The price of tea is affected by weather conditions ©123RF
The price of tea is affected by weather conditions ©123RF

Global focus on… tea

6 October 2017

Like a builder’s brew, the world’s favourite hot beverage is still going strong, with global consumption remaining high in the face of growing coffee competition

Players

China dominated the market with more than a fifth of global production in 2016. Other markets include India, Kenya, Sri Lanka, Turkey and Vietnam. Key players include Unilever, Tata Tea and Twinings.

Production

Tea production was up in 2016 and is expected to continue at a growth of 2% per year. Black tea (mainly grown in India, Kenya and Sri Lanka) accounts for 60% of global production and green tea (mainly grown in China) 30%.

Popularity

Tea is considered the second most popular beverage after water. The global tea market is expected to reach 7m tonnes by 2022, according to Expert Market Research.

Tea making

Originating from China, the trend for drinking tea came to the UK in the 1600s, brewing or boiling the leaves of the Camellia sinensis plant. Tea types now are now classified as black, green and ‘others’ (white and oolong tea), sold loose or in variously shaped bags.

Evolving tastes

The market growth can be accredited to the changing consumer preferences towards healthier beverages and the introduction of new flavours across the world.

Price

The price of tea is very closely linked to production, which is affected by weather conditions. Dry weather this year saw a fall in production across India and Kenya, while recent flooding in Sri Lanka disrupted shipments, sending global prices up 20%. Last year, increased rainfall and high production in all three countries led to a 30% price drop from the year before.

Growth

In 2015, the global tea market was valued at $13,847bn and is estimated to reach a value of $14,448bn by the end of 2017, reflecting a year-on-year growth rate of 4.45%. By 2024, the global tea market is expected to reach a value of $21,329bn, according to Persistence Market Research.

What They Say

 “We have to think outside the box to adapt to emerging challenges the industry is going to face – and focus on technology. If you don’t invest you will vanish, if you invest you survive.”

Ranil Wickremesinghe, Prime minister of Sri Lanka

 

“Climate change is a major threat to tea production. Extreme weather could interrupt supply and make tea more difficult to grow – tea production at higher altitudes will no longer be possible.”

Keith Writer, Commodities director, Taylors of Harrogate

 

“Black tea sales continue to diminish in the UK. Younger people are starting to drink more coffee because it’s perceived as modern – and as millennial consumers explore novel varieties such as green tea and herbal tea, black tea keeps losing share.”

Matthew Barry, Euromonitor beverage analyst

Analysis

The global tea market is expected to grow steadily at a compound annual growth rate of more than 4.45% during 2017-2021. However, it is highly fragmented due to the presence of numerous suppliers, who compete on the basis of price, quality, reputation and distribution. Intense competition and declining profit margins constitute significant risk factors. The marketing of health benefits associated with tea, including antioxidants and amino acids, has attracted health-conscious individuals and has had a positive impact on the market.

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