiliser were stuck in EU ports for several months before eventually being released to African countries.
The Netherlands released its first consignment of 20,000t of Russian fertiliser to Malawi in November 2022, and Latvia released its first shipment to Kenya in April 2023, over a year after the initial invasion.
Fertiliser has also been stung by wider geopolitical tensions, and the supply chain faces the same risks as the tea sector itself, making it vulnerable to rising prices. The first ship sunk by the Houthi rebel group – the Rubymar – was carrying 41,000t of fertiliser.
Debarnik Biswas, hot drinks lead analyst at GlobalData, Just Drinks‘ parent, explains: “Low-income developing tea-producing countries that rely on the tea sector for employment and export revenue have been somewhat affected by fertiliser shortages and increased prices, logistical bottlenecks and higher production costs.”
A changing climate
It’s not only the constantly-changing geopolitical scene which is causing problems for tea producers – the changing climate is too.
Manepalli notes the impact of the recent heatwave through Asia when 40° temperatures brought drought to farmers’ doors in several key tea-growing economies.
“In some of the largest producing countries of tea such as Indonesia, Vietnam, and India, there was a prolonged heatwave that damaged a lot of key crops, especially in Vietnam,” Manepalli says. “Just a mere 1℃ temperature rise in Vietnam can have a dampening effect on the production.”
Tea growing requires specific conditions, including cool temperatures, plentiful sun exposure and sufficient rain. Birchall’s spokesperson calls it “a tricky combination” and points out “a small increase in temperature would create many issues such as lower yields, a drop in quality and even new pests attacking the tea bushes, making production far more unpredictable”.
A mere 1℃ temperature rise in Vietnam can have a dampening effect on tea production
Birchall recently opened the UK’s first fully solar-powered tea production facility, in Amesbury, explaining that “people expect brands to behave responsibly, especially when it comes to the environmental impact of what they’re consuming”.
With the future of production hanging in the balance, there is an appreciation of the damage climate change will do to tea availability and price, and an increasing awareness of the need to minimise its impact.
It’s a point made by Daniel Parr, European R&D team leader for hot drinks at Ecotone – owner of tea brands Clipper and Destination. He tells Just Drinks: “Tea farmers are being faced with climate challenges. Weather patterns are becoming more extreme and harder to predict, with more incidents of heavy rainfall and flooding. That said, there is no shortfall of tea in general and global production of tea in volume terms remains very strong.”
Within the sector, he notes that it is possible to alleviate some of the climate struggles faced by farmers: “we believe tea that is sourced from organic and Fairtrade tea estates is the best way we can support farmers bearing the brunt of the climate crisis. Organic agriculture encourages the growth and protection of biodiversity and offers environmental protection, whilst Fairtrade provides education on sustainable farming and can help to fund climate-smart resources to workforces and local communities. “
However, a warming and increasingly unpredictable climate is largely out of the sector’s control, and the long-term threat to the availability of tea is in turn driving rising prices. It’s not only the quantity of tea that is under threat either: it’s the fundamental flavours too. Altered conditions mean altered phytochemical and secondary metabolite profiles, which define tea’s flavour and benefits. For as long as temperatures are increasing, so is the risk to tea.
Consumer tastes are diversifying. So are prices.
Current trends suggest green, fruit and herbal teas are seeing increasing demand, in line with broader health and wellness trends. A 2023 GlobalData consumer survey found that 47% of UK respondents felt that they were influenced by the impact of food and drink products on their health and wellbeing, and purchasing patterns suggest a shift towards lower acidity products with higher contents of beneficial flavonoids.
This increase in demand has seen prices rise for less traditional flavours. Biswas comments: “For saturated tea markets (mainly in European countries), the demand for tea would be aggravated by the niche segments only, where millennials are looking for an enhanced and individualised tea experience (more in the on-premise channels) and are willing to pay more for a higher quality.”
However, higher prices in niche segments have provided a buffer elsewhere, protecting consumers from the rising production costs of traditional black teas, Biswas argues.
“There are varieties of tea blends at various price points. The mainstream products are kept at lower price points with lower margins for the wide section of people, and the price points are higher for specialised tea with tea companies making up for their margin there,” he says.
In particular, teas addressing immunity, stress, gut health, brain health and mood are seeing increasing interest. Manepalli particularly highlights “herbal, kombucha, matcha and mushroom” teas as successful sub-segments; meanwhile, teas with “adaptogens, probiotics, added with minerals and vitamins – such as buckwheat, hemp seeds and fusion” are the ones to watch.
For now, Manepalli notes rising tea prices “haven’t affected consumers much so far”, but adds: “Costs have increased in the recent past from a production standpoint. The excess of supply* will protect the consumer for the next one quarter but beyond that, if this still continues, then the price of the tea will definitely increase, maybe two quarters from now.”
*The FAO notes: “Over the past two decades, global tea supply has been slightly higher than demand.” Whilst tea production saw a small overall decrease in 2023, Sri Lanka saw an increase of around 2%. Meanwhile, several markets found that public auctions – the major three being in India, Kenya and Sri Lanka – sold less tea than in previous years. Around 75% of the world’s tea is sold this way; in Kenya, the East Africa Tea Traders Association (EATTA) reported that 40.7% of tea remained unsold in 2023.
