Tea Biz
Tea Biz

Episode · 6 months ago

Tea Biz News and Insight - March 11, 2022

ABOUT THIS EPISODE

HEAR THE HEADLINES – Beverage Multinationals Suspend Operations in Russia | Once Unleashed, Sanctions Have an Unpredictable Bite | Extreme Winter Transitions to a Gentle Spring  

| NEWSMAKER – Ian Gibbs, chairman since 2016 of the International Tea Committee  

| FEATURES – This week, Tea Biz travels to the UK offices of the International Tea Committee, where Chairman Ian Gibbs describes several immediate and possibly long-term impacts on the global tea trade - stemming from the ongoing crisis in Ukraine.  

Payment Concerns Further Disrupt Tea Supply Chain – During a period of upheaval caused by the pandemic, the tea industry’s newest worries include guaranteeing payment for containers of tea without violating sanctions while booking scarce carriers for shipments to the Russian Federation and Ukraine.

As the ruble’s value collapsed, Russian tea buyers accustomed to favorable credit terms now find it difficult to secure the financing needed to pay upfront, according to Ian Gibbs, chairman since 2016 of the International Tea Committee (ITC). Gibbs predicts a dip – but not a significant drop in the volume of tea shipped to the world’s third most valuable tea market. In 2020 the Russian Federation imported 142,000 metric tons of tea valued at more than $400 million and produced 4,000 metric tons of its tea, grown in Southern Russia along the coast of the Black Sea near Sochi.

The Tea Bis podcast delivers tea news that you need to know, a recap of the week's major headlines, with commentary and cultural trends. Hosted by Dan Bolt. It is the voice of origin for tea professionals and enthusiasts worldwide. Think of us as a digital caravan of storytellers, bringing authentic, authoritative and exclusive stories to you weekly from the tea lambs. Hello everyone. This week's headlines. Beverage multi national suspend operations in Russia. Once unleashed, sanctions have an unpredictable bite and extreme winter transitions into a gentle spring. More in a minute, but first this important message. What makes a Perfect Cup of Ceylon tea? The Perfect Cup is from the tea businesses that ensure the protection of all the children living within their tea estates. We Salute Kailani Valley, tell a Wacky Lee, Bogajan, Thalawa, Harana and Eliptia tea estates. Support Save the children. Sri Lanka, several multinational beverage companies, including Coca Cola, Pepsico and s our books, each with a billion dollar tea brand, announced this week that they will no longer do business in Russia. You know leaver, the world's third largest tea company, hauled at all Russian imports and exports and stopped advertising its entire portfolio of four hundred brands, but will continue to sell food products and manufacture at five Russian facilities. Nestly, owners of Nest Tea, announced it is closing three factories that make powdered and liquid beverages and employ five thousand workers. This is the first modern instance of tea companies independently retaliating with their own economic might to affect political change. Thomas L Freedman, writing in the New York Times, explains that Russia quote completely underestimated the ability of companies and individuals all over the world to participate in and amplify economic sanctions on Russia far beyond anything government's initiated or mandated. and quote the impact of withdrawing even wellknown brands like Lippton as minimal as market leaders or remi, trade and may foods, with forty two percent and twenty percent market share respectively, dominate the package good sector. A MoD tea and you leaver ECTA each have about a six percent share, down from ten percent in two thousand and ten avalon and act bar or well established niche brands with signal digit market share. Azer K, at five percent market share, is experiencing fast growth in specialty retail and grocery. Chinese tea brands, mainly marketing green and new long teas, can be found in specialty tea shops, and local brands like Krasenar or popular in SOCII. Russians spent about fifty billion rubles last year on package tea and supermarkets, excluding hotels, resorts and traditional retail shops and tea rooms. According to Nielsen, open markets account for fifteen percent of sales, but twenty percent sold, and convenience outlets. Market research firm market analysts estimates that ninety eight percent of Russians drink tea. Like bread and Malt, tea is...

...viewed as an essential brand. Owners say government directives discourage grocers from increasing prices. It's not that fast of process, explain one brand owner, who was astounded to see price adjustments within a week after sanctions were announced. Western imposed sanctions trigger a thirty percent devaluation of the ruble in five days to a record low of less than a US, and rules controlling prices and limiting purchases to prevent hoarding, did not list. Tea Retailers, however, agreed to limit markups to five percent on dairy, baked goods and sugar. Removing European and US tea brands from the market will not significantly reduce consumption, but sanctions make tea shortages a certainty. The fact that ninety seven percent of Russia's tea arrives by ship means stocks will soon be depleted. Moscow based brand managers say the standard practice this stock warehouses at two hundred percent of monthly demand. Ships and route, if they all reach port, carry sixty days replenishment. The interruption of ships in the past two weeks guarantee shortfalls by July. Unlike grain harvests, none enough tea is sold at auction to make direct shipment profitable for even the smallest container carriers. Buyers can expect fewer ships, and probably smaller ships, docking in Russia, making it likely that finding the right carrier and port for delivery will be a challenge. Moscow brand owners say they are discussing many different schemes quote, but risks are high. You'll never know before you try it. It's all going to work out and quote business inside. Russians are not rich, earning a per capita average of eleven thousand seven hundred US last year, down from the pre pandemic average of twelve thousand one hundred a year. According to the World Bank Statistics July, two thousand and twenty one consumer survey show the sixty percent of respondents spend half their monthly income on food. The country is per capita average is deceptive, as workers in only ten of eighty economic regions achieve parody with countries in eastern Europe. Russians living in the far west and Siberia earned the equivalent of five thousand per year. US. Inflation has further eroded purchasing power many of those living within the Russian federations economic zone. We're unaware of what caused the catastrophic decline in the value of the ruble last week. Two weeks ago, a Russian family of four living in Moscow could live comfortably spending two hundred and fifty thousand rubles a month. In one week, the devaluation of the ruble reduced an entire year's wages to the equivalent of twenty twozero, five hundred us. Dollars. Sanctions are precise on paper but messy and practice. The US led sanctions imposed on the Russian Federation following the invasion of Ukraine include one hundred pages of detail, not a word of which bands the sale of tea. In fact, he is listed as an essential food stuff, exempt from restraints imposed on the sale of manufactured goods like advanced aircraft, computer chips and some commodities. It sanctions immediately depressed the...

...price of tea and major auctions significantly raised retail prices due to the devaluation of the ruble and delayed shipments to Russia, which gets ninety seven percent of its tea by sea. Food companies that own tea brands, including Unilever, starbucks, Nestlee, coke and Pepsico, are free to choose where they do business. Rarely do they respond in the unison suspension of goods and services as an expression of moral outrage driven by consumers makes it unlikely to abate while Ukraine is under siege. Isolating the world's eleventh largest economy financially is an expensive endeavor for all concerned. It's also an unprecedented exercise of soft power that has forced tea trading nations to choose sides. The divide was first visible, and the United Nations voted to condemn the invasion and demand the immediate withdrawal of Russian forces. Nations that abstain including four of the tea producing countries that supply Russia with most of its tea. These include Sri Lanka, India, Vietnam and China. Can Youa, the third largest supplier, and Indonesia, voted in favor of the resolution. Payment issues appear to be a greater impediment than transport, but it seems that fewer ships and probably smaller ships docking in Russia will make finding the right carrier and port for delivery of tea difficult. Ports in Ukraine or considered too high risk. Shippers pay up front, and hard currency unavailable now to Russian buyers. Tea Suppliers in China or India Ma except one or rupees, but ocean freight rates are typically paid in US dollars and less of government sympathetic to Russia intervenes. Barbar may be more practical. Russia is the biggest exporter of wheat by a significant margin. Ukraine supplies ten percent of the global market together, they annually ship thirty percent of the world's grain. As the price of wheat soars, there could be a return to the Soviet days when Indians a bartered for food. Russian fertilizer is another essential commodity critical to India and Shri Lanka. While India ships greater quantities of tea to Russia, Shri Lanka earns far more foreign exchange dollars per kilo. This week, sh a lanka, which is low on foreign reserves, devalued its currency to attract investors in hopes of paying down four billion in debts due in July. Origins willing to ship cheap tea without concerned for foreign exchange dollars hold an advantage. Low priced tea from Tansania, Burunda and Uganda may find Russian buyers and Mombassa, but transport remains an issue. Finding carriers willing to send vessels to Russian ports, where they will be subject to length the inspections for contraband, will be a challenge. The largest carriers, representing the majority of container bookings, announced they will no longer call on Russian ports. Uncertainties over payments, insurance rates and wartime risk make the largest ships more profitably employed elsewhere. China will not adhere to sanctions, which removes transport and transaction obstacles for Vietnam. But Green Tea's account for only fifteen percent of Russian tea sales. Thirty years ago,...

Georgia produce millions of kilos of black tea, some of which was quite good. In the s collectives employed a hundred eighty thousand workers, producing a hundred and fifty two thou metric tons annually, enough to supply ninety five percent of the Soviet unions tea. Considerable acreage of seed grown stock remains. Production in the last decade has increased from a low of eighteen hundred metric tons in two thousand and fourteen to more than four thousand metric tons, but much of that is blended. As labeling laws, we require that only twenty percent of the tea be grown in Georgia. As imports dwindle, vendors at local markets will simply stop selling tea once their supplies are exhausted, but the larger package goods brands will need to bring in hundreds of containers. A container holds twenty two point five metric tons of tea. It seems unlikely that Russian tea suppliers will be able to land six thousand two hundred containers, or about a hundred and twenty containers a week, to meet current demand. Last winter brought a five year high and extreme weather events to India, as heavy snow blanketed dartling and cold weather sent shivers through a psalm. Spring so far has been kind. India's Meteorological Department predicts that north India will receive normal precipitation through the first half of the year. South India is expected to be wetter than normal. Quote. Currently, moderate Luninia conditions are prevailing over the Equatorial Pacific region. The latest forecast indicates that these Leninia conditions are likely to persist through March. Thereafter, Leninia conditions are likely to start weakening. and quote. Last year, erratic weather patterns stressed tea plants in a psalm and West Angle. The seasonal transitions that in past years were gradual are now more abrupt, according to professional weather at watchers, average maximum temperatures were higher last year and there were fewer rainy days, but when it rained, it poured, flooding a somb gardens on several occasions. After months of drought. Last fall, I m D recorded a hundred and twenty five extreme weather events. Winter temperatures were unusually low. In Delhi saw its coldest day in January and ninetyears years at ten degrees below normal. Belly also experience eighty eight point two millimeters of rain that month. I'm D recorded a hundred and twenty five extreme weather incidents last fall. Winter temperatures were unusually low. New Delhi so its coldest day in January and nine years at ten degrees below normal. Near they also experience eighty eight point two millimeters of rain, including one record downpour that month. January rainfall totals were the highest since one thousand nine hundred and fifty. In December, darceling experience the heaviest snowfall in fifteen years as temperatures felt a negative two degrees centigrade. Ironically, last year was the fifth warmest twelve month period since one thousand nine hundred and one, averaging point for four degrees Celsius above normal. Are...

Been Dine and there. A man in Bengaluru reports on this week's tea auction prices in the etty price support for the week ending March fifth, twenty and twenty two. The Russian invasion of your cream and the sanctions against Russia are being be able to concerned by the Indian tea industry. The mood of the last auction was understandably subdued in Coutchi export as a badly active average price of Orthodox Leeve dropped by about ender piece Po kilo, which is significant given that two hundred twenty nine tons was sold. Exporters are waiting to see if shipments will be able to arrive at the destination ports. Many liners that are using to carry cargo to Russian ports to the concern is of payments being blocked because of sanctions against Russia. India's relying on its domestic industry and also looking at developing alternative export markets in Iraq, Audi Arabia, the United States, Japan and Tunisia. In auctions, nor India, so auctions only in Gohati in the south. All three auction centers had a sale. And now a word from our sponsor que trade understands at a successful tea blend goes beyond the creative fusion of appearance, a Roma and flavor. Are Multi Award winning product development team is passionate about converting natural ingredients into sensory experiences that customers crave. Every recipe is formulated with a commercial backbone of dependable quality sourcing, with a pricing structure that supports a safe, regulated, profitable and scalable bland q trade meets every brand's retail, food service and ECOMMERCE need. For more information, visit our website, que trade tescom. This week, tea bis travels to the UK officers of the International Tea Committee, where chairman in Gibbs describes several immediate and possibly long term impacts on the global tea trade stemming from the ongoing crisis in Ukraine. During a period of a peaval caused by the pandemic, the tea industry's newest worries include guaranteeing payment for containers of tea without violating sanctions, while booking scarce carriers for shipments to the Russian Federation and Ukraine. As the value of the ruble collapsed, Russian tea buyers accustomed to favorable credit terms now find it difficult to secure the financing needed to pay up front. According to Ian Gibbs, chairman, since twenty sixteen of the International Tea Committee. Gibbs predicts a dip, but not a big drop, in the volume of sales ship to the third most valuable tea market in the world. In Twenty Twenty, the Russian Federation imported hundred forty two thousand metric tons of tea valued it more than four hundred million dollars, and produced an additional four thousand metric tones of its own tea grown in southern Russia along the coast of the Black Sea. Nearsoshi, welcome to the tea Bz podcast. Ian. Thank you very much. It's lovely to be here. Thank you for advising me to join you. E'n. will you help our listeners put the impact of the invasion of Ukraine into perspective? How will approach the US one crisis impact the global trade in tea? Initially it's going to be quite a sort of frightening situation for some of the grows. It's underintingly going to affect some producers more than others. India is probably likely to be the hardest hit. They export thirty Ninezero tons, which represents ends of all their exports. Sri Lanka, on the other hand, exports a little less thirtyzero tons, but this only represents...

...eleven percent of that total exports go to Ken Exported Twenty Five Tho tens to Russia in two thousand and twenty, but this represents less than five percent of Kenny's total exports. Indonesia India, both exporting run nineteen percent of their exports to Russia, could both be hit and the others. T is regarded as an essential product. It's a food stuff. T will be exempt from sections. However, the producers will still have the issues of finance, insurance and shipping, because many being lines, regardless of what's being shipped, will not be shipping to Russia, unlike previous times when sanctions have been a slide. I think that the general feeling in this case worldwide is that people it across the board, from government through companies to individuals, really want to see sections work, because they have been badly affected. If seen on the television and on the Internet, it's going to be quite a challenging task, I think, for quarters to get anything into Russia in the coming weeks. The other problem, of course, is a lot of producers are provided quite blond credit lines and so they wait to be paid once the tea has arrived and they will insist on payment up front, which means that the individual tea companies in Russia are going to have to find and source the finance, and this could change the whole dynamic of the tea market in Russia, depending on which companies have the facilities available to them to fund the imports of tea. This also means that the important companies are going to be taking the long risk. As we go forward, will black tea producers who are concerned over price and settlement of payments cut production, or will te previously distant for Russia, find its way to other markets? I think that quite a lot of tea will still get through. We're talking about a hundred, forty, two million keylers. I think a lot of producers will want to make sure that their businesses, which I mean tea is a crucial part of these economies, that that is not badly affected. There will be an interruption and there's no doubt about it that some of the team will not get through, although they will not be able to buy all the quantity, and there will be a tip in this coming year and for as long as sanctions remain. Let's hope that it's a very short period, but I think that there are plenty of other opportunities. There are plenty of untapped markets out there which we need to get into. There is no reason why producers should cut their harvest or stop producing tea. What they've got to do is find the new markets and they've got to market the tea in these places so when Russia comes back that will be an added boost to them. Of course, it's gate to take time to find these markets and get the sales, but I believe that there's no reason why this there should be a long time effect on producers. Will this crosis soon pass, or do you foresee years of sanctions that permanently disrupt the current alignment of the tea supply chain? Everyone wants the whole problems solved very, very quickly. The amount of damage you're really done Ukraine means that the effects of this...

...invasion are going to be felt for a very long time. It's going to take some time to rebuild Ukraine and for trust to be restored between Ukraine and Russia and all the other parties involved. However, I do think that foodstuffs will be restored fairly quickly, and I don't believe that in the long term there would be a major disruption. One things at the moment, in the short term that is quite good news for tea is is that the price of coffee has got up considerably over the last year, so more people might be encouraged to drink tea. So demand will be there and I believe the government of Russia will be keen to make sure that people get that tea is going to take time to settle down, but I as far as the tea industry is concerned, I personally believe what we're seeing now is a blip. It'll take time to sort things out, but new opportunities invariably are out there. Intrigued by what you heard, in to do is podcast. Would you like to learn more from our problem network, from teams, journalists and t experts remembered the visit? The team is website from more comprehensive coverage. That's wwwat high and Biz bizlcome. Thanks for listening. Farewell, till next week.

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