Tea is the most consumed beverage in the world and India. It is a healthy product having properties that can lower the risk of heart disease, cancer, and diabetes. It offers direct employment to over 1.2 million persons in India. Through its forward and backward linkages, another 10 million people derive their livelihood from tea. For these and other reasons, promoting long-term health, wellbeing and the environmental sustainability of our much-beloved tea sector should be a clear priority. Yet the tea sector is experiencing a sustainability crisis, stemming from continuous low prices of tea squeezing the tea producers-large and small.
A Massive Transformation Happening In The Indian Tea Industry
Tea industry of India is going through a kind of transformation that no one has witnessed since the commencement of commercial tea plantations in 1834. The consumption of tea in India has continuously gone up from 653 million kilos at the beginning of this century to 1090 million kilos in 2018. It means every year, Indian consumption has gone up by 24.2 million kilos of tea. A study conducted by Deloitte on behalf of the Indian Tea Board summarises that 75 percent of the consumers in rural India now buy packet tea instead of loose tea. Typically speaking such a situation should be considered as most sustainable for the Indian tea industry. Yet, we saw in August 2019, The Indian Tea Association (ITA) made an appeal to the Indian Government seeking its intervention for the revival of the tea industry facing sustained low prices that is lower than the cost of production.
How Does It Impact Tea Brands?
Brand market power and the relatively higher margins of leading tea packers and retailers have been the story of the tea sector so far. One can visualise not only in tea but in many other industries that a rising share of total income is earned downstream, with enormous mark-ups and returns for intangibles such as brand. But in the long-run, the starkly contrasting situations of profitable downstream actors and suffering upstream ones may lead a niche segment of consumers as well as shareholders to actively question whether the tea brands they trust support producers' economic sustainability? Such consumer behaviour are increasing abroad and also in a small way in India as well which is reflected by the spate of sustainability certifications undertaken by the domestic tea brands.
Climate Change And SDGS Both Get Affected By The Low Prices In Tea
The economic challenges have a direct correlation to the series of environmental and social challenges faced by the tea industry. Preliminary assessments by the Tea Research Association (TRA) have shown that climate change is impacting the tea producers in a significant way
as tea is mainly grown under rain-fed mono-cropping systems and weather conditions determine optimal growth. The research states that unless we take adequate adaptive measures, tea may not survive in Assam plains by 2050. Excessive rains are creating erosion of topsoil, leading to a negative impact on production. Producers have to buy more fertilisers to maintain soil fertility and spray more pesticides to tackle new pests that are emerging. It does not only increase the cost of the tea production but also affecting food safety issues which are one of the top buying concern of most of the packers.
The tea producers associations need to increasingly become tea marketing associations as we move ahead in the next decade
On the social front, the North-Indian tea gardens are barely managing to meet the wages and statutory requirements. The amount of informal work is increasing in the tea sector. The social progress of the tea workers’ community who have a higher aspiration due to access to global information today has been relatively plodding. It is clear that with the kind of non-remunerative pricing prevailing in the tea production segment would make meeting the SDG targets a challenge in the tea regions.
Piecemeal Efforts On Sustainability Through Certifications
For many years, it was felt that certification of the tea producers by third party social auditors under a sustainability code supported and financed by tea packers together with International NGOs would create lasting sustainability in the tea production and trade. Fortunately, such a myth doesn't exist anymore even though Indian producers (small and big) have more certificates from these auditors than any other time in history. While certification does provide reputational benefits to the tea packers, there is no business case for the tea producers to get themselves certified through such an expensive third party auditing process.
Harvard Business School study (2011) “Sustainable Tea at Unilever” suggested that Unilever's marketing of certified tea with the slogan “Make a Better Choice with Lipton, the world’s first Rainforest Alliance Certified tea” led to an increase in sales by 11 percent in the UK market. Ironically, in 2020, Reuters reported that Unilever is rethinking about struggling PG Tips and Lipton brands of tea including options of partial or full sale of the business. So, if there is no business case for classical certification driven sustainability for brands or producers, who is benefitting from such certification process? Clearly, the business case for producers and brands are no longer visible.
The Way Forward
Indian tea industry stakeholders have to acknowledge the grave sustainability concerns, particularly in light of the ongoing price crisis and impending climate crisis. We suggest the following pathways for a discussion amongst the stakeholders.
Joint Platform Of STGS And RTGS And Setting Up Of A Fund
Trinitea programme was started in 2019 by one of the tea industry's oldest association, Indian Tea Association (ITA) and Solidaridad-one of the world's oldest sustainability organisations. The programme seeks to provide technical support by experts for the STGs to cope with climate change and link them up with high-value supply chains. For the first time, the STG Associations have joined ITA as associate members under the aegis of the global NGO Solidaridad and ITA initiated Trinitea programme. The Trinitea platform should set-up a pre-competitive fund to focus on the collective goals of the tea producers. This fund could come from the donors, brands, industry and the Government. The fund should focus on developing comprehensive climate change adaptation strategies, strengthen the STG associations, facilitate setting up cooperative processing factories, facilitate market access to the STGs, set up a minimum quality framework and improve capacity to enforce social and environmental concerns better. Tea has got the least amount of global climate funding compared to comparable commodities like coffee and cocoa. It ought to change now.