Tea innovations date to antiquity. The beverage is constantly re-invented; in this instance, as a CO2-enhanced, nitro-infused, cold-brewed iced tea conveniently available in cans that pour a craft brew head of foam. The ancients might not fully comprehend pop-top cans but would instantly recognize the taste. East Forged tea co-founder Kym Cooper reminds us that tea’s simple, unadulterated taste is timeless.
Kym Cooper describes the importance of making teas that taste like tea
Kym Cooper
A Fizzy, Foamy Innovation in Tea
By Dan Bolton
East Forged teas, launched in Australia in 2020, are nonalcoholic sparkling adult beverages cold-brewed for 12 hours from organic whole-leaf green, black, and white teas and blended with low-sugar Calamansi, Pitaya, or Yuzu juice. Manufactured in a brewery and then canned, the teas get a burst of CO2 for fizz and nitrogen to add texture and a creamy head. The black tea tastes of citrus and is dry, not sweet. The Fujian-grown white tea is flavored with calamansi, a mild, wild citrus hybrid from the Philippines, ideal for social occasions.
Dan: Kym, let’s talk today about innovation and the timeless essence of tea. What do you like most about tea?
Kym Cooper: I love the taste of tea. The taste is clean and pure, described frequently by tea drinkers as delicate and light. I think we can agree that this is the natural baseline of tea.
You can then find real enjoyment in learning more about the plant, its nuanced complexity, mouthfeel, and the process by which it has been created. These are all qualities that make other agricultural products and ingredients appealing, but somehow it’s just not bridged across to tea.
I think our perception has been largely shaped over the years by what we can access conveniently in supermarkets, where food and drinks become dominated by enhancers to achieve commercial realities such as maximum shelf life. Becoming accustomed to synthesized tastes developed in flavor houses and then enhanced by sugars and sweeteners that still go under the guise of being natural, these products don’t reflect tea’s clean and untainted taste.
It’s quite a real challenge to find tea beverages in the hot and iced tea aisles that represent unadulterated tea.
Dan: How do you interest consumers in tasting better tea? You mentioned that you encourage a broad tea-tasting experience. Let’s start with that.
Kym: I think the best way is to make it approachable and accessible, in my view. When getting people interested in tea, suggesting their tastes need refinement is unnecessary. It’s about encouraging people to try something new and have a wider tasting experience.
We interest people by drawing on some of the simple and natural benefits of tea and allowing them to enjoy it.
“These teas are inclusive and social, suited to adult tastes, a tea for Sober Curious and the mindful drinking community.”
East Forged Website
When I teach people about tea, I encourage them just to take that first step, pick up the cup, taste it, and not have any predefined thoughts about what that tea should be. Then you can move on and decide what you enjoy.
Cold tea drinks with added sugar and flavoring stray a long way from representing that natural taste. To introduce new consumers to the real taste of tea, we use quality leaf tea canned to meet production standards while still retaining the natural taste of the leaf.
I would love to think consumers will eventually reach a point where they can compare and purchase a Japanese-grown Yabukita over an Australian-grown Yabukita, just as we might reach for something like a Granny Smith green apple here in Australia to create a baked apple tart over a red delicious apple as an example.
Understanding the effect of seasons and harvests that we see across all agricultural products can help us be drawn into the world of tea.
Melbourne Tea Festival
Dan: What is the best way to preserve the natural goodness of tea?
Kym: Tania Stacey, who co-founded East Forged, and I hold a strong belief as tea specialists that we’re uniquely positioned to solve the problem of underrepresented natural-tasting iced tea.
We use simple and natural ingredients; we source directly from a wide network of tea growers and farmers we’ve worked with over the years. We minimally brew and preserve the tea plant and its most delicate properties so that we are able to deliver that authentic tea taste.
The tea is manufactured in a brewery. It’s a mix of tea knowledge and craft techniques. In the Australian market, craft beer is huge, and we love looking at the techniques they use to highlight natural ingredients.
We’ve taken the simple and natural ingredient, with just a small amount of fruit juice, to elevate the flavor profile. We’ve also played around with the gases within our drinks. So, there’s a small amount of CO2, and we use nitrogen in our beverages to retain the best flavors of tea. Each gas works slightly differently in the flavor profile. At the end of the day, it’s still undeniably that taste of tea with really short ingredient list that highlights our East Forged difference.
The brilliance in this short ingredient list is that it actually punches above its weight in terms of the taste, delivering a refreshingly new style of craft iced tea refreshment that looks deceptively like a beer and is completely nonalcoholic with natural and health benefits that come with tea.
Product Specifications
250ml cans 0.3g Sugar 1.8 Cal per can (Black Tea & Yuzu) 3.1 Cal per can (White Tea & Calamansi) $29 Six pack Alcohol free Vegan
These teas encourage people to add other inclusive drinking opportunities.
There are strong tailwinds in the low-and-no alcohol category. In Australia, we see a trend towards alcohol abstinence (approx. 20%1), and at least half of our drinkers actively moderate their alcohol consumption, with 40%2 of those moderating specifically looking for low-sugar drinks that are both convenient and meet the occasion. Many brands enter this category with like-for-like alcoholic beverages (e.g., NA beers). But tea has a great opportunity to develop this category with a truly inclusive adult-tasting drinking option!
At East Forged, we’re about creating this new wave of ready-to-drink craft iced tea for tea drinkers expecting that provenance of tea in every drop they drink. It’s a cold brew that I think any Sober Curious person will be surprised to find a bit cheeky.
1 2019 AIWH National Drug Strategy Household Survey
2 2020 Mintel Global Food & Drinks trends
Prizes & Medals
2021 World Tea Expo Innovation Finalists
2021 Tasmanian Fine Food Awards
2021 UK Spirits & Drinks Business (Low/No Masters-aperitif)
2020 UK Spirits & Drinks Business (Autumn blind tasting)
East Forged foamy teaKym sourcing tea in JapanTania filling the cansTania poses with pallets ready to load
India’s highest levels of government are reforming the basic structure of agriculture. The intent is to loosen regulations on pricing and storage and to permit direct sales of produce. These rules have sheltered India’s farmers from the free market for decades. In September 2020 Prime Minister Narendra Modi called the reforms a “watershed moment” for Indian agriculture but a year later was forced to abandon plans to end subsidies following widespread protests.
In Part 2 of this Newsmaker Interview – Prabhat Bezboruah, Chairman of the Tea Board of India, describes a new board mission to increase consumption, promote tea exports and expand markets at home and overseas. He also addresses discussions underway to transfer regulatory oversight of India’s tea industry from the Ministry of Commerce to the Agriculture and Farmers Welfare Ministry.
Listen to the interview (Part 2)
Prabhat Bezboruah, Chairman Tea Board of India on expanding India’s domestic tea market and exports.
Prabhat Bezboruah, chairman of the Tea Board of India
Part II: Tea Board Reform and Changing Priorities
During the past few months, the Tea Board of India has shown signs of change. Stakeholders, many of whom expressed concerns, have met on several occasions to better understand the prevailing views of the Tea Act of 1953. Several amendments were proposed and sections within the Act were revised or discarded. The Minister of State for Commerce and Ministry, Anupriya Singh Patel, also visited the tea regions, meeting various groups from the tea industry. In Part II we continue our conversation with Prabhat Bezboruah, Chairman of the Tea Board of India, on the changes underway.
Aravinda: How can the plantation model stay relevant in these changing times, as the small tea grower community is growing?
Prabhat: The organized sector today is struggling because it has low productivity, low investment, large-scale theft and malpractice, and an inability to carve a niche out for itself. There are companies, even in today’s scenario, where small growers have maintained a cost of production that is half that of the organized sector, or maybe even less. There are companies that are doing well because small growers, the way they are set up, and the fact that they sell their produce to Bought Leaf Factories, cannot make very good teas. There are always exceptions. There are some Bought Leaf Factories that buy only the best quality green leaf from small growers. There are small growers who pluck very well. So there are exceptions. But the general trend in the small tea grower sector is that their quality is not as good as the organized sector. There are estates in the organized sector that make superlative teas. Their cost of production is much higher. Especially this year, they are getting huge premiums. I would like to bring to your attention that a medium Assam today is selling at INRs 180 – 200 a kilo. The best is 400 plus. So you have a quality premium of 200 plus and the cost of production differential is not 200. Therefore, people who aren’t focusing on quality – and I’m talking about really, really good quality – are going to lose out this year. They will lose out to people who are focusing on that kind of quality. And that’s the way to go. If you do go that way there would also be spinoff benefits for everyone because your volume will come down.
It would be of interest to you that there are some areas of Assam where large-scale theft and dacoity [an act of armed robbery committed by a gang] of green tea leaves is taking place. And I’ve been observing that many of the companies, the majors, tea majors, as you would call them, who’ve had to divest their units the units that they’re getting rid of and the bulk of their assets are in the areas where this green leaf theft is rampant. I feel for them.
The green leaf is sold to people who buy and there is no certificate of origin in the case of green leaf. If you have a Bought Leaf Factory and somebody brings two trucks of fairly acceptable green leaf to you, you will buy it. You don’t ask the seller where they got this from.
Aravinda: Is something being done about this?
Prabhat: The leaf is being stolen from the composite garden, estate gardens. The people who are doing the stealing are local people. And the government is doing its best to help. But it’s endemic in certain areas. I have a sneaking feeling that one of the big reasons for majors are having problems in the units is this. I started by saying that small growers can produce green leaf at half or less the cost of production of privatized gardens. But there are ways of handling it, creating niche markets for yourself. But if you have so many pressures on you and one of them is theft, then you buckle.
Aravinda: You spoke of quality being one of the things to go after, but is there enough innovation happening in the industry that you think is going to help tea get better prices?
Prabhat: Innovation is there at the front end, with really fantastic tea rooms and tea boutiques. This is one area where we should move forward. In Australia and in the US there have been new methods of brewing tea, like pressure steam rather than water which brings out more of the flavor.
But we are dealing with an estimated output of 1,360 million kilos this year. These innovative methods of reaching the ultimate consumer are welcome, but they are not going to help bring that 1,360 or any sizeable percentage of that output out of the morass. It won’t.
We need to be innovative in the field, which is not coming through. You need to be open-minded to new technology in the factories, which is not happening. Basically, the tea industry remains very hidebound. I believe that we do need to come out of our shells, and we need to be receptive to new technology.
We need to be innovative in the field, which is not coming through. You need to be open-minded to new technology in the factories, which is not happening. Basically, the tea industry remains very hidebound.
– Prabhat Bezboruah
Aravinda: What’s the Tea Board’s response to challenges and concerns faced by the industry?
Prabhat: We tend to give a lot of importance to the Tea Board, but the Tea Board’s ability to really help the industry is very significant ways is limited. However, the Tea Board can change its focus. What does the Tea Board do? One, they run the auctions. The auctions are not badly run. I don’t think that they did a very, very bad job, but the whole structure of the auctions is wrong. And the Tea Board hasn’t restructured that. We just took the manual auction and converted it into a replica, an electronic replica, where the hammer was replaced by the mouse. We had the option at that time, and the opportunity of redesigning the whole platform, the whole structure of the platform. We had the opportunity, but we lost it. That was in 2007-08.
Now the Tea Board is overregulating the industry, issuing tea factory licenses, issuing licenses at its own whim. So, that’s really not the job of the Tea Board. The Tea Board should actually monitor what is being imported into the country. We can’t block imports [due to World Trade Organization rules] but we have to discourage it by having an import duty. We already have a 100% import duty but it does not apply to tea shipped here from every country.
We can ensure that the tea coming into the countries is clean. The Tea Board must monitor this, but they are not doing that. Maybe they will now. I mean, so far, they haven’t.
We talk about the young generation not being that enthusiastic about tea, moving on to other hot beverages, like coffee. What are we doing to ensure that packets are of reasonable quality?
I’m surprised that there are packets that are being launched priced below the most economy packet. You have to try and attract new customers but I fear that this kind of strategy will actually push people away from tea. The whole concept of competing on price as they do in supermarkets in Europe and America, where a lot of things are price-driven, I feel that strategy should not be aimed for in India because of the much lower segment already in place.
In supermarkets in America and Europe, the price of tea is fairly high compared to our prices. So, for them, it does make sense to compete on price. But in India, the cheapest packets are already very cheap. And if you try to offer the consumer even cheaper tea, you have to compromise on quality. And the kinds of consumers who are offered these very cheap and very poor-quality teas will get turned off from tea permanently.
The marketing wars should be fought on quality rather than on price. And that would expand the overall market for tea. And I feel that the Tea Board has a role to play there because I feel we should look at the really cheaper packets and maybe the other packets and test them. We should also test what’s coming out from our gardens and ensure that all the tea that is sold in India is as safe as that which is exported. Because we talk about other importing countries putting non-tariff barriers on our tea by reducing the maximum residue limits. But I don’t think that’s wrong on their part. If somebody wants to protect its citizens more stringently, they have the right to do so. And we should ensure that our own citizens in the country are drinking tea which is as safe as that which is exported.
Prabhat: There has been news about the various reforms underway at the Tea Board. What can we expect in the coming year?
Prabhat: The government is going to revamp the Tea Act. It’s going to be a wholesale revamp. The role of the Tea Board is also going to be redefined. That’s a work in progress and it’s already happening. Even the Plantation Labor Act is going to get subsumed once the code on wages and the occupational safety and health hazards act is implemented.
They’ve already passed this legislation but the implementation is being delayed a bit because the government is under a lot of pressure. The economy is under a lot of pressure due to the two COVID waves and the resulting huge disruption in trade. But as soon as it comes, the Plantation Labor Act will be subsumed by those two new acts. The two acts have a totally different take on the remuneration that a plantation worker should get. So that’s one big change that we foresee. It will impact the organized sector as well as the unorganized sector, as well as the small tea growers. And hopefully, create a more level playing field. The Tea Act is also being amended and once it’s amended the role of the Tea Board will change.
The government is going to revamp the Tea Act. It’s going to be a wholesale revamp. The role of the Tea Board is also going to be redefined. That’s a work in progress and it’s already happening. Even the Plantation Labor Act is going to get subsumed once the code on wages and the occupational safety and health hazards act are implemented.
– Prabhat Bezboruah
Aravinda: Will we be seeing this in 2022?
Prabhat: About the code on wages, I don’t know. If you bring in the code on wages and the occupational safety and health act now, suddenly there’ll be huge numbers of small and marginal businesses that may go under, and it will be a big disrupting factor in India. So I feel that the code on wages and the occupational safety and health hazards act will be implemented in 2023, not 2022. the Tea Act amendments and modifications will definitely come through in 2022.
Aravinda: What about speculation that the Tea Board of India will move from the Ministry of Commerce to the ministry of Agriculture and Farmer Welfare? Is that something that the industry or the board has been pushing for?
Prabhat: The board hasn’t been pushing for it. There was a meeting where this, among other things, was discussed, but the meeting didn’t reach any conclusion. There’s going to be another meeting and I think at the end of that meeting, we’ll have clear guidance about what’s going to happen in the future. As far as the industry is concerned, I think small tea growers are very keen that the board and the industry be brought under the agriculture ministry. As far as the larger producers are concerned and the associations are concerned, there is no consensus. I think some people would prefer to be under agriculture and others would like the status quo.
Prabhat Bezboruah
Tea came under commerce because it was India’s most important export in the 50s. Up to about 1953-54, believe it or not, it was the biggest export, earning the biggest revenue, the biggest value. So, therefore, it came under Commerce. Today tea exports are just under $1 billion in a country where the total export value is around $275 billion, it’s like 0.3%. So, it doesn’t deserve to be in the Commerce Ministry, but for historical reasons, we are. Going into agriculture might help small growers. I’m not sure how much benefit it will bring. Taking it out of commerce might bring the export focus down and as I said, exports remain a large part of our business plan. Even though domestic consumption is almost five times greater, exports are crucial in standardizing the market and sorting a better price for producers. So I wouldn’t like the export focus to go.
Aravinda: Should the Tea Board become the Tea Market Expansion Board once again, as suggested in the letter by the Guwahati Tea Auction Buyers’ Association, and focus on building the market and promoting tea? Should that be the Tea Board’s priority?
Prabhat: Definitely. That’s what I’ve been saying for the last three years. I think that same letter was sent by the ITEA, the Indian Tea Exporters Association. So, people are realizing that the Tea Board should focus on marketing rather than on regulation. They need to ensure that good tea are sold in the country. They need to ensure that the demand for tea goes up.
People are realizing that the Tea Board should focus on marketing rather than on regulation. They need to ensure that good teas are sold in the country. They need to ensure that demand for tea goes up.
– Prabhat Bezboruah
Aravinda: What about the tea brands that are coming up? What role can they play in building this market and supporting the industry? What would you like to see them do?
Prabhat: I’d like to see them compete on quality. People like Teabox have some really high-quality offerings, but I would also like them to expand their markets faster than they are doing because these innovative marketing approaches are only barely scratching the surface. When you’re talking about a production level of 1,360 million kilos, if you have 100,000 or 120,000 kilos, going into one of these premium brands, it’s not really going to make much of an impact on the entire industry, but that’s not to demean their efforts. They are very important. Although Darjeeling produces only 7 million kilos annually, it acted as the flagship of India. Even today, when you talk about premium teas, the first thing that comes to mind is Darjeeling. These brands, which have come into the market recently, as long as they focus on exclusivity and high-quality tea, are able to lift the whole category up a little bit.
Aravinda: They become a face of the industry, isn’t it? Because they showcase the best of what is available and the best of what is possible.
Prabhat: Exactly. And you see what will happen then if somebody thinks that they would like it a lot and maybe they would try another few brands, their friends who can’t afford such high-priced teas would buy something else.
Aravinda: Will the domestic market compensate for what is lost in the export market?
Prabhat: Exports are now only 20% or less of our total production, so we need to get people in India to drink more tea and better tea. If we can do that, a lot of our marketing problems will be over, but exports are important because India needs exports, without exports, you can’t establish a stable and remunerative primary market for tea. So for both those reasons, we need to focus both on exports and boosting domestic demand.
Aravinda: What about the move to organic production? Darjeeling seems to view organic cultivation as a way to survive. Do you think that’s necessary, especially coming on the back of what happened in Sri Lanka?
Prabhat: Darjeeling needs organic because in Darjeeling the difference in yield between a conventional estate and an organic one is less than it is in Assam. Assam is a hothouse. Its temperature and extremely humid conditions are like a greenhouse. Under these conditions, conventional agriculture will give you almost double the yield, compared to organic agriculture. Since you produce so much less, you need to sell organic produce at almost double the price. In the recent past, or even in the last 20, to 30 years that hasn’t been the case. There is strong demand for organic tea but it’s at a price that is 30-40% more than conventional tea. And with that kind of a price premium for organic, it won’t be sustainable. And that’s what happened in Sri Lanka. That was a bold step they took. If they had stuck to it and if the entire global industry became organic, you would be seeing huge price increases. We would see prices moving into the $7-8 [per kilo] bracket worldwide, maybe more. But the whole industry, the entire global industry would have to convert.
Aravinda: Do you remain optimistic about the future of the tea industry in India?
Prabhat: If we evolve, yes, definitely. The organized sector needs to evolve and fast. As far as small growers are concerned, they’re definitely here to stay. That combination is unbeatable.
In south India, the tea estates are doing many other things. There are tea estates that are into floriculture. There are tea estates that are making very high-quality orthodox teas, which are selling extremely well. In the Northeast particularly, and Dooars, tea over the decades has brought better returns and better profitability than the south. An easier environment breeds lethargy. In the north, especially the Northeast, we have become lethargic, and we are unable to change with the times and keep complaining all the time. And that’s really not the way to go. We have to be focused and optimistic.
Smallholders have replaced plantations it total volume of tea produced, but the tea is often low quality
Part I: Current Challenges and Expectations
The Tea Board of India has been in the news recently for various reforms now underway. We spoke to Tea Board Chairman Prabhat Bezboruah to better understand the changes that are brewing with the Board and to learn his views on how the Indian tea industry is faring this year. Bezboruah has been chairman since 2017. An alumnus of IIM Calcutta and the Wharton School of Business, he is the first tea planter to hold the position.
Listen to the interview (Part 1)
Prabhat Bezboruah, Chairman Tea Board of India on expanding India’s domestic tea market and exports.
Aravinda Anantharaman: How has 2021 been for the Indian tea industry?
Prabhat Bezboruah: It’s been quite bad. 2020, despite the lockdown and that tea gardens were shut for a while, turned out to be a pretty good year for tea. When supply is restricted, prices go up. This year, Indian volumes have recovered almost to 2019 levels, but demand is sluggish.
I personally don’t believe demand contracted over the COVID epidemic. But it’s sluggish, it’s stagnant, growing at maybe 1% or so. 2019 was a bad year for tea, and 2021 will be a pretty bad year, especially for the South Indian tea industry where the prices are lower even than 2019.
Aravinda: Are rising costs and slowing exports the primary reason?
Prabhat: The primary reason is volume output. The crop has bounced back to 2019 levels. Remember, we had record exports in 2019. Last year, exports were about 210 mkg. This year they’re likely to be lower.
[In 2020 tea production declined to 1,257 million kilos and exports dropped by 16% to 208 mkg, down from 249 mkg in calendar 2019. CTC, at 150 mkg, accounts for nearly 60% of the country’s total tea exports – Tea Board Production by Region 2019/20].
The whole logistics chain is broken. There are various reasons Indian tea is uncompetitive. Kenyan teas are still available cheaper than equivalent Indian teas. South Indian doesn’t compete with Kenya. Orthodox exports from South India are decent, they compete with Sri Lankan exports. The South Indian CTCs are much lower in the value chain. Indian CTC exports are going to be very badly affected because Kenyans are available much cheaper. Overall, the export’s scenario isn’t very bright, and the domestic demand is also sluggish, prices are down every way.
Aravinda: Will growers carry forward tea again, this year, like in 2019?
Prabhat: There might be some carry forward stock because exports are going to be much lower than 2019, but in 2019 we made 1,340 million kilos and we exported 250 million kilos. If our exports had been at the 2019 level, you wouldn’t have seen any carry forward this year.
Aravinda: India’s hospitality industry has still not recovered from the pandemic. What is the impact on tea?
Prabhat: Hospitality is a fairly large chunk of demand in India. Hospitality includes tea stalls, roadside tea stalls. That’s a big demand. But the total out-of-home (OOH) demand for tea in India is only around 15% of the total demand. In-home drinking of tea has increased to offset some of the droppings in OOH. I don’t buy the story that Indians are drinking less tea in 2021 than they were even in 2019.
I don’t think you’re really going to see a very bad last quarter as far as demand is concerned. I don’t know about prices, but I think that demand will be there.
Aravinda: You’ve spoken about the need to liberalize the market. What would you say is the current reliance on auctions as a price discovery platform? What needs to change?
The tea auction should not be the price barometer, but it is. I don’t believe that a dual system can survive.
– Prabhat Bezboruah
Prabhat: I’ve always thought that the auctions are a good place to sell your tea provided it’s the only place to sell your tea. You can’t have a system that acts as the primary price discovery mechanism – that’s the auction – and then expose it to manipulation. There’s no overt collusion among the main buyers because they are companies that are bound by very strict ethical codes and they do follow those codes. I would hasten to dispel the notion that there is any overt collusion between, at least the big boys, so to speak.
In any auction, there’s what’s known as a demand multiplier. Even the biggest buyer, to get a million kilos of tea, for example, needs to bid for 2 or 2.5 million kilos of tea because they don’t get every lot they bid for. So if you take away demand from the auction if a buyer has a total tea demand requirement of 50 million kilos, and you permit him to buy 30 million outside the auctions, the level of competition in the auction will be affected not only for the 30 million that he doesn’t buy, but another 40 or 50 million that he would have had to bid for in order to buy that 30 million. It’s actually a no-brainer that if you have parallel systems running, even if there’s no overt collusion, you’ll be weakening the auction. So, therefore, the auction should not be the price barometer, but it is. I don’t believe that a dual system can survive. Now we need to sell 50% of our teas in the auctions, but buyers don’t need to buy 50% of their purchases in the auctions. So it’s a total hodgepodge. I have brought up the issue repeatedly at the Tea Board. Now they have Mahadevan’s report (a reference to the report by Prof. Mahadevan of the IIM-Bangalore, recommending the Japanese auction model) in hand. Even that is being implemented very slowly. That’s not a panacea, that will not be a panacea unless you ensure that 100% of tea is sold through the auctions. If you can’t do that, I feel that the government and the Tea Board should withdraw from the auctions. The brokers, who sell tea on behalf of the producers to the buyers can organize their own auctions. That won’t be a price barometer. It would be like any other sale.
There would be competition. The marketing of tea, the primary marketing of tea would be liberalized in a way that would benefit everyone. The alternative, as I told you before, and I’m repeating myself, is to have everything sold in the auction.
India’s traditional tea plantation model is under regulatory scrutiny. The union government recently amended legislation from the 1950s to gradually loosen regulations, abandoning requirements that previously limited who could grow tea and where it could be grown. Amending the Tea Act and redefining the mission of the Tea Board of India will follow. In Part 1 of this extended Newsmaker Interview, Aravinda Anantharaman speaks with Tea Board of India Chairman Prabhat Bezboruah to better understand the current situation and the economic and societal forces driving change.
Listen to the interview, Part I
Prabhat Bezboruah, Chairman Tea Board of India on current challenges and expectations.
Part I: Current Challenges and Expectations
The Tea Board of India has been in the news recently for various reforms now underway. We spoke to Tea Board Chairman Prabhat Bezboruah to better understand the changes that are brewing with the Board and to learn his views on how the Indian tea industry is faring this year. Bezboruah has been chairman since 2017. An alumnus of IIM Calcutta and the Wharton School of Business, he is the first tea planter to hold the position.
Aravinda Anantharaman: How has 2021 been for the Indian tea industry?
Prabhat Bezboruah: It’s been quite bad. 2020, despite the lockdown and that tea gardens were shut for a while, turned out to be a pretty good year for tea. When supply is restricted, prices go up. This year, Indian volumes have recovered almost to 2019 levels, but demand is sluggish.
I personally don’t believe demand contracted over the COVID epidemic. But it’s sluggish, it’s stagnant, growing at maybe 1% or so. 2019 was a bad year for tea, and 2021 will be a pretty bad year, especially for the South Indian tea industry where the prices are lower even than 2019.
Aravinda: Are rising costs and slowing exports the primary reason?
Prabhat: The primary reason is volume output. The crop has bounced back to 2019 levels. Remember, we had record exports in 2019. Last year, exports were about 210 mkg. This year they’re likely to be lower.
[In 2020 tea production declined to 1,257 million kilos and exports dropped by 16% to 208 mkg, down from 249 mkg in calendar 2019. CTC, at 150 mkg, accounts for nearly 60% of the country’s total tea exports – Tea Board Production by Region 2019/20].
The whole logistics chain is broken. There are various reasons Indian tea is uncompetitive. Kenyan teas are still available cheaper than equivalent Indian teas. South Indian doesn’t compete with Kenya. Orthodox exports from South India are decent, they compete with Sri Lankan exports. The South Indian CTCs are much lower in the value chain. Indian CTC exports are going to be very badly affected because Kenyans are available much cheaper. Overall, the export’s scenario isn’t very bright, and the domestic demand is also sluggish, prices are down every way.
Prabhat Bezboruah
Aravinda: Will growers carry forward tea again, this year, like in 2019?
Prabhat: There might be some carry forward stock because exports are going to be much lower than 2019, but in 2019 we made 1,340 million kilos and we exported 250 million kilos. If our exports had been at the 2019 level, you wouldn’t have seen any carry forward this year.
Aravinda: India’s hospitality industry has still not recovered from the pandemic. What is the impact on tea?
Prabhat: Hospitality is a fairly large chunk of demand in India. Hospitality includes tea stalls, roadside tea stalls. That’s a big demand. But the total out-of-home (OOH) demand for tea in India is only around 15% of the total demand. In-home drinking of tea has increased to offset some of the droppings in OOH. I don’t buy the story that Indians are drinking less tea in 2021 than they were even in 2019.
I don’t think you’re really going to see a very bad last quarter as far as demand is concerned. I don’t know about prices, but I think that demand will be there.
Aravinda: You’ve spoken about the need to liberalize the market. What would you say is the current reliance on auctions as a price discovery platform? What needs to change?
Prabhat: I’ve always thought that the auctions are a good place to sell your tea provided it’s the only place to sell your tea. You can’t have a system that acts as the primary price discovery mechanism – that’s the auction – and then expose it to manipulation. There’s no overt collusion among the main buyers because they are companies that are bound by very strict ethical codes and they do follow those codes. I would hasten to dispel the notion that there is any overt collusion between, at least the big boys, so to speak.
In any auction, there’s what’s known as a demand multiplier. Even the biggest buyer, to get a million kilos of tea, for example, needs to bid for 2 or 2.5 million kilos of tea because they don’t get every lot they bid for. So if you take away demand from the auction if a buyer has a total tea demand requirement of 50 million kilos, and you permit him to buy 30 million outside the auctions, the level of competition in the auction will be affected not only for the 30 million that he doesn’t buy, but another 40 or 50 million that he would have had to bid for in order to buy that 30 million. It’s actually a no-brainer that if you have parallel systems running, even if there’s no overt collusion, you’ll be weakening the auction. So, therefore, the auction should not be the price barometer, but it is. I don’t believe that a dual system can survive. Now we need to sell 50% of our teas in the auctions, but buyers don’t need to buy 50% of their purchases in the auctions. So it’s a total hodgepodge. I have brought up the issue repeatedly at the Tea Board. Now they have Mahadevan’s report (a reference to the report by Prof. Mahadevan of the IIM-Bangalore, recommending the Japanese auction model) in hand. Even that is being implemented very slowly. That’s not a panacea, that will not be a panacea unless you ensure that 100% of tea is sold through the auctions. If you can’t do that, I feel that the government and the Tea Board should withdraw from the auctions. The brokers, who sell tea on behalf of the producers to the buyers can organize their own auctions. That won’t be a price barometer. It would be like any other sale.
There would be competition. The marketing of tea, the primary marketing of tea would be liberalized in a way that would benefit everyone. The alternative, as I told you before, and I’m repeating myself, is to have everything sold in the auction.
The tea auction should not be the price barometer, but it is. I don’t believe that a dual system can survive.
– Prabhat Bezboruah
Part II: Tea Board Reform and Changing Priorities
During the past few months, the Tea Board of India has shown signs of change. Stakeholders, many of whom expressed concerns, have met on several occasions to better understand the prevailing views of the Tea Act of 1953. Several amendments were proposed and sections within the Act were revised or discarded. The Minister of State for Commerce and Ministry, Anupriya Singh Patel, also visited the tea regions, meeting various groups from the tea industry. IN Part II we continue our conversation with Prabhat Bezboruah, Chairman of the Tea Board of India, on the changes underway.
Aravinda: How can the plantation model stay relevant in these changing times, as the small tea grower community is growing?
Prabhat: The organized sector today is struggling because it has low productivity, low investment, large-scale theft and malpractice, and an inability to carve a niche out for itself. There are companies, even in today’s scenario, where small growers have maintained a cost of production that is half that of the organized sector, or maybe even less. There are companies that are doing well because small growers, the way they are set up, and the fact that they sell their produce to Bought Leaf Factories, cannot make very good teas. There are always exceptions. There are some Bought Leaf Factories that buy only the best quality green leaf from small growers. There are small growers who pluck very well. So there are exceptions. But the general trend in the small tea grower sector is that their quality is not as good as the organized sector. There are estates in the organized sector that make superlative teas. Their cost of production is much higher. Especially this year, they are getting huge premiums. I would like to bring to your attention that a medium Assam today is selling at INRs 180 – 200 a kilo. The best is 400 plus. So you have a quality premium of 200 plus and the cost of production differential is not 200. Therefore, people who aren’t focusing on quality – and I’m talking about really, really good quality – are going to lose out this year. They will lose out to people who are focusing on that kind of quality. And that’s the way to go. If you do go that way there would also be spinoff benefits for everyone because your volume will come down.
It would be of interest to you that there are some areas of Assam where large-scale theft and dacoity [an act of armed robbery committed by a gang] of green tea leaves is taking place. And I’ve been observing that many of the companies, the majors, tea majors, as you would call them, who’ve had to divest their units the units that they’re getting rid of and the bulk of their assets are in the areas where this green leaf theft is rampant. I feel for them.
The green leaf is sold to people who buy and there is no certificate of origin in the case of green leaf. If you have a Bought Leaf Factory and somebody brings two trucks of fairly acceptable green leaf to you, you will buy it. You don’t ask the seller where they got this from.
Aravinda: Is something being done about this?
Prabhat: The leaf is being stolen from the composite garden, estate gardens. The people who are doing the stealing are local people. And the government is doing its best to help. But it’s endemic in certain areas. I have a sneaking feeling that one of the big reasons for majors are having problems in the units is this. I started by saying that small growers can produce green leaf at half or less the cost of production of privatized gardens. But there are ways of handling it, creating niche markets for yourself. But if you have so many pressures on you and one of them is theft, then you buckle.
Aravinda: You spoke of quality being one of the things to go after, but is there enough innovation happening in the industry that you think is going to help tea get better prices?
Prabhat: Innovation is there at the front end, with really fantastic tea rooms and tea boutiques. This is one area where we should move forward. In Australia and in the US there have been new methods of brewing tea, like pressure steam rather than water which brings out more of the flavor.
But we are dealing with an estimated output of 1,360 million kilos this year. These innovative methods of reaching the ultimate consumer are welcome, but they are not going to help bring that 1,360 or any sizeable percentage of that output out of the morass. It won’t.
We need to be innovative in the field, which is not coming through. You need to be open-minded to new technology in the factories, which is not happening. Basically, the tea industry remains very hidebound. I believe that we do need to come out of our shells, and we need to be receptive to new technology.
We need to be innovative in the field, which is not coming through. You need to be open-minded to new technology in the factories, which is not happening. Basically, the tea industry remains very hidebound.
– Prabhat Bezboruah
Aravinda: What’s the Tea Board’s response to challenges and concerns faced by the industry?
Prabhat: We tend to give a lot of importance to the Tea Board, but the Tea Board’s ability to really help the industry is very significant ways is limited. However, the Tea Board can change its focus. What does the Tea Board do? One, they run the auctions. The auctions are not badly run. I don’t think that they did a very, very bad job, but the whole structure of the auctions is wrong. And the Tea Board hasn’t restructured that. We just took the manual auction and converted it into a replica, an electronic replica, where the hammer was replaced by the mouse. We had the option at that time, and the opportunity of redesigning the whole platform, the whole structure of the platform. We had the opportunity, but we lost it. That was in 2007-08.
Now the Tea Board is overregulating the industry, issuing tea factory licenses, issuing licenses at its own whim. So, that’s really not the job of the Tea Board. The Tea Board should actually monitor what is being imported into the country. We can’t block imports [due to World Trade Organization rules] but we have to discourage it by having an import duty. We already have a 100% import duty but it does not apply to tea shipped here from every country.
We can ensure that the tea coming into the countries is clean. The Tea Board must monitor this, but they are not doing that. Maybe they will now. I mean, so far, they haven’t.
We talk about the young generation not being that enthusiastic about tea, moving on to other hot beverages, like coffee. What are we doing to ensure that packets are of reasonable quality?
I’m surprised that there are packets that are being launched priced below the most economy packet. You have to try and attract new customers but I fear that this kind of strategy will actually push people away from tea. The whole concept of competing on price as they do in supermarkets in Europe and America, where a lot of things are price-driven, I feel that strategy should not be aimed for in India because of the much lower segment already in place.
In supermarkets in America and Europe, the price of tea is fairly high compared to our prices. So, for them, it does make sense to compete on price. But in India, the cheapest packets are already very cheap. And if you try to offer the consumer even cheaper tea, you have to compromise on quality. And the kinds of consumers who are offered these very cheap and very poor-quality teas will get turned off from tea permanently.
The marketing wars should be fought on quality rather than on price. And that would expand the overall market for tea. And I feel that the Tea Board has a role to play there because I feel we should look at the really cheaper packets and maybe the other packets and test them. We should also test what’s coming out from our gardens and ensure that all the tea that is sold in India is as safe as that which is exported. Because we talk about other importing countries putting non-tariff barriers on our tea by reducing the maximum residue limits. But I don’t think that’s wrong on their part. If somebody wants to protect its citizens more stringently, they have the right to do so. And we should ensure that our own citizens in the country are drinking tea which is as safe as that which is exported.
Prabhat: There has been news about the various reforms underway at the Tea Board. What can we expect in the coming year?
Prabhat: The government is going to revamp the Tea Act. It’s going to be a wholesale revamp. The role of the Tea Board is also going to be redefined. That’s a work in progress and it’s already happening. Even the Plantation Labor Act is going to get subsumed once the code on wages and the occupational safety and health hazards act is implemented.
They’ve already passed this legislation but the implementation is being delayed a bit because the government is under a lot of pressure. The economy is under a lot of pressure due to the two COVID waves and the resulting huge disruption in trade. But as soon as it comes, the Plantation Labor Act will be subsumed by those two new acts. The two acts have a totally different take on the remuneration that a plantation worker should get. So that’s one big change that we foresee. It will impact the organized sector as well as the unorganized sector, as well as the small tea growers. And hopefully, create a more level playing field. The Tea Act is also being amended and once it’s amended the role of the Tea Board will change.
The government is going to revamp the Tea Act. It’s going to be a wholesale revamp. The role of the Tea Board is also going to be redefined. That’s a work in progress and it’s already happening. Even the Plantation Labor Act is going to get subsumed once the code on wages and the occupational safety and health hazards act are implemented.
– Prabhat Bezboruah
Aravinda: Will we be seeing this in 2022?
Prabhat: About the code on wages, I don’t know. If you bring in the code on wages and the occupational safety and health act now, suddenly there’ll be huge numbers of small and marginal businesses that may go under, and it will be a big disrupting factor in India. So I feel that the code on wages and the occupational safety and health hazards act will be implemented in 2023, not 2022. the Tea Act amendments and modifications will definitely come through in 2022.
Aravinda: What about speculation that the Tea Board of India will move from the Ministry of Commerce to the ministry of Agriculture and Farmer Welfare? Is that something that the industry or the board has been pushing for?
Prabhat: The board hasn’t been pushing for it. There was a meeting where this, among other things, was discussed, but the meeting didn’t reach any conclusion. There’s going to be another meeting and I think at the end of that meeting, we’ll have clear guidance about what’s going to happen in the future. As far as the industry is concerned, I think small tea growers are very keen that the board and the industry be brought under the agriculture ministry. As far as the larger producers are concerned and the associations are concerned, there is no consensus. I think some people would prefer to be under agriculture and others would like the status quo.
Tea came under commerce because it was India’s most important export in the 50s. Up to about 1953-54, believe it or not, it was the biggest export, earning the biggest revenue, the biggest value. So, therefore, it came under Commerce. Today tea exports are just under $1 billion in a country where the total export value is around $275 billion, it’s like 0.3%. So, it doesn’t deserve to be in the Commerce Ministry, but for historical reasons, we are. Going into agriculture might help small growers. I’m not sure how much benefit it will bring. Taking it out of commerce might bring the export focus down and as I said, exports remain a large part of our business plan. Even though domestic consumption is almost five times greater, exports are crucial in standardizing the market and sorting a better price for producers. So I wouldn’t like the export focus to go.
Aravinda: Should the Tea Board become the Tea Market Expansion Board once again, as suggested in the letter by the Guwahati Tea Auction Buyers’ Association, and focus on building the market and promoting tea? Should that be the Tea Board’s priority?
Prabhat: Definitely. That’s what I’ve been saying for the last three years. I think that same letter was sent by the ITEA, the Indian Tea Exporters Association. So, people are realizing that the Tea Board should focus on marketing rather than on regulation. They need to ensure that good tea are sold in the country. They need to ensure that the demand for tea goes up.
People are realizing that the Tea Board should focus on marketing rather than on regulation. They need to ensure that good teas are sold in the country. They need to ensure that demand for tea goes up.
– Prabhat Bezboruah
Aravinda: What about the tea brands that are coming up? What role can they play in building this market and supporting the industry? What would you like to see them do?
Prabhat: I’d like to see them compete on quality. People like Teabox have some really high-quality offerings, but I would also like them to expand their markets faster than they are doing because these innovative marketing approaches are only barely scratching the surface. When you’re talking about a production level of 1,360 million kilos, if you have 100,000 or 120,000 kilos, going into one of these premium brands, it’s not really going to make much of an impact on the entire industry, but that’s not to demean their efforts. They are very important. Although Darjeeling produces only 7 million kilos annually, it acted as the flagship of India. Even today, when you talk about premium teas, the first thing that comes to mind is Darjeeling. These brands, which have come into the market recently, as long as they focus on exclusivity and high-quality tea, are able to lift the whole category up a little bit.
Aravinda: They become a face of the industry, isn’t it? Because they showcase the best of what is available and the best of what is possible.
Prabhat: Exactly. And you see what will happen then if somebody thinks that they would like it a lot and maybe they would try another few brands, their friends who can’t afford such high-priced teas would buy something else.
Aravinda: Will the domestic market compensate for what is lost in the export market?
Prabhat: Exports are now only 20% or less of our total production, so we need to get people in India to drink more tea and better tea. If we can do that, a lot of our marketing problems will be over, but exports are important because India needs exports, without exports, you can’t establish a stable and remunerative primary market for tea. So for both those reasons, we need to focus both on exports and boosting domestic demand.
Aravinda: What about the move to organic production? Darjeeling seems to view organic cultivation as a way to survive. Do you think that’s necessary, especially coming on the back of what happened in Sri Lanka?
Prabhat: Darjeeling needs organic because in Darjeeling the difference in yield between a conventional estate and an organic one is less than it is in Assam. Assam is a hothouse. Its temperature and extremely humid conditions are like a greenhouse. Under these conditions, conventional agriculture will give you almost double the yield, compared to organic agriculture. Since you produce so much less, you need to sell organic produce at almost double the price. In the recent past, or even in the last 20, to 30 years that hasn’t been the case. There is strong demand for organic tea but it’s at a price that is 30-40% more than conventional tea. And with that kind of a price premium for organic, it won’t be sustainable. And that’s what happened in Sri Lanka. That was a bold step they took. If they had stuck to it and if the entire global industry became organic, you would be seeing huge price increases. We would see prices moving into the $7-8 [per kilo] bracket worldwide, maybe more. But the whole industry, the entire global industry would have to convert.
Aravinda: Do you remain optimistic about the future of the tea industry in India?
Prabhat: If we evolve, yes, definitely. The organized sector needs to evolve and fast. As far as small growers are concerned, they’re definitely here to stay. That combination is unbeatable.
In south India, the tea estates are doing many other things. There are tea estates that are into floriculture. There are tea estates that are making very high-quality orthodox teas, which are selling extremely well. In the Northeast particularly, and Dooars, tea over the decades has brought better returns and better profitability than the south. An easier environment breeds lethargy. In the north, especially the Northeast, we have become lethargic, and we are unable to change with the times and keep complaining all the time. And that’s really not the way to go. We have to be focused and optimistic.
Equifarm tea is a new brand with deep roots. In 2017 New Delhi-based Grassroots Tea Corp. first shared its vision for transforming the livelihoods of 250,000 of India’s small tea growers (STGs) by processing and marketing well-made chemical-free teas. Subsistence growers with generations of experience understand how to cultivate tea but are held back by their inability to add value. Few advance beyond a time-bound role as raw leaf suppliers. Grassroots helps secure financing and then aggregates, repacks, wholesales, and retails authentic teas supplied by collectives. Tea Producer Companies then partner with the collectives to operate mini-factories that process 2,500 kilos of green leaf a day.
Photo caption: From left, Sabin Narzary, Sanibar Boro, Assaigra Boro, Thapsa Boro, Baburam Daimary, Pijush Goyary, Ajith Boro, Bijoy Boro, Kukhol Boro, J. John, Minto Goswami, and Sanjwrang Basumatary.
Smallholders in Assam supply green leaf to locally owned mini-factories. Photos courtesy of J. John.
Assam Smallholders Express Pride of Ownership
By Roopak Goswami
Tea grower Sabin Narzary, 32, is proud and brimming with confidence, as are 260 small tea farmers in the Udalguri and Biswanath districts of Assam.
All are shareholders in a tea producer company, a new business model that enables subsistence growers to finance mini-factories and create local brands collectively. Their new equifarm tea is now on sale on Amazon. The Grassroots Tea Corporation (GTC) launched the product during a virtual meeting on Oct. 8.
Two weeks later their teas debuted on Amazon.in priced from INRs 360 to 605 (US$4.85-$8.15 for 250 grams).
In 2017 New Delhi-based Grassroots Tea Corp. first shared its vision for transforming the livelihoods of 250,000 small tea growers (STGs) by processing and marketing well-made chemical-free teas. Subsistence growers with generations of experience understand how to cultivate tea but are held back by their inability to add value. Few advance beyond a time-bound role as raw leaf suppliers.
“I have not heard about growers becoming shareholders in the small tea grower sector,” says Narzary, a father of two who was raised in Khasiapather. Small tea growers now produce more than half of the millions of metric tons of green leaf grown in India. Producer-members of the Swmkhwr Valley Tea Producer Company contribute green leaf and are granted shares in the venture.
Smallholders in 2020 produced 52% of India’s tea, primarily for production as black CTC (cut, tear, curl) but with a growing segment of specialty tea producers.
The equifarm brand’s tea range includes Premium Orthodox Whole Leaf, Premium Orthodox packaged in stand-up pouches, and orthodox tea and green tea in teabags. Initially, it will be available online on major e-commerce portals like Amazon, Flipkart, and selected cloud kitchens.
Shortly after it was founded, Grassroots Tea encouraged a group of 260 indigenous Bodo small tea farmers in Assam’s Udalguri and Biswanath districts to set up four manufacturing units to process green tea leaves sourced from their farms. Each unit required an investment of INRs 1.3 crores (about US$175,000) to purchase the property, structure, tea-making machinery, and other equipment. The four factories raised the required capital – as equity and as a term loan from Financial Services Limited (NABFIN), a subsidiary of the National Bank for Agriculture and Rural Development (NABARD).
Ten years ago “We were not getting good prices as we used to sell our leaves individually [to bought leaf factories],” explains Narzary. One of the biggest problems and worries of small tea growers in Assam are getting low prices for the green leaf as they are dependent on bought leaf factories.
Protests and demonstrations are ongoing. The Confederation of Indian Small Tea Growers Association (CISTA) says that bought leaf factories pay an average of INRs 15-17 (US$0.20 – 0.23) per kilo for green leaf growers in Assam and West Bengal. Growers say the cost of producing green leaf has increased as much as INRs 19 (US$0.25) per kg due to shipping expense and a tightening supply of fertilizer and other inputs increasing the cost of production.
He said the entry of Centre for Education and Communication (CEC) New Delhi and J. John changed all that, and the growers formed a society to get a higher price for the leaf they supply to the processing factories. The collective leaf trade fuelled the leadership and entrepreneurial aspirations of kindling their desire to move up the value chain. The societies brought their active members as shareholders to constitute producer companies.
While taking advantage of a ‘Company’ registration, like raising capital and sharing profit, the Producer Company framework has the advantage that it runs based on cooperative principles. The shareholders are ‘active producers,’ which means only those who contribute to the supply of green tea leaves can participate. Each shareholder has one vote irrespective of the number of shares owned.
“Our lives are now completely transformed as we are getting good prices for the green leaf and have learnt a lot about tea,” he says.
Kukhol Boro says one of the most significant learning has been the advantage of being united. “Earlier we were selling our green leaf only by ourselves and did not get good prices, later when we became a society, we got better prices,” he says.
“We had difficulties in getting compliances, but now, we can proudly say that we have a factory of our own where we manufacture tea all by ourselves, a dream that we have been chasing for the last eight to 10 years.
Today after many ups and downs, we could make it happen,” he said.
“We have many more miles to go, but today is the beginning, today is the day of farmers, today is the day of GTC. Let the small tea growers of the world unite and be active part of the value chain,” Kukhol Boro said.
“We could never imagine that one day the growers would be owning factories as members of societies,” added Kukhol Boro.
Grassroots Tea has a packaging unit in Barpeta, Assam.
“It is a market linked to the farmers’ movement in which farmers own and govern various stages of value accrual of an ethical product and obtain a reasonable share of the value accrued. It also establishes a direct connect between farmers and consumers by making available high quality ethical, ecologically sound and traceable natural tea,” said J. John, managing director of Grassroots Tea.
GTC provides support at three distinct stages: empowering small tea growers (STGs) to cultivate chemical-free tea; assisting STGs in raising equity to set up Tea Producer Companies (under the Company Act, 1953) to build processing factories that manufacture high quality, certified orthodox tea; and when the tea is made Grassroots aggregates and markets the tea to conscious consumers under the joint ‘equifarm tea’ brand.
Teas are natural, traceable, single-origin (subsumed within geographical indicators); made and owned by small tea farmers, ensuring a sustainable livelihood and an optimum share of the profits, he said.
“Our long term vision is to transform socio-economic outcomes for 250,000 small tea growers at risk, in India. We want to ensure dignity and economic justice for all STGs by enabling fair compensation at multiple levels of value accrual throughout the value chain,” John says.
India needs an alternate model for the tea-value chain as a core strategy to drive systemic change. In this model, subsistence tea farmers organize in collectives that own and actively participate in the value-creation and value-sharing processes, he explains.
“As part of our long-term vision, we will facilitate the setting up of more STG owned tea producer companies (TPC) across India, directly impacting larger number of STG households and worker households,” he added. In time big brands and retailers will recognize and execute, the principle of fair compensation at value accruals.
At the virtual launch event, Adina Pasula, Supply Chain leader, IKEA, Sweden, commented on the distress faced by small-time farmers across the world: “Social entrepreneurship like the equifarm tea is contributing in addressing their plight,” she said. Initiatives of this nature lead to systemic change and would have a collective impact across stakeholders at various levels, she said.
NABARD General Manager Baiju Kurup praised the GTC model. He said that during the “last couple of years, NABARD’s major focus has been in the facilitation of the aggregation of farmers to a farmers’ producer company, or FPO, where better share of the price can be transferred to the producers so that they enjoy better price realization.”
CISTA president Bijoy Gopal Chakraborty said, “in equifarm tea, we see the prominent footprint of the small tea growers in India.”
Tea Production Company owned mini factory at Kukhol, Assam
Consumers who pay a premium at retail for specialty tea often leave growers to foot the bill. The costs of producing the distinctive taste of the authentic, transparent, eco-friendly, clean-label teas that are so popular with Millennial and Gen Z cohorts are significantly higher than what growers spend supplying conventional tea. A preference for chemical-free cultivation, third-party certifications, energy-efficient, carbon-neutral processing and transport, and recyclable and biodegradable packaging further erode margins along the length of the supply chain. This raises a fundamental question: Is anyone making money making specialty tea?
Listen to the interview
Will Battle discusses the additional expense of producing the best specialty teasArtisan teas require time and hands-on attention to detail that add significant costs. Photo courtesy Folklore Tea.
An Investment in Quality
In this post, Will Battle, author, consultant, and enthusiast for all things tea describes the additional costs to growers producing top-quality tea. Will trained as a taster in India, Sri Lanka, Kenya, and Malawi and has more than 20 years of experience sourcing tea. He is the author of “The World Tea Encyclopaedia” and founder and managing director of Fine Tea Merchants, Ltd., a wholesale tea importer and export venture that supplies tea merchants with mainstream offerings as well as rare teas and herbals. Will sees growers taking initiatives on quality at all levels of the cultivation and manufacture process and so regards the lines between the everyday and specialty sectors to be blurred, but here he focuses on the costs of creating the very best teas.
Dan Bolton: Will, from a grower’s perspective, is manufacturing specialty tea worth the effort?
Will Battle: I think frequently it probably isn’t. I look at some of the growers I deal with and the amount that they need to invest from a financial and human resources perspective and it’s so much greater in almost every area.
Costs are higher at pretty much all stages of the chain. In my experience, Dan, whether it’s the approach to pruning, to leaf quality stipulated to pluckers, or to those buying leaf on the open market; the level of detail that the factory needs to apply to the processing of the leaf, right on through storage, shipping, all of those processes costs a lot more in the specialty tea industry.
I struggle to see many instances where that’s appropriately rewarded.
Dan: Let’s talk specifics, what costs are unique to producing specialty tea?
Will: Let’s take Darjeeling for example, and their approach to the pruning cycle. A good case in point would be my experience with Jay Shree’s Darjeeling this year. They pruned more than they did in previous years, more than most other producers.
That effectively writes off your first flush, but it might give you a better second flush, and then next year, you probably have an improved quality as well. But to write off your first flush is just an enormous financial handicap to impose on yourself and that’s your start point.
Now consider the costs of for a kilo of fine plucked leaf. Let’s take the experiences of Tumoi in Nandi, Kenya.
In Part II Tea Biz will interview brands and category managers on costs they incur in bringing specialty tea to market.
It might be seen in the wage pricing of seven to nine Kenyan shillings an hour for mainstream leaf, but around 25 [shillings] per hour for specialty leaf. You see, you’ve not even got the leaf to the factory yet and you’ve got an enormous margin to make up in the final product cost. And don’t forget, you’ve got 4.2 to 4.6 kilos of your green leaf for a kilo of made tea. So you’ve, got a big headway to make up on the final product cost and you haven’t even got the leaf to the factory yet.
Another example might be transport. The traditional way of getting green leaf to the factory might be to dump it in a pickup. But at Tumoi, in Nandi, they put it in some special aerated baskets to get it to the factory in optimal condition and that’s two or three pickup trucks getting the leaf there rather than one or a tractor adding fuel costs and wages. So again, another increment onto thefinal product cost.
Packaging is a really, really good point. Let’s take Satemwa Tea Estate in Malawi. They are a great example because they make mainstream tea and they make some lovely specialty tea as well. The mainstream tea which I buy and use happily in my blends is lovely tea, but it’ll come in a paper sack and you get 60 kilos in a sack and more or less a ton on a pallet.
The specialty tea. In fact, I’ve got one here that four is kilos net, eight kilos, 8.2 kilos, gross. So you’re shipping more air than product. And it’s in an expensive cardboard carton. So you can probably get nine of those on a pallet that’s just 720 kg in a 40-foot container. That means that the freight alone is almost $5.
So when you get a freight rate increase like we’ve had this year, you have to automatically add another dollar to the cost. So that’s another cost and, here again, you’re not even taking into account the tea cost yet.
The product that everyone wants is whole leaf. But for every kilo of whole leaf there is perhaps 25% waste or broken leaf that people won’t pay up for. It’s not as if every kilo that goes out of the factory is getting rewarded at the top price, because there’ll be some by-product as well. I think that is another instance where these guys aren’t always appropriately remunerated.
It’s easy sometimes to say, I include myself in this, that we were supporting the specialty industry, but supporting the specialty industry is also remembering those other grades that they’re making, the leaf grades where they’re not always recovering a high margin on.
You can go on and on. I see higher costs right through the process, along every stage of the supply chain but particularly labor because of the attention to detail, and in packaging, because of the attention to quality.
Dan: When consumers pay a premium for specialty tea, what is the value received?
Will: I think you’re ultimately investing in quality and an approach to creating a product, that is the best it can be. It’s worth remembering that those people who are making good specialty tea are also improving their mainstream quality as well.
A large proportion [of that investment] should end up back in the communities that have spent the time in trying to create it for you. So wherever that specialty tea comes from ? whether it’s Japan, Darjeeling, Assam, Dimbula, or Malawi ? that investment in the regions and the districts where the tea is made is something really worthwhile.
Dan: Why is it good practice to pay farm gate prices that allow sustainable production not just for specialty tea, as you mentioned, but commodity tea as well?
Will: It’s a good practice because ultimately, we have an obligation to make sure our industry survives and that is reliant upon the people who grow and pluck and process tea. If we don’t pay a sustainable price, they will do something else. Without an appropriate farmgate price we don’t have an industry in my view, and it’s our obligation to make sure that any producer is appropriately remunerated.
Otherwise, why would you grow it?
UK-based Fine Tea Merchants partners with India-based A. Tosh and Sons, enabling multiple formats of tea bag and caddy packing as well as bulk exports from internationally accredited manufacturing facilities.
Fine Tea Merchants
FTM is a business-to-business supplier of tearooms, tea merchants and small packers in the UK, Continental Europe and further afield. The company imports direct from origin and stores a broad assortment of teas and botanicals in its warehouse in Lincolnshire. FTM specializes in fine and rare teas as well as high quality, mainstream teas and a selection of flavored-, herbal-, and fruit-blends.
Tea may be ordered in quantities from 1 kilo to multiple containers and shipped as straight-lines, blends formulated to perform well in your local water, or custom blended against your own recipe.
The World Tea Enclopaedia
The award-winning bookThe World Tea Encyclopaedia was published in January 2017, with a second edition in November 2020. It covers every tea-producing country and advises tea lovers on tea cultivation and manufacture, origin, seasonality and local ‘terroir’ and tries to de-bunk tea myths and snobbishness. ? Will Battle
