Kenya’s tea industry feels competition heat

“Just because we have recorded impressive sales in the Mombasa Auction this year doesn’t mean it will remain so. We produce one type of tea which is facing fierce competition from other producers,” says John Bundi of Swift Commodity Enterprise, a leading exporter.

It’s a message echoed by the president of The Highland Tea Company, a wholesaler of Kenyan specialty teas and a member of the Specialty Tea Institute, based in New York City, Wanja Michuki: “Those that rely on one form of tea will always be scathed because you can’t quite predict international markets.”

Kenya also lacks the buffer zone of a vibrant domestic tea market. It is exporting 95 per cent of the 200m kg of tea it produces annually.

“The average consumption of Kenyan tea per person in Kenya is 400g compared to the UK where average consumption is 2kg,” says Mr Bundi. “This should explain why Kenyan tea continues to be in a volatile position.”

India, one of Kenya’s biggest rivals, produces most of its tea for local consumption.

In 2009, India produced 30 per cent of the world’s tea, but consumed 85 per cent of that on the local market. Kenya has also been hit by a string of new trading deals.

Pakistan was for a long time the largest importer of Kenyan CTC tea.

A few years ago, Pakistan’s embassy in Nairobi sought to establish a free trade area (FTA) with Kenya that would eliminate tariffs, quotas and preferences on most of the goods traded between the two countries, top among them tea.

But Kenya rebuffed the proposal, arguing it would conflict with the taxation regimes of the Common Market for Eastern and Southern Africa (Comesa), including the East African Community (EAC) trading bloc.

As a result, exports to Pakistan in 2008 fell by 43 per cent, and are yet to recover.

Afghanistan went ahead to enter into free trade with other tea exporters, including Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka under the South Asia Free Trade Area (SAFTA) and agreed to remove tariffs on goods traded among them.

Today, Sri Lanka, another fierce Kenyan competitor, enjoys duty-free market access for 206 products into the Pakistan market, with tea high on the list.

Special markets

Moreover, Pakistan is now in exploratory talks with Malawi and Rwanda seeking FTA status with alternative African tea-growing states.

“When such a major importer of tea finds new markets to explore, this has serious effects and places Kenya in a precarious position where a drop in demand from any one of these countries always has a major impact on revenues from Kenyan tea exports,” says Ms Michuki.