Kenya’s tea industry feels competition heat

Kenya’s tea production has gone up this year on good rains, but its biggest market — the low quality — is collapsing on the back of new trade policies.

The domestic outlook is poor. Tea farmers have enjoyed a bumper year.

Production was up by almost 50 per cent in the first quarter to 37.7m kg compared with 25.4m kg a year earlier.

Sales at the Mombasa auction rose by 18 per cent to 94.5m kg from 79.8m kg last year on improved prices.

But the bounce-back from the drought comes against the backdrop of increasingly stiff competition for Kenya’s low-quality tea-bags and the erosion of many of its top markets behind shifting international trade policies.

Strong liquoring

Kenya is a known producer and exporter of black tea processed using the automated cut, tear and curl (CTC) method of crushing for use in bags.

All the leaves, buds and stems are ground to equal sizes, mostly dust and fannings, producing low quality but strong-liquoring teas.

This is in contrast to the orthodox teas, which are manufactured using the traditional method of rolling leaf into smaller particles to produce a higher quality, better-tasting tea suitable for multiple infusions.

Kenya’s fiercest competitors in the global tea market, India and Sri Lanka have developed industries in both CTC and orthodox production, giving them a strong showing in the large CTC markets of the UK, Pakistan and Egypt, as well as the huge orthodox market in the US.

But Kenyan tea producers remain wedded to CTC production, despite concerted efforts by the Kenya Tea Development Authority, in charge of the collection, processing and selling of tea leaves from small-scale farmers, to encourage orthodox tea production.

Kenya’s 314,875 small-scale tea farmers account for 60 per cent of production.

The plantations take the rest. However, the processing of the former lot is exclusively CTC.

Yet, according to the Tea Board of Kenya — the regulator — in 2007, 3,726m kgs of black CTC tea were produced, against world consumption of just 3,600m kgs, representing an oversupply of 126m kgs.

Kenya was hit heavily by the over-supply, suffering sharp falls in both export volumes and prices, even as competitor nations such as India enjoyed continuing growth in tea sales.