RealiTEA: The bitter compromise in our cup of tea
A new investigation by Cafédirect has exposed the trueextent of the crisis facing the treasured cuppa. Whilst the cost of growing tea has soared by as much as 94% in the past five years, crippling smallholder growers, the market hasn’t been keeping pace, with prices paid to these growers increasing by just 25%. Compare that to the price of tea on UK shelves, which has risen by a measly 3.8% over the last 3 years.
In its new report, RealiTEA, Cafédirect reveals that in order to offer tea at the low prices seen on UK supermarket shelves, compromises have to be made. These compromises usually come at the expense of the farmers at the beginning of the supply chain and directly impact on the quality of tea that ends up in the cup. For an industry worth £629M in the UK, this is shocking. In contrast, for every box of Cafedirect Hand-Picked Tea sold, 22.5% goes directly back to the smallholder tea cooperatives.
Alarmed by the situation facing their smallholder tea partners, and the future of a good cup of tea, Cafédirect conducted a series of in-depth interviews with tea growers from Uganda, Kenya and Tanzania.
Their responses showed that the traditional, artisan skill of hand-plucking the tender top two leaves and a bud (widely considered the only part of the plant suitable for making tea) is being fast replaced by far less accurate machine-cutting. Machine cutting is the standard for mass market, low-grade tea, which results in twigs and the tougher lower leaves in tea bags.
Until now expert smallholder growers have rejected these mechanical changes, not just because of the effect on quality, but also to protect the long-term health of the bushes and reduce the environmental impact. However, continual pressure on price is forcing famers to make the choice between quality and survival.
The tea farmers also highlighted spikes in production costs, such as the price of oil, which increases both transport and fertiliser prices. Living costs have rocketed with the worldwide cost of food increasing by over 137% in the last five years. This in turn drives up labour costs, such as bringing in extra help during at harvest season. Oxfam’s recent report on tea workers’ wages highlighted the chronic underpayment on plantations, demonstrating that it’s not just smallholders who are suffering at the hands of monopolies.
UK tea drinkers have, for the most part, been shielded from the truth. As 54% of the tea category is sold on promotion it is easy to see how tea is perceived as a ‘cheap’ commodity, which in turn undermines its value.
Wilson Tugei, Chairman of the 100% member-owned Siret cooperative in Kenya, describes the extent of the impact to the smallholder growers, “The farmers often have to make compromises elsewhere. When prices are low or crops fail, farmers will have to sell their food stocks, fell trees to burn or sell for charcoal or they might resort to lease out their tea farms – often at a very low price.“
He continues: “They will make sacrifices in their personal lives too. It may be that they cannot afford to pay school fees for their children. Or that they might have to change their diet to save money, thereby compromising their health. Some are forced to financially overburden themselves by securing overdrafts and loans to meet their daily needs”.
“The global tea industry is in crisis,” explains John Steel, CEO at Cafédirect.“Tea has long been considered a cheap commodity in the UK, a telling sign of a lingering colonial mindset that distances consumers from the real value of tea, with many large companies exploiting local resources whilst reaping huge profits for themselves.Our demand for cheap goods is twisting and buckling the supply chain and we can’t just sit in a bubble and ignore it because it’s not on our doorstep.” He continues, “Look at the horsemeat scandal and the horrifying clothing factory collapse in Bangladesh. Businesses are driving down the cost of goods to meet consumer expectation of low prices, rather than meeting their demand for quality and value. It is a downward spiral, stripping out moral and ethical standards and undermining quality. Ultimately we all lose out.”
According to the Fairtrade Foundation, 85% of tea production is controlled by seven multinational companies through their factories and estates. Which poses the question of where the profits end up. When it comes to tea, the ethic of ‘buying local’ is best translated to buying from smallholders. Harriet Muhebwa Katiti, Chairwoman at Igara Tea Factory in Uganda explains, “If you buy direct from smallholders then you know the money is going back into the local economy. If you buy from a multinational then money will be taken out of the country and spent in other places.”
To show their support for smallholder tea growers, Cafédirect is asking British tea drinkers to make a pledge to ‘think before they drink’. The pledge celebrates the people behind our food and urges tea drinkers to stand up for a better brew.
The pledges collected will be shared with the tea industry to shape a future that is better for the farmer and ultimately delivers a much tastier brew for the tea loving public. Pledge now at www.drinkbettertea.co.uk.
The cost of producing tea
It was acknowledged by all the tea partners that the costs of production have increased substantially. This financial burden does not transfer up the supply chain, so is rarely born by the tea brands, or tea consumers, but by the farmers themselves because they hold the least power in the whole process.
The production costs for tea include: the purchase of land and its preparation, buying seedlings, labour for planting and plucking, fertilizer (the cost of which has increased by up to 100% in five years), weeding, pest control and transportation to processing units. These costs are not controlled by the farmers, but impacted by commodity rises in other sectors, such as oil.
Robert Ejiku, Group Manager at the Igara Tea Factory in Uganda, confirms, “The price of tea we receive has not gone up in line with these input costs. We need to align tea prices or smallholders risk losing their livelihoods.”
Jill Pinda Birungi, Tea Farmer and Board Member at Mpanga in Uganda, shared a story of how these rising costs affect the farmers on a day to day basis: “One time in Mpanga we went two years running with no fertiliser because Mpanga couldn’t afford it.”
Adolf Sabiiti, General Manager continues, “Production was very low. We were producing at a capacity of around 40%. We went to our friend, Shared Interest, they gave us a loan of 150,000 US Dollars. We purchased fertiliser, we gave it to the farmers at a subsidised price. Then from that, we saw magic. We were producing at around 40%, we started producing at around 100%.”
Once the tea is matured, the single greatest cost is plucking. Labour costs in Uganda have risen from 2,000 to 4,500 Ushillings (per hr) in recent years, a rise of 225%. By contrast, the cost of tea to consumers has remained relatively stable during this time.
In addition, improving education and higher aspirations have led to high urban migration and the knock on effect of a labour shortage and exodus from growing tea.
Kenneth Kyamulesire, Factory Unit Maganer at Mbale in Uganda, explains, “Increased running costs force farmers to abandon tea growing and move into other crops. Issues with aging growers as youths seek other forms of employment is a problem as tea plucking is strenuous, early morning work and older people cannot do it, so they have to let their valuable land become overgrown, harming the long term productivity of the bushes.”
Cafédirect buys tea exclusively from smallholders as a direct transaction, excluding middlemen traders. Not only does this offer a direct dialogue and the ability for smallholder partners to negotiate, but it builds a partnership that results in the growers receiving a far greater proportion of profit.
Calculations show that for every box of Cafedirect Hand-Picked Tea (80 tea bags) sold, 22.5% goes directly back to the smallholder tea cooperatives. In addition to this Cafédirect also reinvests a proportion of its profits back into projects at origin, equating to more than 50% of their profits to date.
John Steel, CEO of Cafédirect, offers further detail on this support programme, “Recent projects have included kitchen garden schemes and bee keeping training to produce honey both to eat and to sell at the local market. Projects like this are vital for smallholders, who are unable to survive on tea sales alone and are unable to predict their income from one year to the next.
Traditional tea traders are fair-weather friends and offer no long-term commitment and when climate change threatens crops. That’s why a long-term, direct relationship and support to face these global challenges are essential for survival.”
Cafédirect’s direct trading model also has a positive influence on the quality of tea. Robert Ejiku, from Igara Tea Factory in Uganda, explains: “Of all our Fairtrade buyers, Cafédirect has been paying us the market price, then an additional premium, but more than that they have also been paying an incentive for farmers to produce very good quality tea.”
UK consumers’ product choices can help smallholder farmers all over the world. By pledging to ‘think before they drink’ and appreciate the value inherent in traceable and personal supply chains that deal directly with the farmer.
The value of smallholder production
In line with many globalised products, tea growing has been affected by the drive to increase production and mechanise processes to deliver more to the market faster and cheaper. In contrast, smallholders need to rely on quality over quantity to maximize the revenue from their small plot of land. Robert Ejiku, from Igara Tea Factory in Uganda, explains the difference in quality: “Smallholder-grown tea is better than tea you get from a plantation for various reasons. It is likely to be a family business and they have to do hand picking that guarantees you the quality of the product you get; that’s what smallholders are known for all over this world.”
The Fairtrade Foundation reports that seven companies control 85% of tea production through their factories and estates Local smallholder cooperatives have been increasingly squeezed as they attempt to compete with large tea plantations, often owned by multinational corporations dealing with multiple commodities and located across the globe, thereby decreasing their exposure to volatile prices in any one commodity. To further highlight the imbalance within the industry, the UK retail tea market is worth £629M.
The value of a direct supply chain
The issue of transparency in supply chains is an important one in tea. Smallholders may end up supplying tea to multinationals but, through various layers and changing of hands, they rarely have the ability to negotiate fair terms. These short-term relationships also reduce the ability for smallholders to effectively plan for the long term.
Reducing unnecessary links in the supply chain by trading directly with smallholder farmers is beneficial for both the growers and the industry. It results in a positive impact on growers, their communities and local economies, and ultimately the consumer with better quality tea reaching the market place.