Tea Biz
Tea Biz

Episode · 9 months ago

Tea News and Biz Insight - August 6, 2021


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 news that you need to know, a recap of the week's major headlines, with commentary and cultural trends. Hosted by Dan Bolton. 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 lands. Hello, everyone, here are this week's headlines. Indian tea auction mandate Chaves producers. Smallholders seek higher Rawley's minimums and share tea ranks among the fastest growing US retail chains. 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 Elyptia tea estates. Support Save the children. Sri Lanka Tea Rowers, currently getting good prices and private sales, strongly objected this week to a July fifth set order by the Tea Board of India calling for strict compliance with a requirement that tea is states sell a minimum fifty percent of their tea by volume and regional auction houses. The mandate comes amid low auction prices and a Glood of mediocre tea. According to growers quote, it's a buyer's market as they demand more customized and quality teeth through private sales, said MC Lloyd Russell, director as a monum. Large producers are already under pressure owing to the auction market crash, high wages, we retail sales in lockdown and the drought, he said. The order follows an audit showing that many registered gardens were sending far less than half of their produced to public auctions. The announcement comes as tea exports decline and labor costs increase. Also of note is the fact that, the lower logistics costs, agents bidding on lots now represent many more buyers. The practice reduces the number of bidders. Prices at the SILIGARY auction fell eighteen percent in early July. Business Inside Sujet Patras, secretary of the Indian Tea Association, explains that selling direct earns growers good prices and quick cash flow, which the press. An auction system does not facilitate forcing growers to auction better quality teas does not offer any protection against continuous declines in prices, he said later in the podcast. Now render darmarage offers an historical perspective on auction mandates. A steep decline in the price paid for green tea leaves threatens the livelihood of small tea growers that produce fifty one percent of India's tea. Uncertainty has led many to sell their green leaf for fifteen to seventeen rupees for kilo, a rate below the cost of production. In a letter to India's Minister of Commerce, the Confederation of Indian Small Tea Growers Associations is said 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. In response, teaboard chairman Propup Bezra said that...

...better prices are possible, but only if the green leaf meets requisite quality standards insisted upon by manufacturers. Share tea, Taiwan based milk, fruit and bubble tea chain, ranks sixth among the fastest growing US food chains in two thousand and twenty. According to nations restaurant news, which use data central's fireflies survey data to calculate rankings, the company recorded sixty four point seven billion in domestic sales in the US market, growing by twenty seven percent during the pandemic. There are one hundred and thirty one US locations in twenty states listed on the website. The chain, which operates three 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 combination of brown sugar and Tapioca Pearls Business inside many of the fastest growing chains are relatively small, but each at the top twenty five grew at least fifteen percent last year. Only two hundred and two of the five hundred largest restaurants ranked by nations restaurant news managed system wide growth. In Two thousand and twenty are vind Ann and their men in Bengaluru reports on India's tea auction prices. indietepies support for the weekend in July. Thirty one, twenty twenty one, continuing the conversation from last week, where the teaboat of India had is, you'd noticed, insisting that fifty percent of all the tea produced to be sold via auctions this weeks are produced groups to spot and raising concerns. One of the responses has come from the northeastern tea association, who said the price of green leaf is a matter between the grower and the manufacturer. They also said that at the minimum price of green leaf is fixed, so should the minimum price of made tea be. Calling the current minimum benchmark price faulty, the Association is said that it's neither helping the growers not the manufacturers. The associations as for third party study to make recommendations that will benefit the industry. In market sale 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 buyers in 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 and Russia, along with sanctions in Iran. Orthodox steely saw about fifty one to send soul, while on the thirty six percent of CTC leaf was sold CTC dust. So better update, as eighty percent of the teas on offer sold. Prices remain the same as previous week or slightly lower. And now or word 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 packaging services, q trade can help you innovate, the scale up and grow your specialty tea brand. For more information, visit our website. Que Trade Tea'scom 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 TEB is continues its coverage on differentiating...

...specialty tea with Shabdom Weber, president of the tea and 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 quote, we should together be working on elevating the value of tea for the betterment of every part of the supply chain. The Tea Board of India recently issued a secular mandating that fifty percent of the production from a garden must be sold via auctions. We ask Nary Didna Amarrach of veteran in the tea industry, about his views in this and what it means to the industry. The Tea Board of India recently is shoot a circular mandating the fifty percent of the production from a garden must be sold by our auctions. We asked the Internet Term Rach, a veteran the tea industry, about his views in this and what it means to the industry. To give you a you a little historic perspective. This all started sometime early s through the introduction of what 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 time when xt sport control order was also introduced. That was the also the time and key prices were rolling high, as a matter of fact, does at some 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 in the in the Indian export scenario. In the beginning of two thousand we lost the following the disintegration the Yuss are we lost captive market. W to was introduced, as see, and cave in. The software underbellue of the industry was exposed. So we were sort of re examining every aspect of the business and one of the things, of course, we did as a grower association 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 the retail price. And then finally we managed to get the government of India to reveal that seventy five person mandage free auctions. And we also at the time studied the auction rules in detail and we were convinced that there were basic issues in the both the the principle and processes of the tea auction which is not leading to correct price dis career. Looking at the data, since two thousand and 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 and therefore this small growers are denied a fair price. I think that seems to be the spirit behind it. Nothing wrong with that spirit, very laudable. But you know, we seem to be coming up with a solution which is worse than the remedy, worse than the disease, in mandating compulsory auction sales, because you know, they they are the entire product action sales. Everything is being monitored and tracked by the t board, the hundreds of returns to be submitted. And as though that was not enough, now there with introduction to the GST. There is obviously a...

...lot of transparency, so why private sale pricing can on be tracked, I am not able to understand. So now 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 given a supply and demand situation. The auctions started even when d before the introduction of the Forum Exchange Regulation Act, the FEMA and the Fara etc. So at that time the producers were the so called sterling companies, the buyers were the district terling companies, the brokers were sterling companies. So it will more transaction arrangement than a scientific price discovery mechanism. So it to that extent it was flawed and heavily biased in favor of the the buyers. Even after the the the English left, everything was in denies, I mean t business practically went into the hands the Indian business houces in Youd bias. Obviously a didn't want to change this system because it was favorable to them. Is the producer? Unfortunately, the undertop with the whole chain. He has the bulk of the cost. What is the personage the cost of the producer in the ultimate end consumer price? There is obviously a big mismatch between what is this personally age cost share versus percentage value share. One was this proxy buying, said one buyer put by on behalf of any number of buyer. So it's literally killed competition to even the option. Of course you can argue that there is no 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 the other. 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 there will be fan in the options. That makes you know the restricted sale geography won't be there. But it's not happening. For whatever reasons which in saled operate thereforchin by Schlu Salem, con bias, etc. The Pan Indian option not happening. Only that happens, then the then the competition will go off. 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. I have studied this in fair detaid. Time after time I we could find that even 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 that division of lots continues even now, which is again, and I competition. In fact, one other recommendation of Percuson at that point to a time was they introduced what is called a divisibility premium. Anybody who buys on a divided mode has to pay a five person premium, one on price, which, of course was stout the opposed by the buyer community. That was before the the options came in. Is Auction System Sill relevant today? have any auctions made a difference? My answer is...

...a big you know, they're not plament 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 any rules. That the work is done. Let then, dependent free trade mechanism. Fine, a price, we are saying, what is the way to reach that price? What is the way to discover that price? The option, as a said, it is an improvement, no doubt, but some of 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 are serving their business objective of fraud. yesters, the producer wants to produce at the lowest coston sender the highest price. Why? I would want to buy at the lowest price nextly, so you know and if there is a system that allows that. That seems to be the the concern, in my opinion, for the producers. Joining us to day is Shabnam Webber, president at the tea and Herbal Association of Canada. In Two thousand she co founded the tea emporium, a chain of Canadian specialty tea shops. She served as a member of the TAJ AC board for many years before selling her company to lead the 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 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. Can Specialty to be defined, or is te quality best viewed as a continuum? Trying to find a definition for tease like kind of Nail Jello to a wall. And that's not my quote, I'm quoting Bill 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 energy in trying to differentiate and what appears to be dividing up the industry into good and bad? Our objective is in industry should be working together in order to 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 question is, so what? And then what? What's going to happen? Have we actually converted a single coffee drinker over to tea? Have we converted a water 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 to what go now to shelves and say, well, your specialty and you're not specialty. The associations. In reality, if you actually understand what the associations do, are here represent the industry as...

...a whole. We're here for the for the betterment of an entire industry. I just I don't see where the gain is. What do we as an industry gain from it? We don't what value additions favorably influenced customer perceptions. What are the characteristics? Are Aspects that make tea more valuable and therefore more worthy of consumer spending a little more of their pocket change? Well, I think that's an interesting question because, you know, we can. We can look at it on an analytical level and 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 of leaf, on seasonality, perhaps depending on where the teeth come from, on a Roma compounds, on clarity of the liquor, on, you know, just overall flavor, you know if you're sort of given overall. So we can look at it on a very analytical level that way and, as they said, every person within the industry, regardless of if they're working in traditional or 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 look at packaging, we can take a look at marketing, we can take a look at how we communicate tea. You will not find an objection from me when, you know, you make the statement that he is undervalued. It is undervalued, absolutely and as an industry we need to do better as a whole 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 way that we've seen it in the past year with Covid you know, people have been attracted to tea because it makes them feel good. I mean, I practically screen that from the rooftops when I heard that. Hallelujah. This is a long term, you know, lifestyle change that people are actually communicating to us. Beyond, you know, vitamins and antioxidants and all the rest of those good things that are also part of tea. There are some beautifully forgeous products out there that you know, when people drink it it's like this big revelation and it's beautiful. where I have issue and whereas associations we take issue is when we are celebrating that at the expense of something else. Tell me why your product is a premium pluck and and it's and it's rare, the rarity of it that it's only available for this window of time when it was plucked. Tell me about how it was crafted, tell me about, you know, the flavor profiles. Tell me about those things, because we're celebrating why this is good. There's a problem with trying to split and splinter up this industry. That's dangerous for everybody and, ironically, it is most dangerous for those that are producing our teeth. It's two under valued. It is an absolute problem when, when any retailer is putting a two cent certified product onto market, we have as an industry, we have allowed we've allowed retail to undervalue our product and the assumption then is that the product is of no value and we have to do better. I mean, I have to honestly say, and I'll say this and you can quote me on it, shame on us as consumers, shame on us as retailers in consuming countries that allow that to happen. Intrigued by what you...

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