Spend Matters is pleased to welcome the following guest post from Abigail Green at Mintec.
Iced tea has long been a favorite summer drink during the long hot summer. In fact, 85% of all tea consumed within the US is iced. As we approach the summer season, let’s turn our attention to tea and explore what has been happening in the major producing regions.
The tea in tea bags is not actually made of tea leaves, but tea fannings and tea dust. Tea companies often blend teas from different origins to achieve a signature taste. Tea growers in Kenya and India, the two largest global exporters, have raced to keep up with expanding global demand amidst opposing local market conditions.
2015 has been a turbulent year for Kenya so far. The average Mombasa auction price for pekoe fannings grade rose 22% at the beginning of March compared with the 1st January 2015, and dust grade rose 34% in the same period. Prices are up following prolonged dry weather in Kenya, with fears that this will damage the development of the tea crop. This is causing particular concern in the market now, as whilst tea is picked all year round, yields are traditionally at their highest in February/March (a period often called the first tea flush), and fears regarding the dry weather have caused some to worry that both the quality and quantity of the crop will be reduced. While there are concerns that the quantity of the crop will fall, it is still likely to be above the 5-year average because 2014 saw record tea output in Kenya at 445 thousand tonnes, which was up 3% in 2013.
In contrast, prices in India have fallen since January. Prices for dust-grade tea in the India auctions fell 19% on average from January to the end of February. This follows favorable weather condition, which has aided the development of the 2015 crop. Demand has also been slightly weaker as the market waits to see the results of the first flush. Production in India was down slightly in 2014, 1% year-on-year to 1.2m tonnes following heavy rains in the North that damaged output. However, early indications all point to a good year in 2015 for Indian tea.
With the average tea bag or commercially made iced tea bottle likely contain tea from India or Kenya and a number of other origins, it is always going to be hard to predict price movements of your favourite brand. If the current price trends continue, it is likely that the prices we see on supermarket shelves will remain at similar levels this year.