How Direct Trade Helps Tea Farmers and Small Retailers
Tea production output both in quantity and quality varies on a weekly and monthly basis. During British colonial rule, this gave rise to pricing through the auction system. Auctions still exist in former British colonies like India, Kenya, Malawi and many others. This system determines the price of tea from estate to estate on a day-to-day basis. Prices are set according to how broken the leaf is and the forces of supply and demand on that day. Approx 70% of Kenyan tea sales and more than 90% of Sri Lankan tea sales go through auctions today. Some people argue that it’s a transparent system. But with technological advances and the possibility of direct trading between buyers and sellers, this is becoming redundant. Direct sales using catalogue and real-time data benefit buyers by providing fresher, better-quality product. This also benefits producers through quicker payment, less uncertainty and savings on agent fees. Yet regulators still limit direct sales by law to 10 to 15% of overall output in countries like Kenya and Sri Lanka. The auction system is used a lot by large importers. Importers used to play an important role in ensuring supply for packers — and in many cases still do. They typically manage the supply chain for large packing houses. Many importers only want to deal with larger retailers and enforce minimum order quantities, making it difficult for small retailers to work with them. Another reason why many retailers switch to trading directly in today’s market. There is a belief in today’s big importer- and packer-dominated tea market that the “tea market demands standardization.” This is because we have been drinking teas that are blended for conformity in aroma, flavour and liquor colour over decades. Many tea drinkers will know exactly what their favourite English Breakfast blend tastes like. However, few know that this means that their favourite beverage is cooked together from 30 to 100 tea ingredients bought through auction systems at commodity prices. This is what’s needed for a standard English Breakfast tea year after year! Sobering is it not? In this system, the whole brand value goes to the packing house and none to the many producing farms. Clearly a single estate cannot supply this kind of consistency in product given natural factors affecting tea flavour. Now to the key question: Would today’s informed and globally-engaged caring consumer accept such a system knowing what this means for farmers? The beautiful and fascinating reality is that tea flavour is not and will never be constant. That is what makes single-origin and authentically processed, handcrafted tea so interesting. By embracing what’s special about each tea and supporting retailers who trade directly with farmers, we can help farmers and workers to be more than fairly compensated but also develop even more unique teas. This means we get better products and everyone wins. Who doesn’t want to be part of that?