Global Demand for Tea Is Growing Despite Sustainability Challenges

The global demand for tea is increasing despite challenges to sustainability Tea is a beverage that’s infused with dried leaves that is derived in the leaves of tiny tree that originated from China It has grown to become the second-most popular beverage , after water and has 3 billion cups being consumed every throughout the world. In 2017, the total tea production was 5.98 million tons, of which around 35 percent of it was exported, a value of 8 billion dollars. In the was the same time, this industry had a value retail of around $50 billion. Tea was produced across 48 nations in the year 2016 which included 12 Low Human Development Countries (LHDCs). Tea production has a workforce of 13 million and 9 million of them are smallholder farmers, and the remaining are employed in tea estates. In China, Sri Lanka and Kenya that comprise half of the world’s tea production. The majority of tea is grown by small-scale farmers. The production is concentrated in a handful of countries and the top seven countries that are growing making up 90 percent of the world’s tea supply in the year 2015. The top exporters of tea of 2017 are China (USD 1.6 billion), Sri Lanka (USD 1.5 billion) and Kenya (USD 1.4 billion) The largest importers were Pakistan (USD 525 millions), Russia (USD 525 million) and the United States (USD 487 million). A substantial amount of tea is consumed in the United States. As an example, the quantity of tea consumed within China, India and Turkey in 2015 was higher than all other tea-consuming countries combined.

How Much Tea is Certified by Each Standard?

The global tea supply growth was higher than demand growth in both 2016 and 2017 in the range of 4.4 percent and 4.3 percent and 4.3 per cent respectively, which resulted in an excess of around 200 tonnes for each year. The global supply-demand balance of tea ended in 2018 with only a tiny surplus, and the trend is expected to continue until the year 2020. Because countries that produce tea are the top users of tea tea production and consumption are closely linked. It is reported that the Food and Agriculture Organization of the United Nations (FAO) states that it has a balanced production as well as consumption increase of approximately 4.4 percent between 2007 between 2007 and the year 2016. The industry is expected to continue growing because of the growing demand by Asian as well as Pacific countries, especially people with increasing incomes, a rising demand with young urban consumers interested in the health advantages of drinking tea and the development of new flavors and products including ready-to-drink premium tea, premium tea, as well as fruit and herbal mixtures. Furthermore, consumption of green tea is predicted to surpass the demand in black tea. The significant growth in sustainable tea products is worth mentioning. In 2016 19.4 percent of market share was comprised of teas that were compliant by Voluntary Sustainability Standards (VSS) in comparison to 2.4 percent in 2008. But only 6.6 percent of tea production is VSS-compliant. This leaves the remaining 74 percent of tea being normal. Based on the FAO as well as a range of market research firms, the tea industry is predicted to expand with a compound annual rate (CAGR) between 4 to 5.5 percent between 2017 and 2024. The tea market is predicted to reach USD 73 billion in value in 2024. Despite this optimistic forecast however, the industry of tea faces significant challenges that are distinct to the industry. The ability to access tea-processing facilities is crucial for smallholder and tea estate tea farms to be able to continue operating because the tea leaves picked have to be processed within six hours. So, the world’s leading tea producers have constructed processing facilities near to their fields, which has resulted in an integrated value chain that is vertically linked. The production of tea is managed by a handful of firms, resulting in a significant degree of horizontal and vertical integration. Around 85 percent of tea sold is controlled by a small number of multinational corporations and 20% of the market worldwide is managed by three largest tea producers. Therefore, it is essential to create a more fair distribution of wealth across tea supply chains, which will improve the sustainability of the industry. Additionally, 70 percent of the world’s tea production is sold through auctions, which are anonymous transactions, where intermediaries are able to easily change suppliers, bringing down prices and decreasing the margins of farmers. Tea cultivation areas are geographically restricted, since tea is a delicate crop that requires certain conditions for it to flourish. Changes in climate are also anticipated to impact temperature and rainfall patterns, which could drastically affect yields. Estates of tea are reporting more rainfall and prolonged dry seasons that could lead to more soil erosion as well as the continued application of fertilizers, pesticides, and irrigation to ensure productivity. Other challenges that tea producers face include child and forced labour which is still widespread and a poor working conditions, low wages, and pesticide residues that are present in the finished product.

Demand for More Sustainably Produced Tea Is Growing and Could Help Address the Sector’s Challenges

Voluntary Sustainability StandardsA (VSS) have been utilized in the tea industry for over 40 years to tackle the many challenges that confront the industry and offer tea drinkers more sustainable choices. Tea that is certified VSS is made to satisfy consumer demands and aims to ensure the long-term sustainability of the tea industry through the use of agricultural practices that improve climate resilience as well as prevent soil erosion. less pesticide use, boost profits for smallholders, and improve the working conditions of workers including workers with the opportunity to bargain collectively as well as access to sanitation as well as drinking water that is safe for consumption. The demand for sustainable tea was historically coming from countries outside of the producing region mostly coming from Europe as well as North America. Tea producers who had the capacity to be VSS-compliant could have access to the lucrative export markets, while also being in a position to meet the increasing demand from domestic consumers. With their role in meeting the global demand of more environmentally sustainable tea VSSs played an significant impact on making tea production more sustainable for workers, as well as the profits of small-scale tea producers. VSSs are designed to create an environment where the demand for tea that is more sustainable leads to better conditions for producers as well as the environments that support the production process, which ultimately, will bring more investment into the more profitable and sustainable industry for tea producers. On the side of supply, VSS-compliant tea has increased significantly from the time that the initial tea farm was certified organic in 1983. Between 2008 and 2016 tea that was VSS compliant saw a CAGR of around 35 percent, accounting for 19 percent or more of the total tea production. It is believed that the Rainforest Alliance, Fairtrade, UTZ Certified and Organic are the most prominent VSSs in the tea industry according to their size of production. In 2016 1.15 million tons of tea was certified as VSS compliant estimated at USD 2 billion. The value comes from the average prices of producers for each country, as published by the FAO and later applied to the quantity of tea that was produced in compliance with VSS standards by every country. The majority of tea that is VSS-compliant originates out of Africa (Kenya, Malawi, Rwanda) and Asia (India, Turkey, Indonesia). From a demand perspective of things, several significant corporate sustainability commitments to sourcing increase the demand for VSS compliant tea. In 2017 the five top tea-consuming companies bought greater than 1.2 million tonnes of tea. and at least 900,000 tonnes that were VSS compliant. Based on the commitments to source by these 5 companies as well as the latest information about tea-sourcing sources that an extra 245,000 tons of sustainably sourced tea will be consumed by the year 2020. The top suppliers’ commitments to sourcing are primarily driven by consumer preference to buy healthier and sustainable products. European as well as North American countries are the most popular destinations for tea that is certified by VSS, and they will continue to be the primary buyers of sustainable tea over the next few years. They will likely see a rise in demand as people become willing to pay for premium and compliant tea. Despite this optimistic prospects, the rising demand for tea certified by VSS is a problem since the biggest tea-producing nations are also the biggest consumers, and prefer conventionally grown alternatives to more expensive green alternatives. This leads to an oversupply of tea that is certified VSS compliant that is a further issue, due to tea that is certified being sold as normal. But there have been recent efforts taken to develop national VSSs including those of the Trustea Standard that is in India as well as Lestari standard in Indonesia. Lestari Standard in Indonesia and Indonesia, which have seen a significant increase up to the amount of 400,000 tons certified tea that supports the livelihoods of 40,258 smallholders and 350,000 workers. The demand for tea that is VSS compliant is predicted to grow in some of the biggest producing countries, including China, India, Indonesia and Sri Lanka, with the increasing middle class growing interested in premium and sustainable tea. Additionally, there is a chance to increase the demand for tea made with VSS over the next 10 years in the most rapidly growing traditional tea markets, which are expected to be located situated in East Africa: Rwanda, Uganda and Kenya have predicted growth of 9 percent five per cent, 5.4 percent and 4.4 percent in the three countries, respectively. The consumers in these countries may be drawn to more environmentally sustainable options in the future particularly in Kenya where the majority of Kenya’s tea production is certified VSS and is receiving increasing attention from the government of the country to increase consumption in the domestic market. VSS-compliant tea production must translate into comparable sales in order to expand in the future.

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