• Boba as a Gateway to Tea

    Boba Guys make their drinks with real fruit, real milk, real foamed cheese, and real tea, brewed from loose-leaf oolong and other quality varietals, and served with tapioca balls made in their own factory. The bustling chain, now with 20 locations, was co-founded by Andrew Chau and Bin Chen. Chau, a featured speaker at World Tea Expo this week, explains how relentless attention to quality elevated a simple mix of milk tea and tapioca to a $3 billion global segment that is enticing a generation of non-tea drinkers to give tea a try.

    • Caption: Andrew Chau, co-founder and CEO, Boba Guys.
    Co-founder, CEO, and author of The Boba Book Andrew Chau describes the allure of bubble tea.

    ‘We Really Push the Envelope for Quality’

    By Dan Bolton

    A business graduate with a master’s degree from the University of California, Berkeley, Andrew Chau worked as a marketing planner and manager at Target and Walmart before co-founding Vergence Media, a digital imaging startup. He later managed e-commerce for Timbuk2, a consumer electronics venture, and worked as a global brand manager for LeapFrog, in Emeryville, Calif. In 2011 he and Bin Chen launched Boba Guys opening their first shop in the Mission District. In 2015 they launched Tea People. The company has since expanded with six locations in Los Angeles and one in New York City.

    Dan Bolton: Why is bubble tea a gateway for exploring tea in-depth?

    Andrew Chau: I hope I don’t insult anybody by suggesting that you need boba in order to experience tea. There’s a millennia of history with tea. I’m not saying that we’re rewriting all of that history. Tea is something that’s been drunk for thousands of years.

    In certain countries, tea is normal, in certain places coffee is normal, in certain places mate is normal. Tea is basically a cultural product. When I say it’s a gateway drink, what I mean is that is how a lot of people get into tea. It brings you into the deep parts of tea; we’re talking about knowing what an oolong is, knowing where tea comes from in the world.

    Knowing tea at that depth opens the gate.

    There’s a drink that I really love in Taiwan, where my parents are from. It’s made with a high mountain oolong, a buttery tea that you put crema on top. The crema is like ultra milk, some people call it cheese. Sometimes you get a milk mustache drinking it along with the tea. It’s almost like a milk tea, and yes you are having tea with milk, maybe there’s some sugar in it. But what you are really tasting is the body of the drink, which in this case is an outstanding oolong, an Iron Goddess [of Mercy] tea with a milk cap or foam. Ten years ago you would have probably just ordered a Frappuccino.

    And that’s how so many people get in. The idea is to get you interested in the tea. Sure it is called a “Frozen Summit Oolong” but drinking it you are starting to understand the profile of that fine tea flavor.

    That’s what we do.

    We really push the envelope. We source our own tea and sell it to different cafes across the world. Our tea brand pushes innovation, meaning that we do nitro tea because with nitro you have more body and can taste nuances that you wouldn’t get in a hot water steep.

    What we do is get people involved.

    A gateway is basically like a beachhead, right? It’s where people enter. So you enter the shop and order a simple milk oolong, a Tie Guan Yin, a familiar English breakfast tea, or a Ceylon tea. We capture the best qualifies of these teas in a bubble format.

    Dan: Your Boba gateway doesn’t have a sign on it announcing, “no one over 35 allowed.” Boba Guys shops are filled with people of all ages eating and slurping and conversing. They are animated and interact as they poke and play with their broad-diameter straws. Boba is experiential — a drinking occasion that mingles quality tea and a memorable experience. Will you talk about those aspects?

    Andrew: People sometimes say boba is a fad. I’m like, well, how is it a fad if two billion people drink milk tea, or have tapioca every day? When boba first came out, it was a kind of dessert. Tapioca and cassava, the plant that it is made from, are native to Brazil. The Portuguese and Spaniards brought it to Southeast Asia. Similar to flan, you have cassava pudding, and cassava cake across Southeast Asia, in Malaysia, the Philippines, and other Spanish and Portuguese colonies. The pudding got mixed into a milk tea culture. In Europe, there’s a milk tea culture in the Middle East, and even in Mongolia and Russia.

    So I think that what happened is that it caught on again, in modern times as a kid’s drink because teenagers drink it loaded with a lot of sugar. I was one of those kids, but as I got older my metabolism changed, so I have to watch that sugar.

    When we created Boba Guys we purposely made it accessible. The format and taste profile are like what people want in a Frappuccino. We lowered the sugar content and used raw sugar. We make our own sugars. We don’t have any high fructose corn syrup in our stores. That is one way we made it accessible.

    Consider matcha. Everybody loves matcha in a latte or shake, but many don’t appreciate matcha’s tea culture. We have tea classes at Boba Guys. I teach people ‘this is a Dragonwell, a Longing green tea,’ or ‘this is a sencha green tea.’ When you grind it up to make it into a fine powder that is essentially matcha. At Boba Guys we layer it into the drink. The technique is known as a pousse-café. You see the layer, it is visually separate versus one giant green mixed latter.

    I explain that you’re drinking the entire tea leaf, whereas if you had a Dragonwell Longjing it would just be steeped. So you begin to understand how your body is internalizing all these anti-oxidants, like the catechins and ECGC. When you explain that to people you’re able to story tell. People haven’t been articulating the story of boba.

    How do we make it accessible to Americans?

    We explain that it is something to enjoy casually. If you want a slight tea buzz and you’re young and just are not a alcohol drinker. Go grab a boba.

    That’s what we are seeing now. It’s become a hangout for people. You would never a decade ago hear a regular everyday American want to talk about oolongs. You would hear them talk about green tea and black tea. I think we have come a long way and we want to be much more inclusive.

    “When I say it’s a gateway drink, what I mean is that it’s how a lot of people get into tea. It brings you deeper into tea, knowing what an oolong is and what is Pu’er, knowing where tea comes from in the world.”

    – Andrew Chau

    Bridging Cultures

    The Boba Guys sell tea online and supply many cafes and shops. “We started Tea People because we wanted to share our favorite teas with our friends the only way we knew how, by keeping it simple,” said Chau. “We visit the farms ourselves and source our own teas. Our mission is to make quality tea approachable, so we try to make it intimate, straight from the source,” he said.

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  • Tea at the Top of the World

    The Guinness Book of World Records has certified a May 2021 tea break on Mt. Everest as the highest tea party in history.

    Climber Andrew Hughes, who organized the high-altitude tea break, writes that “tea already was interwoven into life on an Everest expedition. From the tea houses and lodges where we stayed along the trek to the countless hours spent with one another with a warm cup of tea in hand awaiting weather windows to climb onwards – tea is something that we shared so regularly that it is impossible to detach it from the overall Everest experience.”

    • Caption: Andrew Hughes hosts a tea party at 21,312 feet
    Sharing dainties at 21,000 feet
    Sharing dainties at 21,000 feet

    Tea Offers Climbers Many Practical Advantages

    By Roopak Goswami

    On May 5, 2021, 15 climbers joined Andrew Hughes at Everest Base Camp No. 2, to enjoy Nepali milk tea with ginger and dainties at an altitude of 6,496 meters (21,213 feet). The team carried both packet and loose leaf teas including peppermint to aid digestion and chamomile to aid sleep. Climbers witnessed first-hand the effect of low atmospheric pressure which speeds boiling. Achieving a roiling boil at sea level occurs at 100 degrees Celsius. Above 20,000 feet water boils at less than 80 degrees centigrade, about 175 degrees Fahrenheit.

    For Andrew Hughes, tea is woven throughout cultures and history. It is a drink both unique and universal, which he finds beautiful to celebrate.

    Hughes and his team* are proud to learn the Guinness Book of World Records officially recognized their Mt. Everest tea party as the highest in history at 6,496 meters. The names of participants are now listed as record holders for participating in Hughes’ Highest Party Team on Mount Everest Camp 2, Nepal, on May 5, 2021.

    Andrew has completed the Seven Summits (ascending the highest mountains on each continent) and six of the Seven Volcanic Summits (climbing the highest volcanoes on each continent). His next goal is the Explorers’ Grand Slam; a quest delayed until April 2023 after the 2022 climbing season was canceled due to the war in Ukraine – the Grand Slam is a feat fewer than 70 adventurers have ever achieved. 

    “It would be an honor to become an ambassador to promote tea if somebody gives me such a role,” he says.

    “Tea already was interwoven into life on an Everest expedition,” he said. “From the tea houses and lodges where we stayed along the trek, to the countless hours spent with one another with a warm cup of tea in hand awaiting weather windows to climb onwards — tea is something that we shared so regularly that it is impossible to detach it from the overall Everest experience,” he said.

    Recounting the experience, Hughes recalled that the tea party, “felt like a natural celebration to organize, allowing us to celebrate one another with gratitude for this opportunity to be together in this special place with so many special people from around the world.”

    He took three different packet teas on the adventure. “I chose packet for several reasons over loose-leaf, but the primary one is packability up the mountain and its durability to keep it wrapped up and dry from the elements. We do use loose leaf tea while at base camp as we have more means to make large quantities of tea,” he said.  

    “Often each day while at base camp, we consume over a dozen large containers of Nepali milk tea and ginger tea,” he says.

    For his tea party, Hughes served the following from the Republic of Tea:
    Get Heart Herb Tea for Cardio Health
    Organic Immunity SuperGreen Tea Bags
    Get Happy Herb Tea for Lifting your Spirits

    “I chose these to help us combat some of the ravages of high altitude,” he says.

    It is intriguing to boil water at a high altitude, he noted. The lower atmospheric pressure means that water boils at a much lower temperature [80 Celsius, about 175 degrees Fahrenheit], but contrary to the common belief that cooking is quicker, cooking food takes longer at altitude.  

    Hughes said there were a dozen international climbers, a handful of international guides, and a remarkable team of local high altitude mountain climbers and support staff from Nepal who made possible his dream of an Everest summit, including this record.

    “I organized two tea parties during the Everest season. The first was to celebrate and thank the incredible Everest Base Camp Nepalese team who make camp function and the outstanding Nepalese climbers on our team. The original goal was to have this be the record-setting tea party, but after a long search, it was impossible to find an altitude high enough at base camp to set a new mark,” he said.

    “We celebrated all the same at what was at that time the time the second-highest tea party. I then set about organizing the new record-setting tea party at Camp 2 on Everest at the end of our second rotation on the mountain,” he says.

    Andrew recommends that people who ascend high altitude peaks take along tea.

    “There are numerous practical reasons why incorporating tea into your kit to carry up the mountain with you is valuable. The first is that a warm drink uses less energy for your body and aids in hydration up high,” he says.  

    “Climbers brought with them a variety of teas, such as peppermint or ginger to aid in stomach issues that often occur at high altitude or chamomile to reduce stress and aid in trying to steal some sleep amidst the stormy nights. Black or green teas with caffeine can often help mitigate some of the symptoms of altitude sickness, like headaches,” he says.

    “Tea already was interwoven into life on an Everest expedition. From the tea houses and lodges where we stayed along the trek to the countless hours spent with one another with a warm cup of tea in hand awaiting weather windows to climb onwards.”

    – Andrew Hughes
    Dainties at Everest Base Camp No. 2

    *Guinness lists the following participants: Andrew Hughes, Ronan Murphy, Kristin Bennett, Garrett Madison, Sid Pattison, Robert Smith, Art Muir, Helen Cokie Berenyi, Krisli Melesk, Ben Veres, Kevin Walsh, Kristin Harila, Mark Pattison, Rick Irvine, James Walker.

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  • The Rise of India’s New Tea Lands

    Rajiv Lochan is the founder of the Doke Tea Estate in Bihar, a non-traditional tea-growing region bounded by West Bengal and Nepal. India no longer requires permits to grow tea, a policy decision driven by increased domestic demand. Lochan foresaw the need to open new tea-growing regions years ago and began acquiring land along the Doke River in 1998. Since then, Lochan’s marketing mastery and tireless promotion have literally put Bihar on the official map of India’s tea-growing regions.

    • Caption: Rajiv Lochan, founder Lochan Tea and Doke Tea Estate

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    Rajiv Lochan founder Lochan Tea and owner of the Doke Tea Estate in Bihar, India

    The Rise of India’s New Tea Growing Regions

    In 1850 after the British established the Tukvar tea plantation in Darjeeling, India’s tea industry expanded rapidly, felling forests and flattening hills in Assam and terracing the Himalayan foothills to meet global demand.

    To fill London’s warehouses, growers planted the Dooars and Terai, much of West Bengal, and the entire length of the Brahmaputra Valley in Assam. In 1940 there were 500,000 acres under tea; by 1960, there were more than 800,000 acres (329,000 hectares) under tea.

    Exports rose steadily but beginning in the 1950s domestic consumption climbed even faster. In 1960 India exported 195 m.kgs of tea and consumed 115 m.kgs. Household consumption as a percent of India’s gross domestic product peaked that year at 87.4% percent. Ten years later, exports remained flat at 200 m.kgs, while domestic consumption had increased to 212 m.kgs. Today Indian consumers drink 90% of the tea it produces.

    Until last year, registered gardens were permitted in only a few states. In 1960 the Tea Board of India recorded 160,000 hectares under tea in Assam. There were 82,000 hectares under tea in West Bengal (Darjeeling, Dooars, Terai, and West Dinajpur). North India, consisting of the Tripura, Uttar Pradesh, Punjab (Kangra), and Himachal Pradesh (Mandi), cultivated 255,000 hectares.

    Bihar grew tea on only 725 hectares (about 1,800 acres under tea).

    Growing regions are inherently blessed with tea-enhancing terroir. However, ideal soil conditions, altitude, and micro-climate still require the pioneering vision and gritty persistence of growers like Rajiv Lochan to achieve their potential. Rajiv graduated from university in 1973 with a master’s degree in organic chemistry. He spent his early career managing established gardens where his efficient management complemented his skills in cultivating award-winning teas.

    In 1998, the Indian government, noticing the strong growth in domestic sales, issued permits to expand tea lands. Adhering to biodynamic principles, Lochan planted drought-resistant cultivars in the loamy soil along the Doke River. He now produces green, white, and oolong teas and black fusion, combining Assam and Darjeeling teas. It took him ten years to acquire and consolidate smaller plots into the Doke Tea Estate.

    Dan Bolton: Rajiv, will you describe India’s domestic market for new regional teas?

    Rajiv Lochan: We start with eastern India. Bengalis are very, very appreciative of Darjeeling tea. Calcutta has a direct connection to this growing region and is known to be a tea city.

    It’s very unusual to find Biharis, who like orthodox Darjeeling. They are now opening up; yes, this is something good.

    Doke Black Fusion is a handmade Bihar tea, a mix of Darjeeling and Assam. That’s why we call it fusion. We sit right in front of Darjeeling, and the cold winds coming from Darjeeling cool the plains for a more delicate tea. Doke has an amber liquor, fragrant aroma, and sweet taste, complex. Mixed together with the strength of Assam, it is full-bodied, slightly bitter morning tea.

    Dan: That suggests terroir is important to their buying decision.

    Rajiv: They understand; they listen. They’re very appreciative, they come in with questions, and they take the samples. I have a sample pack of about 10 grams which I sell for 60 rupees. They sometimes buy 600 rupees worth of packets.

    “We produce very little on 10 hectares but we source teas from all over the region to make different blends and then package it. So we handle about a million kilos of tea every year.”

    – Rajiv Lochan
    Rajiv Lochan
    Rajiv Lochan

    Dan: Where do customers get their first taste of teas grown and processed in Bihar?

    Rajiv: Online. Not many stores stock all these teas, and it is very easy to order online.

    Specialty teas are only available in the big cities with lounges and specialty tea shops. I would not say even many of the tea specialty shops.

    Amazon has taught India how to sit at home and order very, very comfortably and has created online shopping. All the ladies are very happy sitting at home buying whatever from this thing. Many buy to experiment. Yeah, Amazon has done wonders in India, successful like Coca-Cola.

    Dan: Are the websites built by local brands sophisticated? Is delivery by mail or courier?

    Rajiv: Teaswan. That’s our website. They do everything online; we do everything else. They handle the ordering and the total thing collection money and all.

    Dan: How long does it take online customers to get their tea?

    Rajiv: Maximum three days. Three days is very fair. We also use FedEx, DHL Blue Dart Express, and UPS. Siliguri, since the pandemic is very, very conveniently connected.

    Dan: Tea from non-traditional growing regions like Bihar is now accessible but still not well known. Your innovative processing and tireless marketing of green tea and oolongs have earned the brand an international following, representing only a small volume of the million kilos you process locally. You can get higher prices overseas, but in a CTC (cut, tear, curl market), pricing is critical. According to the Tea Board of India, only 22% of Indian households spend more than INRs200 rupees (about $2.50 US per month for tea). What price do you charge local consumers?

    Rajiv: Our 250 gram CTC sells for INRs 70 to 90 per pack. Tata costs almost the same, but the quality is better than Tata. The reason for people buying outside Tata is the quality. There are four or five local brands available from Siliguri, so people are not switching, and we find it very easy.

    There are now seven factories in Bihar. There are 20,000 hectares under tea, and the total production is 25 million kilos. We package our teas in Siliguri, and most of our market is nearby in Bihar so that we can keep the quality. The shopkeepers prefer stock that is easy to sell.

    Quality control is not that difficult; we have one system for packaging one mindset for our local CTC pack. Green tea orders are bigger than Darjeeling. When it comes to exporting CTC to China, we sell bulk 20 tons to the container, maybe 25 containers to one company and ten containers to another company.

    We produce very little from the 10 hectares at Doke, but we are basically trading; we are sourcing teas from all over the region to make different blends and then packaging, so we handle about a million kilos of tea every year.

    The sourcing people know that we can keep supplying them with the same blend throughout the year because we will source it from hundreds of people. We do our blending, tasting hundreds of samples, then giving them a standard blend that they want throughout the year.

    Producers like Williamson Magor walk into the room, and they always say, ‘we are the third-largest producer of India,’ or ‘we are the second-largest.’ Being a very big producer, he’s going to sell only his produce, which he can give a little cheaper than us because he can manage his cost of production. Our cost is the total of buying from many smaller growers at rates that are profitable to the producer himself. Growers might have less overhead lower labor expenses. So, these are two different competing economics that the big buyers understand.

    The domestic tea market in India is still not mature; this is just the beginning. The entry of more and more players from different regions will change the scenario, but India is a huge market, and if it opens up, it will really solve the industry’s problems.

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    Doke Tea Estate on the banks of the Doke River

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  • Q|A Ian Gibbs

    Tea Biz travels to the UK offices of the International Tea Committee where Chairman Ian Gibbs describes the immediate and potentially long-term impacts on the global tea trade stemming from the ongoing crisis in Ukraine. According to Gibbs, the combination of sanctions and the collective refusal of the world’s largest container shipping companies to deliver or receive goods will interrupt tea shipments to Russia, but no one knows for how long.

    • Caption: Ian Gibbs, Chairman since 2016 of the International Tea Committee

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    Ian Gibbs, Chairman of the International Tea Committee

    Payment Concerns Further Disrupt Global Tea Supply Chain

    On top of the upheaval in the tea trade caused by the pandemic, new worries include guaranteeing payment for containers of tea without violating sanctions while booking scarce carriers for shipments to the Russian Federation and Ukraine. Stocks of tea in Russia are adequate for several months, but the interruption of scheduled replenishment that averages 120 containers a week will invariably lead to shortages.

    As the ruble’s value collapses, Russian tea buyers accustomed to favorable credit terms now find it difficult to secure the financing needed to pay upfront, according to Ian Gibbs, chairman since 2016 of the International Tea Committee (ITC). In 2020 Russia imported 142,000 metric tons of tea, valued at $412 million — a total likely to decline in 2022. Gibbs predicts a dip – but not a big drop in the volume of tea shipped to the world’s third most valuable tea market. 

    Dan Bolton: Ian, will you put into perspective the impact of the invasion of Ukraine? How will a prolonged crisis impact the global tea trade?

    Ian Gibbs: Initially, it will be a very worrying time for many producers. It’s going to affect some more than others. Reduced demand in one market will have knock-on effects elsewhere.

    If we look at the main countries from which Russia sources its tea (See chart below, all ITC figures are from 2020), India is likely to be hit the hardest — just over 39,000 metric tons or 19% of their exports went to Russia in 2020. Sri Lanka sent 30,000 metric tons to Russia, representing 11% of their total exports.

    On the other hand, Kenya exported 25,000 metric tons to Russia — a significant figure for Russia but a total that represents less than 5% of Kenya’s annual exports.

    Vietnam exported 13,000 metric tons to Russia (10% of their total exports). Indonesia exported 8,500 metric tons, a smaller quantity than the other countries I’ve mentioned, but a quantity that represents nearly 19% of Indonesia’s tea exports. So that suggests that Indonesia could be hit quite hard. 

    Tea is regarded as an essential product and along with other foodstuffs should, I understand, be exempt from the sanctions. But producers will still have considerable issues to contend with, such as finance, which currency to use, the ruble’s depreciation, insurance, and shipping. Regardless of what’s being shipped, many shipping lines have stopped shipping to Russia.

    Unlike other occasions when sanctions have been applied, I think that the feeling of the majority of people worldwide — at the government level, commercial companies, and as individuals — is they want to see these sanctions effective as a result of what they are seeing on the television and the internet. So, it’s going to be quite a challenging task, I think, for exporters.

    Dan Bolton: Will black tea producers concerned over price and settlement of payments* cut production, or will tea previously destined for Russia find its way to other markets?

    Ian:  I don’t think producers will cut production. Tea is exempt from sanctions; probably quite a large quantity will be imported by Russia. 

    However, there will be a hiccough in the short term as the players in the market work out how to deal with the various issues I listed earlier.  There is no doubt these issues are substantial, so the market is likely to be adversely affected for a while. 

    New markets don’t suddenly appear, but I hope that producers (and by this, I mean producing companies backed by their countries’ governments) will use this opportunity to explore new markets, which could be a long-term benefit to everyone. 

    “I think that the trade-in foodstuffs, including tea, should be restored to normal fairly quickly once hostilities end. I don’t believe that in the long term, there will be a major disruption to trade.”

    “I think that the trade in foodstuffs including tea, should be restored to normal fairly quickly once hostilities end. I don’t believe that in the long term, there will be a major disruption to trade.”

    Ian Gibbs

    Dan Bolton: Will this crisis soon pass? Or do you foresee years of sanctions that permanently disrupt the current alignment of the tea supply chain?

    Ian: Everyone wants the whole problem solved very, very quickly. The amount of damage already done in Ukraine means that the effects of this invasion will be felt for a long time.

    It will take time to rebuild Ukraine and for trust to be restored between Ukraine and Russia and all the other parties involved.

    It will be a while before we get back to normal. However, I think that the trade in foodstuffs, including tea, should be restored to normal fairly quickly once hostilities end. I don’t believe that there will be a major disruption to trade in the long term.

    Tea is not alone; other commodities are contending with the same problems.  It’s worth noting all this is happening against a hike in the price of coffee over the last year, which has happened for several reasons, and so there is potential for tea to benefit as people can be expected to switch from coffee to tea. 

    In my view, demand will be there, and I believe the government of Russia will be keen to make sure that people get their tea. It is going to take time to settle down. As far as the tea industry is concerned, I personally believe that it’s a blip — it’s going to take time to sort things out, but new opportunities are invariably out there waiting to be explored — and we have to find them

    Tea Exported to Russia (2020)

    Total Production (mt)Total ExportsExports to Russia%age1
    China2,986,016      348,81515,3004.39
    Georgia5,0001,80020011.11
    India1,257,530203,56539,20019.26
    Indonesia 126,00045,265 8,50018.78
    Iran19,0007,0006008.57
    Kenya569,536518,92125,1004.84
    Sri Lanka278,493 262,726 30,40011.57
    Vietnam186,000130,00013,00010.00
    Source: International Tea Committee courtesy Ian Gibbs
    1 Percentage of tea producing country’s total exports to Russian Federation

    Ian Gibbs was elected Chairman of the International Tea Committee in May 2016.  On leaving school, Ian served 14 years with the British Army.  He joined the tea trade in London in 1990, working with tea brokers Wilson Smithett in the City of London until 2005 when he set up his own company. Ian joined the management board of the ITC in 2009, representing Malawi, and became Vice-Chairman in 2010. Ian graduated in 2017 with a BA (Hons) at the Open University in the UK, majoring in French and International Relations. 

    *SWIFT is a secure protocol used by 11,000 financial institutions to transfer about 70% of interbank funds. Founded in 1973, SWIFT is managed by the Society for Worldwide Interbank Financial Telecommunication. The EU, UK, Canada, UK, and the US barred seven Russian banks as of March 1 and are expected to add more to the list, according to Reuters. SWIFT announced the disconnect is effective March 12. It is only the second time that the world’s central banks agreed to sanction a country’s banking system, writes Forbes.

    Established in 1933, the International Tea Committee (ITC) has provided the tea industry with valuable statistical information for more than 80 years. The ITC is an unbiased, non-profit supported and recognized by many major tea-producing and tea-consuming nations as the official source of timely, accurate, impartial data suited to all statistical requirements. To learn more, visit intea.com

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  • Sri Lanka Responds to Tea Market Turmoil

    This week Tea Biz traveled to Colombo, Sri Lanka to assess the impact of the war in Ukraine on one of the Russian Federation’s most important tea trading partners. Correspondent Dananjaya Silva spoke with veteran exporter Anil Cooke, managing director and CEO of Asia Siyaka Commodities, whose insights offer clarity amid a fast-changing crisis that is disturbing global harmony in tea.

    • Caption: Anil Cooke, managing director and CEO of Asia Siyaka Commodities in Colombo, Sri Lanka

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    Anil Cooke Explains Sri Lanka’s Response to Tea Market Turmoil

    Sanctions Trigger Halt in Tea Shipments to Russia

    By Dananjaya Silva | PMD Tea

    The Russian Federation faces an unprecedented combination of payment and logistics barriers that are interrupting supply. The combined resolve of governments condemning the unprovoked invasion of Ukraine has created uncertainty over prompt clearance of payments. Sanctions that exclude several Russian banks from the SWIFT global payment system and threaten the liquidity of Russia’s Central Bank led to a severe devaluation of the ruble (currently trading for less than 1 cent USD) making tea imports far more costly. That action led MasterCard, American Express, and VISA to suspend transactions at physical locations in Russia or online. Apple Pay and Google Pay systems did the same. Separately the US, EU, Canada, and UK closed their airspace to Russian owned and operated aircraft.

    The collective refusal of the world’s largest container shipping companies to deliver or receive goods poses additional barriers to the movement of tea. Russia annually imports 150,000 metric tons of tea — a total likely to plummet in 2022.

    Correspondent Dananjaya Silva, managing director of PMD Tea in London was in Colombo this week where he spoke with Anil Cooke.

    Dananjaya Silva: Will you discuss the current situation in Ukraine?

    Anil Cooke: It’s critical for Sri Lanka. Last year, Russia imported 27 million kilograms and 29 million kilograms the year before. And Ukraine has been steady at around 4 million kilos each year over the last three years. So that’s approximately 10% of all the tea shipped by Sri Lanka.

    The impact of these two markets is varied in the sense that they buy a whole cross-section of grades from small-leaf, high-growns, to a mix of black leaf orthodox teas. And that could be a definite issue with the depth of demand at the digital auctions, given the uncertainty over trade with these countries. At the moment there’s tea that has already been shipped. Often, the importers operate on a degree of credit, sometimes 30 to 60 days. We are not certain how long these proceeds will take to reach Sri Lanka.

    The other concern is that it looks like shipping and movement of cargo to these markets will be restricted in the immediate short term. We find there are fewer [shipping] lines operating at the moment. So, we’ll have to wait and see.

    Dananjaya: Will you provide some insight on the current price realization? Are you concerned about clearing payments with Russia, given the magnitude of sanctions prevent tea transactions? Do you anticipate workarounds and bartering of commodities?

    Anil: Auction prices are beginning to reflect slackening demand from Russian and Ukrainian buyers.

    The positive aspect is that it’s gradual. Right now, Colombo, Sri Lanka is in the midst of its western quality season. And it’s been pretty dry with production low. So, I don’t see this being felt until a few weeks further downstream, because there is ample demand to take up the available quantities on offer.

    The impact of sanctions on the banking system is also unclear. We are aware that there are yet some banks that have not been prevented from doing business. The impact of SWIFT will be visible later.

    [Editor’s Note: SWIFT is a secure protocol used by 11,000 financial institutions to transfer about 70% of interbank funds. Founded in 1973, SWIFT is managed by the Society for Worldwide Interbank Financial Telecommunication. The EU, UK, Canada, UK, and the US barred seven Russian banks as of March 1 and are expected to add more to the list, according to Reuters. SWIFT announced the disconnect is effective March 12. This is only the second time that the world’s central banks agreed to sanction a country’s banking system, writes Forbes.]

    On the face of it, these sanctions could bite and stop the movement of goods, even though in most cases sanctions are not supposed to block the movement of food.

    Dananjaya: Do you see Sri Lanka adopting a bank settlement system in currencies other than US dollars, like that developed with Iran to circumvent sanctions, happening with Russia?

    Anil: The system with Iran was unique. It was in relation to historic debt on previous oil shipments, which is not the case here.

    [Editor’s Note: Air, land, and sea carriers that refused booking to and from Russia confirmed they will deliver tea, coffee, and humanitarian products. In aggregate these carriers represent more than half the volume of goods shipped in containers.]

    Dananjaya: Assuming hostilities and sanctions continue, how will logistics impact sales given the difficulties of delivering cargo? It appears that it will be simpler to ship tea elsewhere. Is there sufficient demand in the rest of the world? Or should the Orthodox producers throttle back?

    Anil: The biggest challenge is movement of tea to Russia. The impact on most black tea markets is significant, particularly the Orthodox producers.

    Sri Lanka, South India, and Vietnam would feel it to a great extent and Kenya to a lesser extent, but from Sri Lanka’s point of view, we can cope without this demand, because I anticipate a drop in production this year.

    Sri Lanka has already been struggling with shortages of fertilizer and even if the rains are on schedule, I believe that the crop loss would balance the reduced demand from Russia and Ukraine. The way things are going, even the movement of cargo to Belarus is likely to be restricted.

    So, this is a transitional phase. I think we will overcome lower demand from Russia because there’s plenty of interest from North Africa and the Middle East.

    We also believe that some of the Russian tea drinkers who moved to coffee may come back to tea due to less discretionary income with the depreciation of the ruble. That’s a hopeful interpretation of how the customer would behave in what is a complex situation.

    I think it’s going to be tough on the world for tea, particularly the most vulnerable people in the value chain, the farmers and the workers and the tea producers. We don’t need this kind of disruption to a situation that is already complex, and as you know, people suffering and not making ends meet at the producer level.

    So, this is a totally unnecessary problem. If one considers the absolute destruction in Ukraine, we don’t know when these people will be able to return to some sort of normalcy. Cessation of violence will not enable them to simply restart their previous lives.

    There will also be a price that the Russian public will have to pay for this because the sanctions will bite deep and remain in place for a long time.

    Invariably it’s the most innocent who are the victims of all of this.

    London-based Dananjaya Silva is the managing director of PMD Tea and a fourth-generation tea man whose family business, P.M. David Silva & Sons date to 1945 during the Plantation Raj in Ceylon’s Dimbula Valley. The company was founded on Brunswick Estate in the fertile Maskeliya Valley as a small independent Tea shop for tea plantation workers to gather, relax and enjoy a quality cup of tea.

    Asia Siyaka

    Asia Siyaka Commodities is one of Sri Lanka’s leading market intermediaries in the tea industry. The 16-year-old licensed tea brokerage has built a reputation for innovation and dynamism and has played a pertinent role in transforming Sri Lanka’s tea auction logistics, which is now among the most sophisticated and structured systems in the world. The company trades an average of 40 million kilos of tea annually and ranks consistently among the top four tea brokers both in terms of traded volumes, with a 14% market share, and prices obtained. Services include warehousing and tea factory development. To learn more, visit www.asiasiyaka.com

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    Anil Cooke, managing director and CEO of Asia Siyaka Commodities in Colombo, Sri Lanka

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