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Writer's picturejohn snell

The elusive art of valuing tea





As a producer of tea it is extremely difficult to know whether you are producing the right stuff or indeed whether you are in the right business, unless you are one of the fortunate few who have garnered long term support from well founded brands under a direct contracting environment. The rest, condemned to sell their product either through auctions or through other middle men (and I am not using this term as a collective derogatory term, or implying that this is a male only domain, but merely as a catchall) really have very little intelligence with which to understand their value.

Value can be considered the price that someone pays for your product but this is a singular data point and may not be reflective of ongoing interest or price attainment, for the same teas in the future. How can we assess whether a tea in auction was purchased for sale as a single origin tea or as a blend component and, if the latter, was it a price reducer, a provider of body, colour or any other sensory fragment of the finished article or, worst of all, merely as the cheapest of it's type from a multitude of origin offers?

The fact is that there is no current reliable translation of value, for sales through intermediaries . In fairness to intermediaries, they have purpose; auctions are a very good vehicle for selling a lot of tea efficiently but Ex/Importers have access to finance, markets and customers, all assets that are difficult to access for those at origin.


To back up this supposition, the fact is that Farmers, in particular, have been misled by politically motivated "assistance" to produce more and more tea without any investigation as to whether his or her product was desirable or surplus to requirement. Without this divining, value is unknown as is the immediate, mid term and long term viability of the efforts of Farmers and Producers alike.

In Kenya we have 100-200MMkgs of tea unsold and in Uganda we have teas selling in Mombasa auction for less than $0.60/kg and well under COP. In Sri Lanka we have a fight for yet another increase in tea workers pay, completely delinked from the economics of the market place in which their tea is sold. Time after time, the industry is hijacked by those that do not have to live with the consequences of their actions and, most shockingly, time after time, the industry does sweet nothing about it!

So, what can be done?


We can start by looking for answers in amalgamating data from all markets to deliver a global evaluation for tea because tea is tea tot the consumer.

Of course, brokers value teas but based on market conditions and quality, a snap shot that is irrelevant after an auction has come and gone.


There are Exporters and Importers that do the same, with similar results, unless they are part of a well developed long term supply agreement where the dialogue is two way, free and forward looking.

If you are not in the rarified atmosphere of direct long term relationships then how can you garner the intelligence of value and forearm yourself against the vagaries of the market? To be clear, ALL relationships will experience $/Kg fluctuations, as the markets move, but if the value of the product is understood then the amplitude of these changes can be muted and managed.

The task is to maximize our products intrinsic value by measuring it's performance against a basket of International and competitive products along a variety of "assets" including


In cup sensory attributes

Leaf make and relevance

Rarity of type

Consumer trends and demand




This may seem obvious but, we seem loathe to step across the origin divide to truly assess in a way that coffee has for decades.

Arabica coffee is traded, bought and sold, against the C market ( Futures) for which individual lots have to be graded as being equal to the clearly defined standard, before they can be registered for sale. All arabicas are traded up or down from the "C" market based on their superiority or inferiority to that standard. In a similar but more subjective manner, Brokers evaluate teas this way but it is on the basis of relativity and their read of the market rather than an indice driven by actual demand (as this is unknown until after the sale).

What we must do is challenge ourselves to imitate coffee's practice of origin agnostic evaluation which is backed up later by differential pricing( to the C market) based on contract negotiations. Further, in coffee, rules are in place for defects (in green beans) which are measured and discounted, as they have a known impact on processing capabilities and outputs, much like the impact (defects if you will) of low density and flowability, or dust and fibre content, in tea. . This systemic and granular judgement of a singular lot around a globally derived evaluation of supply and demand is, despite the influence of the investment community, more thorough than what we have in tea.

Without a global tool, many are left to work with the uncertainty of insular market information and myopic views of worth, some of it sustaining a cycle of poverty that should be broken. The Indian trade and many others would agree (including me) that Assam tea cannot be replaced in a blend, without notice, but this has been ridiculed by historical ignorance of the stated value! That is not to say that Assam does not have intrinsic value just that the evaluation in some consuming markets has been eroded, influenced by internal factors such as the retail competitive landscape and the increasing importance of shareholder returns, both making COG more important (wrongly) than the maintenance of legacy blend value.


To increase visibility of true value for an origin or producer output, it must be with an eye to the target markets and a global view of like offerings, rather than a dogged belief that what is produced is needed and value has been optimized. We must challenge the status quo, if commercial sustainability is under threat or the certainty of it is unknown.


The majority of Producers are smart, courageous and highly skilled in the running of their industries and I look up to them. However, contextualizing of value is not always given air time as passion, sweat equity and the balance sheet, understandably, trumps such fanciful exercises.

We argue that fanciful this is not but necessary, for mid to long term relevance and the health of the tea industry and those in it.


Investing time to realize the true global value of your crop helps determine a number of tactical and strategic actions, including but not limited to


Change to quality

Changes to grading

Change to make

Change to market

Change/Diversification of land use away from tea



All these can be made proactively IF you have a real handle on your value proposition rather than as a reaction to continued unsatisfactory interest and prices.


How is a valuation executed? By utilizing algorithms of relevant data, a velocity of need and price expectation can be determined, relative to the market and any permutation can be explored, hypothetically, by changing those data points that can be influenced, in order to prioritize next steps to improve value.

Many will say that call for a value focus is nothing new and a rigour performed by every tea company but the facts suggest otherwise, or at least that the analysis is not comprehensive or indeed acted upon. Maybe sales are reasonable and returns satisfactory.....today but as consumers shift their habits and interests we must identify these, the rate of change and of absolute growth, with a granularity that ensures we will not suddenly awaken to a crisis.


If the above reads as if producers are not striving to remain relevant and create excellence then it has not done it's job. There are many fine examples of diversified, specialty focused and vertically integrated companies out there but they are usually "connected" to end markets through one method or another and I would argue that they are still the minority. They have adopted the principle of comparative evaluation and changed; this is merely encouragement for the rest.










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