By Perry Luckett, TeaManToo

Whether you’re a green tea or black tea person, COVID-19 can affect your supply of the magical beverage that brightens our lives. Prices are dropping as demand slows and surpluses rise in the face of virus-related protections. That’s good for tea retailers and perhaps consumers but not so good for producers and distributors.

For example, in February, China was “reeling from the outbreak of novel coronavirus-caused pneumonia,” according to Cai Jun, secretary general of tea with the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-Products (CFNA). CFNA is an influential trade association that operates under the supervision of China’s Ministry of Commerce.

Setbacks haven’t come from illness or deaths of tea-garden workers; they result from China’s national effort to limit travel, close factories, ban public gatherings, and shut down bus, train, air, and subways to prevent the virus from spreading. Also, CFNA was forced to postpone three tea conferences scheduled for March, and several tea fairs, including the spring edition of the Global Tea Fair, have been rescheduled. [Bolton 1]

China limits oversupply: phases tea harvests, covers public health

According to tea retailer Austin Hodge, founder of Seven Cups Fine Chinese Tea in Tucson, Arizona, China’s tea industry saw this coming. Hodge, who imports tea directly from China, recalled the SARS epidemic in 2003. The Chinese learned valuable lessons from that outbreak, which killed 774 globally. Hodge says the Chinese are adjusting as necessary, plucking leaves only when they can process them. Because people in rural tea country don’t need to travel, those restrictions haven’t stopped harvesting, so importers began receiving tea shipments in March.

In the tea gardens (fields) those who prune and pluck tea must wear masks, avoid forming groups, and keep at least 10 feet apart while working. Factories also have used special precautions to lower the risk of coronavirus spread low. Procedures at China’s largest tea company factory in Erhai are typical. The plant resumed operations Feb. 13 as 700 workers were screened for fever. They also signed a personal health commitment to wear masks, disinfect their hands and periodically visit one of six health test points. When they enter the factory, they scan a QR code with their cell phones. This scan activates a cell-phone application that tracks their movement and warns employers if they’ve been close to someone who has come down with the virus. [Bolton 1]

The provincial public at large participate in the same kinds of precautions to ensure public health. All residents must scan the QR code to enter and exit public places, including residential complexes, markets, malls, hospitals, and public transit hubs. (The provincial government promises to destroy all tracking data once the virus is contained.)

The Chinese understand tea’s importance to their overall economy and personal well being. Chinese tea exports, mainly green, were valued at more than $1.5 billion in 2018, rising 10.41 percent year-on-year, according to the China Tea Marketing Association. That was the second year in a row China topped the list of tea exporting nations in value and was also the year they shipped the world’s greatest volume of tea. At the same time, more than 500 million Chinese drink about 1.9 million metric tons of tea annually, according to the Association. The domestic tea market alone is valued at $18 billion. So far, if the country can continue to recover from COVID-19, they will see a dip in market value but may escape any devastating effects overall. [Bolton 3]

Good news for teapots: cozy up to green teas from China

Fortunately for all you green tea drinkers—I’m especially looking at you folks under 40, COVID-19’s danger of spreading through imported tea is very low to nonexistent. Peter F Goggi, president of the Tea Association of the USA, has been closely monitoring the situations involving China, from the newly imposed tea tariffs to the risk of coronavirus infection from tea imported from China. In a letter to U.S. Tea Association members, Goggi stated the risk of COVID-19 infection according to the CDC:

“The virus is not spread through goods but by human to human contact. . . . In general, because of poor survivability of these coronaviruses on surfaces, there is likely very low risk of spread from products or packaging that are shipped over a period of days or weeks at ambient temperatures. Coronaviruses are generally thought to be spread most often by respiratory droplets.”

The Tea Association’s assessment of infection risk from imported tea products is as follows:

• Tea Leaf—because of generally long transportation times from origin, the risk is very low.

• Spray Dried Extracts—Because the spray-drying process uses very high temperatures, the risk is very low.

• Liquid Extracts—most, if not all, liquid extracts are either pasteurized or UHT treated, reducing the risk to virtually zero.

Goggi says the Tea Association believes people needn’t be concerned about the risk of COVID-19 infection from imported tea products. [Goggi]

Kenya still largest black tea exporter but with declining revenue

This East African nation, the biggest exporter of black tea in the world, hasn’t escaped general production and revenue problems associated with COVID-19. In 2017 they were projected to increase exports 20% by 2020, but a recent review shows their tea revenue DROPPED by 16% in 2019 on low prices and world oversupply of black tea. Their production also dropped by about 7%, in part because of severe drought, which actually turns out to be good because of declining demand. The coronavirus, excess teas in the global supply chain, plus political and economic upheavals in main markets have continued to depress tea prices and decrease net earnings for farmers.” [Reuters, Workman]

Some of the main buyers of Kenyan tea include Pakistan, Egypt, and Britain. The United States’ imports of Kenyan tea are increasing, but at $17 million last year, our purchases are less than half of Pakistan’s annual intake. Decreased demand for tea sales through tea shops because of coronavirus-related business closures has affected Kenya’s trade in all of these countries but has had a stronger impact in U.S. states with severe “stay at home” orders.

As of this writing, Pakistan and Egypt are seeing a sharp recent rise in COVID-19 cases and deaths. Britain has about 125,000 confirmed cases and an unusually high 16,000+ deaths, translating to a 13% death rate. Of course, we U.S. citizens know how necessary closure orders have ravaged coffee and tea shops in this country. Although Pakistan has reopened certain parts of their economy to avoid economic disaster, restrictions remain in all four countries to keep people at home—and therefore out of tea shops and retail stores.

India foresees downturn for black tea sales from travel restrictions

Depressed demand, shipping delays, and travel restrictions are driving down tea prices for India and adding to a global tea glut. In the past few weeks, India's tea exporters witnessed dramatic declines in bidding at tea auctions across the country. Record amounts of tea on offer remain unsold. India’s exporters are concerned about a possible decline in purchases by Iran, which annually imports around 50 million kilos of quality full- and broken-leaf tea. Exports to China, Russia, and the Middle East all have declined significantly. [Bolton 2] China, a green tea producer, had imported 13.45 million kg (12.7 million pounds) of black teas from India in 2019. That made India the largest exporter of black tea to China, with neighbor Sri Lanka trailing in the race. Indian exports to China have increased almost four-fold in a span of five years as Chinese millennials have developed a taste for black tea. In 2014, China had imported just 3.6 million kg of this variety.

For the first time in the history of Darjeeling tea, the entire lot of the expensive and exportable first flush leaves withered away when India suspended garden operations as part of the Covid-19 lockdown. Garden experts confirm it will take a few weeks to a month to get the tea bushes back in shape after re-opening on April 15, which may also affect the equally prized second flush crop of May-June. Tea planters in the Hills are already grappling with losses of Rs 150-200 crore (22.5 to 30 million US dollars) for destruction of the first flush. Now, they fear a never-seen-before liquidity crisis.

As China recovers from the COVID-19 outbreak, it has resumed purchase enquiries from Indian exporters for black-tea shipments. But the Indian trade is concerned about the spread of the virus at home, and likely disruptions may halt production and arrivals of tea crops for auctions. “The enquiries have started coming in over the last two days. China generally buys second flush black teas for which they start negotiating and enter into forward contracts during this period,” said Mohit Agarwal, MD, Asian Tea and a leading exporter to China. “The second flush comes into the market in May-June.” [Ghosal]

Neither buyers nor sellers are likely to be airborne through early summer. India strongly restricted visas for travelers from Europe and Japan—two of the largest trading regions. Usually, March-April harvests of first-flush tea draw buyers to Darjeeling, where 20% of the annual 8 million kilos (about 17.5 million pounds) command the highest prices and account for more than 60% of total annual sales. But the Darjeeling Tea Association points out that foreign buyers won't be able to fly down to India because of limited visas, and canceled airline flights mean tea can’t be airlifted to importing countries. If foreign buyers can’t come, they are unable to taste, select, and buy tea of their choice. [Bolton 2]

Warehouses are holding a 50 million kilos (110 million pounds) of surplus into the new harvest year. Production also increased by 4% last year, adding to India’s pricing and distribution difficulties. With exports likely to decline, the Tea Board of India is trying to increase domestic consumption, which has stagnated.

Why does all this bad news for India and Kenya matter to consumers in the West? Well, without fresh supply of tea from current harvests, distributors and retailers alike will be selling us black teas from at least two years ago. Selling long-stored tea is already a common practice because large retailers, such as Harney and Sons and Seven Cups, suggest we can drink their tea up to two years after receipt. But because India and other producers of black tea may have to destroy parts of the crop or process and store it for longer periods, consumers are likely to receive tea that is already more than a year away from harvest. So, although we’re likely to pay less for black tea in the near future, we’ll be getting less freshness for the price.

Good for your teapot: analysts see cozy future for U.S. tea market

United Kingdom-based GlobalData reports that in 2019, the U.S. hot tea market stood at $2.8 billion and is expected to have a compound annual growth rate (CAGR) of 4.8 percent through 2023, reaching $3.4 billion. The projected growth is expected to come from many innovative flavor solutions directed at Millennial and Generation Z green tea drinkers. [Jacobsen] Although this growth will take a temporary hit as the U.S. economy struggles to put people back to work during 2020-21, tea is well-positioned for a boost by second quarter of 2021 if progress continues on coronavirus solutions. [Jacobsen]

GlobalData’s Carmen Bryan says “New, distinct flavors are a key driver of the hot tea market. Globalization and migrating influences from Asia have led to the rise in green and herbal teas, with Western consumers demanding their own spin on these favorites, and new, distinct flavors being a key driver.”

A consumer survey at the end of 2019 found 48 percent of U.S. consumers say traditional black tea is the type they most often drink, but only 19 percent of Generation Z consumers agree. The latter prefer green tea, especially with herbal and sweet flavors and infusions. Millennial consumers prefer fruity and herbal teas, again heavily weighted toward green teas, which have a reputation for being more healthy and less caffeinated.

This health connection also has driven demand for premium teas with purported health benefits. For example, Psychic TEAZ is furthering the premium market with its collection of loose-leaf teas designed by a naturopathic doctor to keep musicians healthy while touring. Its most recent release is Champagne, which contains red rooibos, dehydrated grapes and grape skin, carrot powder, nettles and stevia. Another example is the Matcha Latte Infusions line from Jade Leaf Matcha. They’re available in four varieties—Glow, Protect, Think, and Balance. Each infusion blends immune system boosters and adaptogens (physical, chemical or biological stress reducers) into CCOF-certified organic Japanese matcha.

Although this premium path could create opportunities for the hot tea market, its challenge is to develop more sales for home brewing with loose-leaf teas rather than ready-to-drink tea for people on the go. Convenience is a deciding factor for many consumers: if given the choice, they’ll often choose ready-to-drink instead of waiting the few minutes it takes to brew a cup of their own. Still, the small silver cloud in this otherwise terrible COVID-19 era may be that younger folks are learning to make the best of their home environment, including the joys of a teapot and a cozy reading nook.

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Resources

“Black tea production in Kenya to rise 20% by 2020,” https://bit.ly/2wUg7JU , (2017, day unknown).

Dan Bolton, “The Coronavirus Impact on China’s Tea Harvest,”https://bit.ly/2VqXird, February 25,2020. [Bolton 1]

Dan Bolton, “Tea Prices Plunge as Demand Dissipates,” https://bit.ly/2yuvolc, March 16, 2020. [Bolton 2]

Dan Bolton, “China Remains the World’s Top Tea Exporter,” https://bit.ly/34ToQbW, January 28, 2019. [Bolton 3]

Sutanuka Ghosal, “China keen on buy but tea output, auction disrupted,” https://bit.ly/2KpajLC, Last Updated: March 23, 2020

Peter F. Goggi, “The impact Covid-19 and tariffs have on tea imported from China,” https://bit.ly/3cFPUOH, February 13, 2020. [Goggi]

Jessica Jacobsen, “Future is bright for U.S. hot tea market,” https://bit.ly/2RWnpUS, April 12, 2020.

“Kenya's tea export earnings drop 16% in 2019 on low prices,” Malawi Investment and Trade Centre (Reuters), https://bit.ly/2KnuNnZ, January 28, 2020. [Reuters]

Daniel Workman, “Tea Exports by Country,” https://bit.ly/2XSwulq , April 15, 2020. [Workman]