History of Ceylon Tea

The Asian Tea Alliance (ATA) announced in April 2019 in a memorandum of understanding (MOU), an agreement to act rather than a formal plan, between the main industry and policy organizations in five tea-growing countries: Indian Tea Association, China Tea Marketing Association, Indonesian Tea Marketing Association, Sri Lanka Tea Board and Japan Tea Association. It is representative of the trend towards co-opetition as critical to the future of tea growing in an era of climate change, global overcapacity, disappearing operating profit margins, and labor and social turmoil.

Co-opetition can be summarized as “Collaborate in the morning so you can compete in the afternoon.” It’s very different from a cartel—cooperate so we can stop outsiders competing—or a NAFTA-like trade treaty. It is a formal group publicly committed to working together on a specific area where the collaborative gains outweigh individual advantage.

The BBC summarizes the issue as “Tea industry’s future rests on corporate collaboration” and points to how the largest “tea companies are laying to one side their competitive instincts to protect the long-term future of their business” through transparency and authentication, Fair Trade, Rainforest-UTZ, the Ethical Tea Partnership, and supplier identification. ATA works from the other end of the value chain.

The viability and impact of ATA is unclear. It is an MOU only. It may drift, lack financial and organizational resources or not be a priority for national policy makers and industry leaders. But it is part of a growing trend away from “Go it alone” to “We can only work on this together, “This” is the future of the tea industry. And ATA is the largest force in trading.

Here are rankings of the top ten countries in tea Production (millions of metric tons), Exports and Imports. ATA nations are highlighted. They absolutely dominate production and exports and, correspondingly, are minnows in imports.

Tea Exports and Imports(ATA members shaded)

*Reported in millions of metric tons

For the ATA, the agenda is expanding both the size and quality of the trade space and mobilizing to move forward on sustainable development as a block. The specific targets are:

• Trade: within the major markets of Europe, Russia which produces virtually no tea but imports $500 million worth, mostly from Kenya; the US, which is among the fastest growing tea re-exporters as well as a major importer, and West Asia; a cluster of very varied countries, including Turkey, the Middle East and Iran, as well as between China and India.
• Cultural exchange: Trade delegations are a key factor in tea trade relationships. They serve many purposes, such as informally fueling communication, testing out proposals and agreements, and `bringing together senior industry, political and NGO officials. Sri Lanka has long relied on these to help build its export markets, and smaller players such as Vietnam and Indonesia draw heavily on them to make its case for relaxation of import restrictions by countries such as Japan.

ATA emerged from a series of such interactions, with a pivotal MOU in December 2018 that focused on global market promotion of China and India as premium producers.

• Technology exchange: This is an underexplored area of opportunity. There are pockets of advanced application but little sharing of information, expertise and experience. China is the global leader in drones for precision agriculture and Japan in robotics. There is plenty to share.
• Global promotion: Here, the broad message is that the era of mediocre commodity tea is over for the ATA growers. Today, there is a massive oversupply of bulk tea. Climate change throws the entire market into uncertainty and volatility. Sri Lanka and Kenya are in severe droughts that have halved output.

Prices drop with oversupply and costs increase with underproduction. The future of tea rests with premiumization, a message the ATA aims to make its brand.

• Asian sustainability agenda: This is obviously central to co-opetition across every area of tea, from bush to cup. The broad agenda is to focus on the UN-mandated SDGs – Sustainable Development Goals – drawing on implementation support from such organizations as the Solidaridad Network, a strong backer and enabler of the MOUs. This is funded by four European governments and the International Finance Corporation.