The Future of the Global Tea Industry

Many markets are fluctuating through today’s current wants and needs in the world. One market that has grown is the tea market. But, even through it’s growth, this market is facing many problems.

The tea market before the pandemic was already the largest beverage market after water. Global production was about 5.8 million metric tons of tea in 2018, making about 12.6 billion U.S. dollars every year. Pakistan is the leading tea importer globally, currently producing about 571 million U.S. dollars in trade value. There are four main tea groups within the market: ready-to-drink tea (RTD), the traditional market, the specialty segment, and the foodservice segment. The RTD category has continuously been the largest market. Some of the largest companies are Lipton, Pure Leaf, Arizona, and Gold Peak. This industry is now growing at an incredible rate, with a CAGR of 6.6% from 2020 to 2027. 

The tea industry’s current issue is an incredibly high demand and a lower supply of the product. Prices of wholesale tea leaves have jumped 50% since March 2020. The bottled tea (often sold in the United States) has had a price increase of 9.6%. And, packaged tea, or tea bags, have risen 1.7% in prices. 

The lower supply of tea comes from the worsening weather conditions in the main growth areas. The Food and Agriculture Organization of the United Nations (FAO) had warned that climate change is threatening the limited agro-ecological space required for tea production. One large climate event that affected this market was the Sri Lanka drought. Sri Lanka is the third-largest producer of tea leaves in the world. The lack of water the country experienced caused production to fall by 15% through the first seven months of 2020. In India, the world'ss fourth-largest producer, they have mainly been affected by the Coronavirus. Production fell 22% due to social distancing, not allowing for easy harvesting and exporting of goods. The inability to export goods easily is a supply chain trend occurring in many different industries over the past ten months.

The tea case study shows that the pandemic’s effects are creating new problems, and companies are working to discover the best ways to solve them every day.