Tea Biz
Tea Biz

Episode · 5 months ago

Tea News and Biz Insight - August 6, 2021

ABOUT THIS EPISODE

HEAR THE HEADLINES – India Tea Auction Mandate Chafes Producers | Smallholders Seek Higher Raw Leaf Minimums
| Sharetea Ranks 6th Among Fastest Growing US Retail Chains

| GUEST – Narendranath Dharmaraj, consultant and former plantation manager with Brooke Bond, Unilever, and Harrisons Malayalam

| NEWSMAKER – Shabnam Weber, president Tea & Hearbal Association of Canada

| FEATURES – Tea Biz this week travels to India for an historical perspective on the Tea Board’s recent decision to enforce a controversial mandate that registered gardens sell at least half of the tea they produce at auction… and then to Toronto, Canada where Tea Biz continues its coverage on differentiating specialty tea with Shabnam Weber president of the Tea & Herbal Association of Canada and a spokesperson for the Tea Association of the USA and Tea and Herbal Infusions Europe. Shabnam says that as an industry, “we should together be working on elevating the value of tea for the betterment of every part of the supply chain.”

Tea Auction Mandate

The Tea Board of India recently issued a circular mandating that 50% of the production from a garden must be sold via auctions. We ask Narendranath Dharmaraj, a veteran in the tea industry about his views on this, and what it means to the industry.

Is Tea Divisible?

Joining us today is Shabnam Weber, president of the Tea & Herbal Association of Canada. In 2000 she co-founded the Tea Emporium, a chain of Canadian specialty tea shops. She served as a member the THAC board for many years before selling her company to lead the association. In this conversation she represents not only the Canadian tea industry, she is also spokesperson for the Tea Association of the USA and Tea and Herbal Infusions Europe, an apex group that in turn represents tea associations in Ireland, the UK, Germany, Spain, France, Austria, The Netherlands and several other European countries.

The Tea Biz podcast delivers tea newsthat you need to know, a recap of the week's major headlines, withcommentary and cultural trends. Hosted by Dan Bolton. It is the voice oforigin for tea professionals and enthusiasts worldwide. Think of us as a digital caravanof storytellers, bringing authentic, authoritative and exclusive stories to you weekly from thetea lands. Hello, everyone, here are this week's headlines. Indian teaauction mandate Chaves producers. Smallholders seek higher Rawley's minimums and share tea ranks amongthe fastest growing US retail chains. More in a minute, but first thisimportant message. What makes a perfect cup of Ceylon tea the Perfect Cup isfrom the tea businesses that ensure the protection of all the children living within theirtea estates. We Salute Kailani Valley, tell a Wacky Lee, Bogajan,Thalawa, Harana and Elyptia tea estates. Support Save the children. Sri LankaTea Rowers, currently getting good prices and private sales, strongly objected this weekto a July fifth set order by the Tea Board of India calling for strictcompliance with a requirement that tea is states sell a minimum fifty percent of theirtea by volume and regional auction houses. The mandate comes amid low auction pricesand a Glood of mediocre tea. According to growers quote, it's a buyer'smarket as they demand more customized and quality teeth through private sales, said MCLloyd Russell, director as a monum. Large producers are already under pressure owingto the auction market crash, high wages, we retail sales in lockdown and thedrought, he said. The order follows an audit showing that many registeredgardens were sending far less than half of their produced to public auctions. Theannouncement comes as tea exports decline and labor costs increase. Also of note isthe fact that, the lower logistics costs, agents bidding on lots now represent manymore buyers. The practice reduces the number of bidders. Prices at theSILIGARY auction fell eighteen percent in early July. Business Inside Sujet Patras, secretary ofthe Indian Tea Association, explains that selling direct earns growers good prices andquick cash flow, which the press. An auction system does not facilitate forcinggrowers to auction better quality teas does not offer any protection against continuous declines inprices, he said later in the podcast. Now render darmarage offers an historical perspectiveon auction mandates. A steep decline in the price paid for green tealeaves threatens the livelihood of small tea growers that produce fifty one percent of India'stea. Uncertainty has led many to sell their green leaf for fifteen to seventeenrupees for kilo, a rate below the cost of production. In a letterto India's Minister of Commerce, the Confederation of Indian Small Tea Growers Associations issaid that bought leaf factories are not complying with pricing minimums adjusted by region.The Confederation is seeking a twenty five rupeet for Kilo minimum for smallholders. Inresponse, teaboard chairman Propup Bezra said that...

...better prices are possible, but onlyif the green leaf meets requisite quality standards insisted upon by manufacturers. Share tea, Taiwan based milk, fruit and bubble tea chain, ranks sixth among thefastest growing US food chains in two thousand and twenty. According to nations restaurantnews, which use data central's fireflies survey data to calculate rankings, the companyrecorded sixty four point seven billion in domestic sales in the US market, growingby twenty seven percent during the pandemic. There are one hundred and thirty oneUS locations in twenty states listed on the website. The chain, which operatesthree hundred locations worldwide, was founded in one thousand nine hundred and ninety two. Share tea reports that their best selling beverage is tiger melt, a combinationof brown sugar and Tapioca Pearls Business inside many of the fastest growing chains arerelatively small, but each at the top twenty five grew at least fifteen percentlast year. Only two hundred and two of the five hundred largest restaurants rankedby nations restaurant news managed system wide growth. In Two thousand and twenty are vindAnn and their men in Bengaluru reports on India's tea auction prices. indietepiessupport for the weekend in July. Thirty one, twenty twenty one, continuingthe conversation from last week, where the teaboat of India had is, you'dnoticed, insisting that fifty percent of all the tea produced to be sold viaauctions this weeks are produced groups to spot and raising concerns. One of theresponses has come from the northeastern tea association, who said the price of green leafis a matter between the grower and the manufacturer. They also said thatat the minimum price of green leaf is fixed, so should the minimum priceof made tea be. Calling the current minimum benchmark price faulty, the Associationis said that it's neither helping the growers not the manufacturers. The associations asfor third party study to make recommendations that will benefit the industry. In marketsale dirty the auction saw a higher volume of unsalty, especially in north India, called Cutas aw good demand for Orthodox tea in fair demand for CITC leaf, while Gohati so fair demand for both. In Gohati, the two big buyersin the sun you reliever and Datta consumer products for active for dust.In the south, couche saw decline and exports ascribe the rise in covid andRussia, along with sanctions in Iran. Orthodox steely saw about fifty one tosend soul, while on the thirty six percent of CTC leaf was sold CTCdust. So better update, as eighty percent of the teas on offer sold. Prices remain the same as previous week or slightly lower. And now orword from our sponsor. To trade teas works with tea purveyors at every scale, from promising startups to the world's largest multi national beverage brands in the hot, iced and bottle tea segments. With US based formulation, blending and packagingservices, q trade can help you innovate, the scale up and grow your specialtytea brand. For more information, visit our website. Que Trade Tea'scomTea Biz, this week travels to India for an historical perspective on the TeaBoard's recent decision to enforce a controversial mandate that registered gardens sell at least halfof the tea they produce at auction, and then to Toronto, Canada,where TEB is continues its coverage on differentiating...

...specialty tea with Shabdom Weber, presidentof the tea and Herbal Association of Canada and a spokesperson for the Tea Associationof the USA, and tea and herbal infusions Europe. Shabnam says that,as an industry quote, we should together be working on elevating the value oftea for the betterment of every part of the supply chain. The Tea Boardof India recently issued a secular mandating that fifty percent of the production from agarden must be sold via auctions. We ask Nary Didna Amarrach of veteran inthe tea industry, about his views in this and what it means to theindustry. The Tea Board of India recently is shoot a circular mandating the fiftypercent of the production from a garden must be sold by our auctions. Weasked the Internet Term Rach, a veteran the tea industry, about his viewsin this and what it means to the industry. To give you a youa little historic perspective. This all started sometime early s through the introduction ofwhat is called the team marketing control order by the government of India, TMCO, more popularly known as t MCO, which generally stipulated seventy percent mandagey options, and they made it into seventy five percent. That was about the timewhen xt sport control order was also introduced. That was the also the time andkey prices were rolling high, as a matter of fact, does atsome point, I think it was eighty three, hundred and eighty four,there was a ban on exports from media, which literally almost put a nail inthe in the Indian export scenario. In the beginning of two thousand welost the following the disintegration the Yuss are we lost captive market. W towas introduced, as see, and cave in. The software underbellue of theindustry was exposed. So we were sort of re examining every aspect of thebusiness and one of the things, of course, we did as a growerassociation from a Possy was to lobby against this seventy five percent mandage reaction auctions. We did, we have to do a lot of work on that.You know, exposed a huge gap between the farm gate price and the theretail price. And then finally we managed to get the government of India toreveal that seventy five person mandage free auctions. And we also at the time studiedthe auction rules in detail and we were convinced that there were basic issuesin the both the the principle and processes of the tea auction which is notleading to correct price dis career. Looking at the data, since two thousandand fourteen, the percentage drop in volume of auction sales is not new.So by insisting on this, will there be any advantages to the the industry? The thinking seems to be the lack of transparency in the private sales andtherefore this small growers are denied a fair price. I think that seems tobe the spirit behind it. Nothing wrong with that spirit, very laudable.But you know, we seem to be coming up with a solution which isworse than the remedy, worse than the disease, in mandating compulsory auction sales, because you know, they they are the entire product action sales. Everythingis being monitored and tracked by the t board, the hundreds of returns tobe submitted. And as though that was not enough, now there with introductionto the GST. There is obviously a...

...lot of transparency, so why privatesale pricing can on be tracked, I am not able to understand. Sonow going back to the inherent lack your in the option princippers and process assay. Said, we do believe that it's not lending to correct price discovery givena supply and demand situation. The auctions started even when d before the introductionof the Forum Exchange Regulation Act, the FEMA and the Fara etc. Soat that time the producers were the so called sterling companies, the buyers werethe district terling companies, the brokers were sterling companies. So it will moretransaction arrangement than a scientific price discovery mechanism. So it to that extent it wasflawed and heavily biased in favor of the the buyers. Even after thethe the English left, everything was in denies, I mean t business practicallywent into the hands the Indian business houces in Youd bias. Obviously a didn'twant to change this system because it was favorable to them. Is the producer? Unfortunately, the undertop with the whole chain. He has the bulk ofthe cost. What is the personage the cost of the producer in the ultimateend consumer price? There is obviously a big mismatch between what is this personallyage cost share versus percentage value share. One was this proxy buying, saidone buyer put by on behalf of any number of buyer. So it's literallykilled competition to even the option. Of course you can argue that there isno proxy buying, but you know it's our password managed, as you know. So the PAT's nothing prevents anybody from sort of sharing the password to theother. So it is despite the option that that issue a proxy buying,to my mind, has not been resolved. After you option came they said therewill be fan in the options. That makes you know the restricted salegeography won't be there. But it's not happening. For whatever reasons which insaled operate thereforchin by Schlu Salem, con bias, etc. The Pan Indianoption not happening. Only that happens, then the then the competition will gooff. There will be more more play. Yes, work and the other.The is problem in the principle was what is called the division of lots. The the option allows for bias to divide the lots between them. Ihave studied this in fair detaid. Time after time I we could find thateven the biggest buyer in the country were sharing lots with the smallest buyer.It seems so, so rational, unfair. I think. I'm told that thatdivision of lots continues even now, which is again, and I competition. In fact, one other recommendation of Percuson at that point to a timewas they introduced what is called a divisibility premium. Anybody who buys on adivided mode has to pay a five person premium, one on price, which, of course was stout the opposed by the buyer community. That was beforethe the options came in. Is Auction System Sill relevant today? have anyauctions made a difference? My answer is...

...a big you know, they're notplament at all, because there's an option in coffee with an option rubber.Rubber, in fact claims they have the highest form gate price for any commodity. Rubber price or come one's right with the supplied amount. Of course,the prices are scientifically arrived at by the forces of market, independent of anyrules. That the work is done. Let then, dependent free trade mechanism. Fine, a price, we are saying, what is the way toreach that price? What is the way to discover that price? The option, as a said, it is an improvement, no doubt, but someof these issues are still not getting resolved. The proxy is Davision of lots.Last minute crowding and they sare not being addressed, even the the option. I'm not for a moment saying the the buyers are mercenaries. They areserving their business objective of fraud. yesters, the producer wants to produce at thelowest coston sender the highest price. Why? I would want to buyat the lowest price nextly, so you know and if there is a systemthat allows that. That seems to be the the concern, in my opinion, for the producers. Joining us to day is Shabnam Webber, president atthe tea and Herbal Association of Canada. In Two thousand she co founded thetea emporium, a chain of Canadian specialty tea shops. She served as amember of the TAJ AC board for many years before selling her company to leadthe Association. In this conversation she represents not only the Canadian tea industry.She has also a spokesperson for the Tea Association of the USA and tea andherbal infusions Europe an apex group. That in turn represents tea associations in Ireland, the UK, Germany, Spain, France, Austria, the Netherlands andseveral other European countries. Can Specialty to be defined, or is te qualitybest viewed as a continuum? Trying to find a definition for tease like kindof Nail Jello to a wall. And that's not my quote, I'm quotingBill Clinton here. And if we all accept that to be an absolute truth, which we seem to be agreeing on, then why are we putting our energyin trying to differentiate and what appears to be dividing up the industry intogood and bad? Our objective is in industry should be working together in orderto capture share of throat from coffee, from water and from soft drinks.That should be our objective. So let's pretend that in some magical world,we actually manage to find a different definition that everybody agrees on. My questionis, so what? And then what? What's going to happen? Have weactually converted a single coffee drinker over to tea? Have we converted awater drinker or a soft drink, a soft drink consumer over? We haven't. Have you bettered the life of a single tea producer on this planet?No, and not to mention WHO's going to appoint themselves the tea police towhat go now to shelves and say, well, your specialty and you're notspecialty. The associations. In reality, if you actually understand what the associationsdo, are here represent the industry as...

...a whole. We're here for thefor the betterment of an entire industry. I just I don't see where thegain is. What do we as an industry gain from it? We don'twhat value additions favorably influenced customer perceptions. What are the characteristics? Are Aspectsthat make tea more valuable and therefore more worthy of consumer spending a little moreof their pocket change? Well, I think that's an interesting question because,you know, we can. We can look at it on an analytical leveland an any tea taster, regardless of what part of the industry they're in, will tell you that the value is placed on pluck, on size ofleaf, on seasonality, perhaps depending on where the teeth come from, ona Roma compounds, on clarity of the liquor, on, you know,just overall flavor, you know if you're sort of given overall. So wecan look at it on a very analytical level that way and, as theysaid, every person within the industry, regardless of if they're working in traditionalor specialty, will agree that there are higher quality products within the industry.You will not find a single person that will object to that. You know, on the flip side, when you're asking where does the consumer place value, the consumer places value in all different aspects and we can take a lookat packaging, we can take a look at marketing, we can take alook at how we communicate tea. You will not find an objection from mewhen, you know, you make the statement that he is undervalued. Itis undervalued, absolutely and as an industry we need to do better as awhole to improve that message and that comes in a lot of different fronts.That comes in communicating to consumers not only why t is good for you,but why it should be part of your lifestyle, your every day the waythat we've seen it in the past year with Covid you know, people havebeen attracted to tea because it makes them feel good. I mean, Ipractically screen that from the rooftops when I heard that. Hallelujah. This isa long term, you know, lifestyle change that people are actually communicating tous. Beyond, you know, vitamins and antioxidants and all the rest ofthose good things that are also part of tea. There are some beautifully forgeousproducts out there that you know, when people drink it it's like this bigrevelation and it's beautiful. where I have issue and whereas associations we take issueis when we are celebrating that at the expense of something else. Tell mewhy your product is a premium pluck and and it's and it's rare, therarity of it that it's only available for this window of time when it wasplucked. Tell me about how it was crafted, tell me about, youknow, the flavor profiles. Tell me about those things, because we're celebratingwhy this is good. There's a problem with trying to split and splinter upthis industry. That's dangerous for everybody and, ironically, it is most dangerous forthose that are producing our teeth. It's two under valued. It isan absolute problem when, when any retailer is putting a two cent certified productonto market, we have as an industry, we have allowed we've allowed retail toundervalue our product and the assumption then is that the product is of novalue and we have to do better. I mean, I have to honestlysay, and I'll say this and you can quote me on it, shameon us as consumers, shame on us as retailers in consuming countries that allowthat to happen. Intrigued by what you...

...heard in today's podcast, would youlike to learn more from our global network of PBIS journalists and t experts?Contact them directly through subtext, private message based platform. Avoid the chaos ofsocial media and start a conversation that matters. Subtext message based platform let's you privatelyask meaningful questions of the t experts, academics and t Biz journalists reporting fromthe tea lands. You see their responses via SMS texts which are sentto wreck to your phone. visit our website and subscribe to subtext to instantlyconnect with the most connected people in tea. Remember the visit the T is websitefor more comprehensive coverage. That's wwwt biccom. Thanks for listening. Farewell. Till next week.

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