Tea News for the week ending May 13
| China tea value increased by $4.4 billion to $43.2 billion in 2021
| International Tea Day is May 21
| Sofa Summit is May 23
| PLUS Yunomi.Life founder Ian Chun discusses Japan’s resurgent tea export market and the remarkable story of the record-setting two-million-yen hand-rolled green tea.
Caption: Ian Chun
Two years of COVID reset tea consumption at restaurants and cafés, initially reinforcing traditional expectations of comfort and warmth but evolving to permanently disrupt delivery, takeaway, menu choices, and celebratory occasions with tea. Tea (except for bubble tea) largely missed out on the rapid growth of restaurant-quality food delivery, curbside service, and take-out. Beverage service in downtown offices, sales at transit terminals, and inner-city stands remain below pre-pandemic levels. Retail vendors offering afternoon tea at tourist locations, iced tea at sports venues, and food trucks selling teas and juice lost sales to homebound tea drinkers purchasing online or near-to-home suburban locations. COVID reversed the sales growth of tea as a breakfast alternative. Independently operated tearooms with few seats and limited financial resources closed, changed owners, or pivoted online. Tea is consumed more frequently at home, and with food inflation rising and costs driving up menu prices, it is clear that in 2022 tea retail will not return to the familiar patterns of yesteryear.
By Dan Bolton
The pandemic continues to exert a heavy hand. Everything is so unpredictable that the best advice for a battered tea segment is to stand pat. If 24 months of turmoil has not bankrupted your venture, now is not the time to exit. Those who qualify should judiciously spend government assistance and wait.
Above all, don’t sell out because of Omicron. Retail sales of tea are stubbornly reliable during periods of crisis. Demand for conventional black tea may be flat in developed countries, but tea consumption has more than doubled to 6.4 billion kilos since 2000 — per capita consumption held at 400 grams per capita. According to the Tea Association of the USA, the US tea market grew in 2021 and is now valued at more than $13 billion.
“Tea in the United States was uniquely vulnerable to Coronavirus (COVID-19) since an unusually high proportion of it is consumed at foodservice,” writes Euromonitor beverage analyst Matthew Barry. In 2019, that proportion was 48%. Statista estimates that 52% of spending and 5% of volume consumption in the tea segment will be out-of-home by 2025.
TEAIN22 Forecast: The upheaval in foodservice is manageable. Fears that keep diners away from cafés are diminishing. Out-of-home tea sales in COVID-ravaged India already exceed pre-pandemic totals. It is too soon to know what’s next, so focus on efficiencies in the here and now. The immediate priority is to recuperate and resume growth at a sustainable pace. Retailers that survive will see greater demand, better prices, and fewer competitors.
The path ahead is omnichannel. Elements include experiential online and face-to-face retail. Teach classes (online or in-person), start tea clubs, serve tea in the park. Offer carefully curated premium teas with an authentic (not necessarily artisan) back story and botanicals in sachets. Technology is underutilized by tea retailers. Accepting mobile orders and emphasizing takeaway (and drive-thru) communicates convenience and safety. Digital menus and QR codes that open to short videos showcase ambiance and preview the experience. Use predictive consumer intelligence to guide tea discovery online and to save on logistics expenses. Every specialty tea customer, young or old, is now a veteran online shopper seeking value (over price) and confronted with a dizzying number of choices. Concentrating on delivering tea delight – that transforming moment when uninitiated customers first taste premium quality tea – has never been more essential.
Adaptations by tea café and restaurant operators to meet new challenges including high turnover and more significant labor expenses are mainly defensive. Fewer footfalls in shopping districts, hospitality centers, and tourist locations and resorts are a formidable obstacle to full recovery.
While restaurants are experiencing aggressive consolidation and a rush of capital to finance M&A with more than a dozen IPOs in 2021, tea’s transformation will be mainly self-financed. There is little outside investment, and there are no IPOs or $650 million sales of home-grown tea chains to Starbucks on the horizon. Carve-outs are more likely than rollups. In 2021 Unilever shed 34 market-leading brands, including retail outlet T2, due to sluggish growth. The fact that CVC Capital Partners spent $5.1 billion, paying 14x EBITDA to acquire Unilever’s legacy brands, is notable.
Online sales show great promise, but garden-owned and direct-to-consumer brands are crowding a minimal marketplace for premium tea. Worse, automated comparison shopping suggests online prices will converge, driving down margins as advertising costs increase. Devising profitable business strategies, redesigning the retail experience, and remodeling storefronts will take time.
Innovations are emerging: Upscale boba tea rooms, nitro cold brew tea in bars, drive-thru iced tea shops, premium fruit tea outlets, subscriber-only tea clubs, and Livestream marketing. The mix of retail innovations and market-moving developments below (most visible in the West) will shape the future and fortunes of tea foodservice and foodservice suppliers in 2022.
Defenses against pandemic-driven trends that appeared entrenched in 2020, including Lockdowns and the Pivot Online, continued to evolve in 2021. The restaurant segment and tea-themed cafés initially “hibernated,” as Samovar Tea Lounge founder Jesse Jacobs described. In the spring of 2020, he shuttered locations grossing $1 million annually, hopeful they would soon reopen. The office crowds in downtown San Francisco never returned. A year later, with depleted resources and no longer attracting outside investment, high-cost malls and downtown shops closed. By August 2021, well-respected operators like Roy Fong abandoned the Imperial Tea Room in Berkeley after 16 years. Shunan Teng, who founded Tea Drunk, closed her East Village tea shop in New York the same month. Mary Greengo, who founded Queen Mary’s Tearoom in Seattle in 1988, scaled back to a small packaged goods storefront across from the restaurant. In Sylvania, Ohio, Sweet Shalom Tearoom permanently closed after 20 years. Samovar Tea became an online-only tea retailer, and Jacobs now sells Detroit-style pizza at the former tea shops.
In contrast, small towns tenaciously supported Victorian-style tea rooms. Retirees sold many to a younger generation. According to Sinensis Research, there were more than 1,600 specialty tea shops in the US before the pandemic. Sinensis Research did not survive to count the survivors. Still, researcher Abraham Rowe would have found many fewer conventional “wall of tea” shops and far more bubble tea locations – 3,392 according to IBIS World.
In short, retail is reviving. Camellia Sinensis closed its Montreal tearoom in July 2020 and has been remodeled and will reopen in 2022. The LoKey Café in Spokane, Wash., opened this week, and in Atlanta, the Juniper Café opens next week.
Always considered extreme, lockdowns for a time all but eliminated 20% of the tea industry’s revenue and continue to depress foodservice sales globally. Staff from chaiwallah stands in Mumbai to five-star restaurants on the Riviera shuttered their stores during the Alpha waves, shuddered in fear as Delta rampaged and now face nimble Omicron as the third year of the pandemic begins.
The National Restaurant Association estimated 110,000 US eating establishments closed in 2020, eliminating 2.5 million jobs as foodservice sales declined by $240 billion below estimates (off 24% year-over-year), making 2020 the worst year for restaurants in history – 2021 had to be better – and it was for a time. Vaccines built confidence, and at mid-year, the NRA forecast a 19% increase in foodservice sales to $789 billion. That didn’t happen. Summer lockdowns to control the Delta variant are to blame. While China, New Zealand, and Australia still tolerate zero-COVID periodic, geographically limited lockdowns like those currently in place to counter the Omicron variant are the new normal.
Diners will eagerly return whenever and wherever infections ease. Perilously-thin margins in the foodservice segment pose a more significant threat and will further tighten in 2022. On median, restaurants have only a 16-day buffer* (cash on hand) to meet their financial obligations.
Tea wholesalers servicing hotels, restaurants, cafes, and coffee shops were in disbelief in 2020 as standing orders simply stopped. Foodservice clients that survived often doubled their orders in 2021 to ensure stock in hand. Wholesalers weathered the crisis in part by supplying packaged tea blenders who worked overtime to restock grocery outlets with shelves stripped bare. The top sellers? Plant-based functional beverages with a reputation for health and wellness. In other words, tea. Sedate center-aisle tea overnight became the fastest moving of the fast-moving consumer goods in stores through much of 2020.
In 2021 the spotlight shifted to botanicals.
Plant-based, functional, botanical beverages (ignoring those with psychoactive properties) eroded tea sales the past two years. Still, there is no gloom for those whose first concern is customer well-being. Rishi Tea is now Rishi Tea & Botanicals with products on the shelf next to Bigelow Botanicals and Yogi Herbal Teas.
Consumers seek the calming promise of herbal teas during a time of anxiety and stress rather than traditional medicinal uses. The popularity of adaptogenic teas shows that evolving consumer taste preferences, healthy living habits, and convenience are the primary factors boosting sales.
According to Research and Markets the botanicals market globally was valued at $93.6 billion in 2020 and will achieve a CAGR of 6.63% from 2021-2026,
Brazil, Canada, the US, and a handful of European countries account for nearly the entirety of global growth in herbal tea because it is in these countries that the wellness trend that is boosting the category is strongest, according to market research firm Euromonitor.
Euromonitor writes that at 4% CAGR, “herbal tea represents most future tea growth in many regions. Usage is expanding beyond traditional medicinal and slimming to embrace a wide variety of new occasions resulting from modern wellness trends. This gives herbal tea a number of new areas to target in functional, indulgent, and hydration spaces.”
Europe consumes the largest share of botanicals globally. Germany has emerged as the leading market. Germans in 2020 consumed an additional two liters of tea to average 70 liters per capita, according to The German Tea & Herbal Tea Association. Most of that increase was from drinking botanicals.
Tea-only vendors are at a disadvantage competing with broader plant-based specialists such as Martin Bauer Group with a century of tea and botanicals expertise. In 2022 if you can’t beat them, join them; botanicals drive innovation, additional drinking occasions, and deliver health benefits. Relish the fact that virtually every botanical benefits with tea as its base.
As the pandemic ebbs, herbals will represent a much larger share of total consumption than in 2019, with calming and immune support functionalities showing especially high rates of interest, according to Euromonitor.
The average revenue created by tea per capita in the United States amounted to $32.53 in 2020. At the same time, per capita volume purchased by US consumers amounted to 400 grams. Per capita spending by Americans will further increase in the next few years, until reaching a per capita revenue of $46.95 in 2025.
– Statista Consumer Market Outlook
Coresight Research notes that the growth of single-channel online retailers, including marketplaces, now trails their omnichannel counterparts.
“The e-commerce boom should have been a heyday for digital-first retailers, yet one of the most striking features of this trend has been the general failure of online-only (or online-predominant) retailers to seize the opportunity to outperform in the only channel in which they compete,” writes Coresight CEO Deborah Weinswig. Stores serve as an online billboard for a retailer’s websites while online-only competitors are forced to pour money into advertising, she explains.
There were never enough local tea shops where US tea drinkers could taste a selection of good teas. There are many fewer now, making tea discovery online a top priority in 2022.
Sonic, Dunkin, and now Starbucks are blowing up the bubble tea trend following difficult days for the niche. Virtually all bubble tea is consumed away from home, and in 2020 just as lockdowns eased, a shortage of Taiwan boba virtually halted sales globally. The bubble tea market reached $2+ billion in 2019. Forecasts of $4.3 billion by 2027 are overly optimistic.
The category has momentum, with legendary fan support in Asia where bubble tea drinkers line up daily rain or shine.
Once a cheap 1980s Taiwan street-stall novelty made with hot powdered milk, boba (named for its tapioca pearls) is now served cold. The colorful beverage blurs the line between dessert and drinks, making it welcome at fast food and fast-casual restaurants, as well as cafes and kiosks. In 2015 vendors began enhancing ingredients, added fresh milk and cream, and customized orders by level of sweetness, adding whipped cheese, candied toppings, and fresh fruit.
Bubble tea has grown 76% on menus during the past four years, according to Datassential MenuTrends Infinite. It is the one tea beverage that benefited from the pandemic-induced growth in delivery.
“Bubble tea is loved most by Gen Z, a generation that’s grown up overall more used to the idea of global dishes and flavors,” writes Datassential. The sweet mix of milk and tea can be ordered at 20,000 US outlets, including major fast-food chains. IBIS World estimates 3,392 boba shops, including home-grown Kung Fu Tea, Lollicup, San Francisco-based Boba Guys, Gong Cha, Coco, ViVi Bubble Tea, Tiger Sugar, and Yi Fang Taiwan Fruit Tea.
Globally Taiwan bubble tea maker CoCo Fresh operates 3,000 locations. Gong Cha, also based in Taiwan, has more than 1,500 locations in 15 countries. China-based HeyTea, valued at $9 billion, operates 800 locations, and cross-town rival Nayuki which raised $656 million in its Hong Kong IPO to build 1,000 new storefronts, is valued at $2.5 billion.
In late December, a Tik Tok video revealed Starbucks had developed flavored “coffee popping pearls” for its cold-brewed “In the Dark” coffee. The company later confirmed that boba drinks are in trials in Palm Springs along with milk tea and Iced Chai Tea Latte at $5.25 for a grande.
Comfy chairs and inviting interiors to encourage leisurely conversation made Chai Point the ideal place to meet friends and take an office tea break with associates. Founded in 2010, the company had expanded to 169 locations during its first decade. Co-founder and CEO Amuleek Singh Bijral preserved the simple mission of “brightening lives and bringing people together” while building the venture into India’s largest chain of tea cafes with annual turnover of $25.5 million.
The company’s innovative online tools go well beyond standard sites and communications that focus on the customer contact point. Chai Point’s relationship-building through technology includes customer face recognition at point of sale, an extensive cloud computing infrastructure that connects to business customers for “touch-free” 30-minute ordering and delivery, a real-time inventory management system, and customer feedback apps.
Overnight COVID lockdowns cut revenue by $15 million. The pandemic transformed the company into a delivery dynamo operating from 120 locations and growing 120% in revenue as the first wave crested. Chai On Call delivery began in 2014. Chai Point launched vending services in 2016. During the crisis the company operated IoT vending machines at 4,000 locations. As locations closed Chai Point pivoted online, developing a packaged goods line of 15 instant teas sent directly to customers.
In March 2021 as the new wave crested, retail sales were close to 80% of pre-pandemic totals, vending had recovered by half with online retail steady Chai Point doubled down with 15 new products including multi-grain organic cookies and snacks.
Bijral told Fortune India, “We didn’t anticipate the second wave. People were cautious but the intensity of the wave and the kind of hysteria it created among consumers was sort of unexpected.” Like a cat, Chai Point once again landed on its feet.
“We ventured into vending, delivery and now, packaging, because we firmly believe that as a brand, we have to provide the customer an arms-length opportunity to pick our products. So, if the customer is at home, how will he get his tea? If he is in the office, he can go to the pantry and get a quick cup of chai. And if he is in the boardroom, he can get his chai served. When walking around, one can step into a neighborhood store and get chai,” Bijral told Fortune India.
Texans brag about their Texas tea, but on a blazing day in the oil fields, HTeaO, an iced tea drive-thru in Amarillo (West Texas), delivers another kind of liquid gold. The franchise chain, founded in 2009, has expanded rapidly despite the pandemic. “We’ve got thirty-two stores open, thirty-seven in some phase of construction, and another one hundred and fifty in development,” founder Justin Howe, President & CEO for HTeaO, told Texas Monthly.
HTeaO resembles a convenience stop with 26 fresh brewed sweet and unsweetened iced tea flavors that can be mixed, garnished, or blended with cut fruit. It’s a fun place to hang out with “happy hours” that draw crowds of patrons rewarded with loyalty points and complimentary tea. The focus is refreshment with pebble ice machines, Tik Tok-inspired recipes, and gallon jugs to go. Twelve-ounce cups are nowhere to be found in these shops. Start with 24 ounces, top off a 44-ounce cup with pineapple or cherries or choose the contractor’s favorite 51-ounce (1.5-liter) Peach-ginger or Sweet blueberry green iced tea. Buy a $3.50 tankard or pay $19.99 for four gallons to take away. Shelves are stocked with healthy snack options and a full line of YETI merchandise.
Construction workers arrive throughout the day to fill their on-site coolers with tea and fill five-gallon containers of double-pass reverse osmosis water, kids mix, and match at the self-serve fountain.
The above are just a few examples of experiential, tech friendly, customer obsessed retailers committed to the leaf we love.
Join me at World Tea Expo, for a presentation with additional examples of tea businesses “Coping with COVID” at 8 am Tuesday, March 22, 2022.
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Mary Cotterman was 12 when she learned to throw clay on a potter’s wheel. In the decades since, that wheel has never stopped spinning for this accomplished teaware artisan. She describes the foundation of her work as functionality, “because for me, no matter how it looks, if I’m making a piece of teaware it needs to be a precise tool for pouring tea, so a lot of my design I take from traditional Chinese vessels, but I have learned small techniques and vernacular from all over.”
In 2015 Cotterman moved to China to learn from the old masters how to pour Chaozhou Gongfu at the Ming de Yuan production studio and to speak Mandarin. She spent two years there learning Cha Yi (tea arts) from a master in the Beijing school, becoming the first westerner to throw shou la hu teapots. She next studied at the San Bao International Ceramics Village in Jingdezhen, the home of porcelain for 1700 years. Her residency included helping run a gallery, curating shows, and translating for international artists.
In 2018 she returned to the United States after a long sojourn across Europe. She makes her home in Asheville, North Carolina where you will find her crafting water jars, pitchers, teacups, celadon gaiwans, and ash-glazed Japanese-style Kyusu teapots in a wood-fired kiln. By day she forages for local plants, studies traditional folkways and earth-based practices.
Dan Bolton: Your arrival in Asheville anchors the western end of a bridge that spans Europe and leads to ancient China where you spent several years learning Gongfu Cha style pottery and to speak the native language of porcelain and Yixing clay. Will you describe for listeners the state of artisan teaware in the US?
Mary Cotterman: Teaware in the US is a reflection of the amalgamation of different traditions from throughout the world, wherever tea goes, it creates its own unique culture based on how the people in the region live. In the US we’ve got the British teaware, a lot of us ceramicist make teaware and teapots in that style.
I don’t. I specialize in small Chinese teapots.
As the tea community gets more educated and broadens, people are getting excited about teaware from different places. So, Gong Fu Cha, the Chinese tea service is becoming quite popular in the United States and throughout the world.
To me, it’s a really lovely experience pouring tea in this way because it lends an aspect of ritual to people’s lives that I think we miss a lot in our quotidian daily lives because we’re rushing to and fro.
The Chinese tea service invokes this sense of process and ritual.
I also make Japanese-style Kyusu pots, which are side-handled teapots with big openings. They’re typically used for green tea so a lot of steam needs to be able to escape the opening. You don’t want your pot getting too hot.
As people get familiarized with the different styles of tea and regions, they’re starting to collect teaware from all over.
Dan: On your website you mention that every vessel contains the wisdom you absorbed from around the world. How do you see the wisdom manifest in your work?
Mary: That is a good question. The foundation is functionality, because for me, no matter how it looks, if I’m making a piece of teaware it needs to be a precise tool for pouring tea, so a lot of my design I take from traditional Chinese vessels, but I have learned small techniques and vernacular styles from all over.
I’ve been doing wood firing recently, which is a really magical process, very labor-intensive. That style of wood ash glaze was taken to its height in Japan. It’s done all over the world. But the particular long firings in very hot kilns for the buildup of wood ash to create this really natural glaze is a long-standing Japanese tradition.
I think of lineage a lot as a craftsperson. There’s a gift that you’re given by your teachers especially with pottery. It’s difficult, and it’s a steep learning curve, and you can practice for many, many, many years and still not be an expert.
I think of lineage a lot as a craftsperson. There’s a gift that you’re given by your teachers especially with pottery. It’s difficult, and it’s a steep learning curve, and you can practice for many, many, many years and still not be an expert.
– Mary Cotterman
Dan: Will you describe the artisan spirit and state of mind of those embracing native clay to make teapots and teaware in the US and elsewhere?
Mary: This is an interesting area of exploration because it is at once new in that we’re trying to be more ecologically friendly and our artists and practices, we’re trying to be climate-conscious in our practices so that we can continue making pottery, as humanity always has, but it is also something that is historical.
Throughout the world’s pottery, artisans gather around natural sources of clay. And each source of clay has its own life story. Yixing clay is very touted and it’s incredible, and it’s very good for what it is, but it is not special in its uniqueness. Every native clay has unique properties based on its life story, the mineral composition, and what bacteria is in the soil will affect how it can be worked.
Native clay is integral to pottery itself. Finding that relationship between the Earth and us between the life story of the clay began on the top of the mountain, rocks eroded over millions of years added plant material and bacteria, and then it gets deposited in a place where you can go and dig it.
There are many ways you can use this in the process; you can make things out of native clay, and you can also use them as slips or decorating or crush up rocks to use in glazes. It’s really all about coming back to the origins while also looking forward to a sustainable practice.
Dan: Asheville is a thriving community of artists. How has covid impacted the arts community there in general and you as a tea artisan.
Mary: The shift to lockdown personally wasn’t huge because I’m already kind of a hermit. It’s mostly just me in the clay all day, which continued throughout COVID.
Our studio, which is a big warehouse, subdivided into different studios, was shut down formonths, Not being able to get my hands on play was pretty tough. It’s a deep source of grounding and a spiritual connection did for me So that part was hard.
Once our studio opened back up, in the summer of 2020, it was pretty normal. My sales, thankfully, were doing pretty well.
I think people getting stimulus checks in the US were putting those to good use.
I haven’t met most of you, but you’re all online all over the world, and really just showed up for the small businesses in the tea community in a really inspiring way.
As far as the tea places everyone shifted, I think everyone sort of had to suddenly become more online and do different things like subscription services, and, you know, selling more loose tea. I know, for some of those sit-down businesses, it was quite rough, but I think everybody made it to the downhill side intact from the tea businesses that I know.
As a creative person, it was really nice to have the social pressure taken off, because I have some social anxiety, and so being social definitely takes a lot of energy for me.
During COVID, I went into a monk-like creative state because all I was doing was staying at home with my dog and my sweetheart and then sort of meditating for hours on end in the studio, silent and almost nobody else in there.
It was a really lovely time where the whole world slowed down like I feel when I’m working late at night in the studio, and I could just tune in and listen deeply to the craft.
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There are few entry barriers to tea. It does not demand heavy infrastructure. But the complaint from smallholders selling raw leaf to large-scale tea producers operating multiple factories is that for the past decade, farmgate prices are not commensurate with costs. Now the economics of the tea trade is gradually shifting from oversupply to scarcity. At the same time, some quiet work underway in India is yielding encouraging results that lower the cost of tea production, improve quality, and ease a shortage of labor. The most powerful driver for change is revenue. Prices globally, on average, increased by $0.21 cents per kilo during 2021, according to Trading Economics. Abhijeet Hazarika, IT analyst @TeaSigma and former head of process innovation at Tata Global Beverages, observed that “Tea is not a very high profit yielding commodity and will not be so in the foreseeable future until some tech breakthrough happens.” The frugal innovations described in this series, combined with higher prices may herald that breakthrough.
By Aravinda Anantharaman
Frugal innovations utilize simple technology to address some of the most vexing challenges facing the tea industry. It’s an umbrella term for innovations that do not require much capital, carry a low financial risk and can be done safely with high reliability. Abhijeet Hazarika, former head of process innovation at Tata Global Beverages, describes several innovations that have moved from the drawing board to become successful pilots at partner estates. In Part 1, Aravinda Anantharaman looked at frugal innovation in buying and selling tea. In Part 2, she explores the application of frugal innovations in the tea garden.
Shekib Ahmed of Koliabur Tea Estate in Assam talks about experimenting with frugal innovations in the field, but it’s in the factory, he says, that these simple technologies show the biggest impact.
“With data,” says Ahmed, “I have an objective source of attention to detail. I don’t have to depend on someone who has been working in the industry for 40 years, who uses his expertise and muscle memory to guide us. I have objective data. And that really helps me change the conversation in the factory. I’m not talking of vague concepts. I’m talking about numbers. I’m saying, this is the parameter that we want, and we must keep it within this threshold. It makes it scientific.
“What happens is that even the youngest boy or girl who’s joining as an executive, he or she can pick it up very quickly. She doesn’t have to be there for 20 years. Now, we have a young lady in one of our factories in Dubba. She’s running a 12-hour shift by herself and it’s just data. She has the data. She knows that we must stay within these parameters for the quality to be good.
“She’s in her 30s. Normally, guys running factories at that level, are in their late 50s and 60s, because you need to have that much experience. But if we can objectify data, we can have younger blood come in quickly. They are also not operating blind. I’m not just telling them, make good tea. I’m telling them this machine should be running from this much to this much. The sensor will inform you whether you are in that range. In our shared platforms, we have a cloud-based platform where we share the data, and we keep verifying it. There are many little things in production where we were operating blind and now, we have a certain level of clarity so that really helps us improve.”
Ahmed meters temperatures in the factory. Incidentally, this was developed by a young boy at a cost that Hazarika only will say, “is laughable”. Three machines are ready, and one of them is at Ahmed’s factory. Attention to detail, which was once subjective, has now become scientific and objective, says Ahmed. He likens processing tea to cooking, and how by tweaking the temperatures and the RPM of machines, the quality of tea changes exponentially. These innovations are sensor-based, that are already in use in other industries. Ahmed reminds me that the color sorters in orthodox tea production were derived from rice sorters.
And finally, innovation in the field
During our conversation, Hazarika discusses people, welfare, and productivity. Speaking on low productivity, he says, it’s not because people are shying away from work but because of the nature of the work.
Hazarika says “There are times when I stand in the gardens in August, and it is so hot that I could not stand more than 45 minutes to an hour before I felt unwell. But these people do it day in day out. It’s difficult and I don’t think anybody talks about this. So much hype about the romance of the woman carrying the bags, how many realize what goes on in that case, it’s like a furnace!”
We talk about harvesters. Most of the harvesting machines, he explains, are handheld machines and they tend to be noisy and heavy to carry. Therefore, men are assigned the machines. Not only is it tiring but it’s hard to keep one’s hands steady with them. This means that the quality of the plucking is not very good. Terrain poses another challenge for harvesters even in Assam’s valleys, where it is an uneven terrain. This challenge is amplified in the hills. Hazarika talks about harvesters not as a means to increase quantity but to aid quality.
He is looking at two major deliverables. One, the quality of the finely plucked should be at least 5x better than what is plucked by current machines and at least 2x better than what has been plucked by hand. Two, pest controls. The cost of pest and disease control is significant, especially where there are large areas to monitor, which is the case with estates that span many hectares. Pests can spread within two to three days offering a very small window to arrest their spread. An early warning system, says Shekib, can make an enormous difference. However, this seems to be a mammoth task — perhaps the most challenging space to build innovation — because, for every pest, Hazarika says, a year’s worth of data needs to be collected to feed the algorithms.
Nowhere does the conversation turn to machines replacing people. Instead, the conversation repeatedly brings up utilizing labor effectively to increase output but with better quality.
“I think the tea industry supply chain is completely out of sync with the way modern supply chains work. There is no concept of made-to-order.”
– Abhijeet Hazarika
From ‘make to stock’ to ‘make to order’
Ultimately, it comes down to the perennial problem of oversupply and reduced demand, and the mad scramble for markets. Indian tea producers do not make to order but make to stock, their priority is to sell. And the circle that begins with variability in the quality of tea closes with variability in price realization. Made-to-order brings other advantages, as it is collaborative and brings both technical and technological inputs as part of the process.
“I think the tea industry supply chain is completely out of sync with the way modern supply chains work,” says Hazarika. “There is no concept of made-to-order. They will say forward contracts are made to order. I beg to disagree because, when you say I will take a tea from you, I mean I will take a tea off a particular quality from you. The guy who’s making the tea, in many cases, is not even aware of what you want. So, the buyer has permission to reject it.”
“One of the most important aspects of made-to-order is to leverage the unique aspects of an estate of the factory that has consumer value. Somebody might make tea that makes good color which is preferred in Maharashtra or some may make tea with a sweet after taste which the Gujaratis like. We need to be able to treat every garden as unique and not as a commodity.”
While this is a familiar story, of not treating tea as a commodity, Hazarika offers a roadmap of sorts that is possible with frugal innovation. Once you have quality specifications, a producer can do real-time monitoring during manufacturing. All the resources are focused on producing only what meets the specs. This in turn optimizes the cost of production and increases the likelihood of the customer buying it because it’s been made to their specs.
Which brings the conversation to buyers because the change has to begin with them. If the large tea buyers are procuring 1,000 mn kilos of tea a year, assuming an average estate produces 1 mn kilos of tea, that’s 1,400 estates that can cater to one single buyer. Change can begin with one single buyer.
Saurav Berlia talks about how he is piloting the make-to-order model. He has partnered with a buyer who has agreed to buy his tea at a higher-than-average price. In return, Berlia assures the buyer will receive:
There may not be certifications here, but data is being recorded digitally and analyzed. For those who have wondered about the alternative to expensive certifications, this may well be it. Because the proof is there for anyone to see.
Ahmed talks about how the conversations are changing, becoming more specific. It’s helping him build a young team who are learning, not averse to technology, and who are razor-focused on quality. Innovation, he says, is no longer just for multinationals but for everyone.
“The only way I can do something better than the much larger tea garden groups is if I can execute innovation quickly and if I can execute quality improvement better and in the most cost way,” says Ahmed. And that can only happen with teamwork.
The larger outcome is more significant. Frugal innovation will change the way the industry is run. It will no longer be about waiting for an executive to invest 30-40 years in the factory to be relied upon to run it. Frugal innovation can bring effective processes into play in a way that someone young can be trained early on. This is important in a state like Assam where migration is extremely high and the intellectually able who leave don’t return.
The work on frugal innovation is being made possible by harnessing vast industry experience, a wide network, and an active collaboration with academia. Support and partnerships have come from major tea buyers. The possibilities where tech can play are vast and are seen by both Ahmed and Berlia as the way forward.
“Come in with an open mind,” advises Ahmed. It requires a willingness to try piloting the various options. And because these innovations are frugal by design, it’s affordable even for small growers and small gardens. Berlia confesses that he didn’t buy into it readily but the potential to earn a better price for the tea was a strong pull. Within a month, he says, he could tell it was working and he’s since been advocating it.
For an industry that’s been grappling with multiple challenges, frugal innovation is a low-risk and impactful option, spearheaded by an industry veteran with an eye for innovation. For every successful experiment, there are many that fail, but these are essential to the process that begins with the question, “What if…?”
Those interested in pilot projects can contact [email protected]
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There are few entry barriers to tea. It does not demand heavy infrastructure. But the complaint from smallholders selling raw leaf to large-scale tea producers operating multiple factories is that for the past decade, farmgate prices are not commensurate with costs. Now the economics of the tea trade is gradually shifting from oversupply to scarcity. At the same time, some quiet work underway in India is yielding encouraging results that lower the cost of tea production, improve quality, and ease a shortage of labor. The most powerful driver for change is revenue. Prices globally, on average, increased by $0.21 cents per kilo during 2021, according to Trading Economics. Abhijeet Hazarika, IT analyst @TeaSigma and former head of process innovation at Tata Global Beverages, observed that “Tea is not a very high profit yielding commodity and will not be so in the foreseeable future until some tech breakthrough happens.” The frugal innovations described in this series, combined with higher prices may herald that breakthrough.
By Aravinda Anantharaman
Abhijeet Hazarika talks about technology in terms of “frugal innovation”.
What is frugal innovation? His checklist includes:
The ideas he shares are not limited to large estates but have taken cognizance of the small growers. Frugal innovation also correlates with low risk which makes it an attractive proposition. And yet, there have been few takers for it.
In Part 1, we look at how implementing frugal innovations can impact the purchase of leaf and the sale of tea.
Innovation in the procurement of leaf
Saurav Berlia is the third generation in his family’s tea business. The LR Group (Berlia Foods) has been involved in all aspects of tea, from gardens and factories to broking, packing and exports. His company produces more than 20 million kilos annually, supplying to buyers including the top three in India. Berlia decided to pilot some of Hazarika’s projects in frugal innovation.
The group procures about 500 kilos of tea every day from small growers. This process involves calling every small grower each morning for an estimate of the tea they expect to pluck. The small growers sell their leaves, but they won’t know the price they will be paid for it until the next day. They will also not receive feedback on the quality of their leaves.
Berlia is piloting an app that his growers could connect to. With this, the call every morning is made redundant. The grower’s login to the app to understand the market requirements in the morning and offer the estimated quantity of leaves right there. What’s more, because they have an insight into the market requirements, they can set their own prices. Berlia’s staff can accept the price or negotiate before they buy the leaf. Once the transaction is confirmed, the grower gets a message with the weight of the green leaf to be supplied and the price they will be paid for it.
A three-month pilot has shown a positive response and a few of the growers are very happy. However, Berlia admits that he met with resistance at both ends — growers were resistant to the new-fangled app that demanded their inputs and attention. At his factory, Berlia’s staff were convinced it wouldn’t work. They preferred the status quo. He says patience accompanied by training addressed some of this resistance. With each unit having about 50-100 growers as partners, the app can potentially transform how transactions are conducted, to everyone’s benefit.
“Technology has become much more affordable today than what it was 5-10 years ago because processing power has made it affordable. Devices are more affordable. Technology has become simpler.”
– Shekib Ahmed
Using data effectively
Another early adopter of tech is Shekib Ahmed who runs the Koliabur Tea Estate near Silghat in Assam. The 1,600-acre estate next to the Kaziranga National Park with 900 acres under tea. Low hill ranges form part of the terrain here. The garden produces exceptional single-origin CTC tea.
Ahmed chose to partner with Hazarika because of a shared desire to integrate technology in tea farming. Listen to as Ahmed talks about the two key points that attracted him to this.
“Technology has become much more affordable today than what it was 5-10 years ago because processing power has made it affordable,” says Ahmed. “Devices are more affordable. Technology has become simpler. He (Abhijeet) was reminiscing how, when he was working with data, the cost of data analytics was astronomical. But now with cloud computing and everything, it’s become a lot more affordable for companies of our size to give it a shot. That was the first part.”
“The second part was how he focused so much on frugal innovation, things that are affordable for companies of our size to try to tweak and to learn. And one of the biggest benefits of working with Abhijeet is that when we’re doing three to four projects, two or three may not give the results that we want today. They may give it later or they may not work out. However, the side benefits of all the ideas and discussions, just the access to these bright minds like Abhijeet, like the scientists really opens up a lot of little innovations, which are very groundbreaking in the sense that it’s really helped me improve quality in the last one and a half years,” said Ahmed.
He adopted a simple system of data analytics for tea from the tea auction system. There’s a lot of data that comes from the tea board of India, but this is raw data. Ahmed talks about the resistance to change even here when he says the Indian tea industry is where the steel industry was 30-40 years ago. Innovation was very, very slow and the industry was loathed to move past its way of working.
Ahmed’s tea is sent to the auction every week. Data analytics helped him understand how his tea was performing but also what quality the market was seeking. Just to jump the gun a bit, in using data analytics to offer tea that the market wants, Koliabur and Dubba, both of Ahmed’s estates saw a jump of 15-25% in auction prices this year. From being in the Top 20 in the ranks, they are now in the Top 10, which, given that there are 800 gardens in Assam, is no small feat. But he is quick to add that it’s not data alone that has contributed to this.
For innovation to fully work, it must be leveraged across the value chain.
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