Business

Chinese tea faces threat from the weather -- and milk and sugar

(China Daily)
Updated: 2010-08-24 15:04

BEIJING - As producers of Chinese tea take a battering from the weather resulting in lower output, another threat is emerging - from top brands of "Western" tea such as Lipton.

"The biggest threat in China now is not the reduction of output in the south and southwest," said Zhang Fengqiu, manager of Beijing Gengxiang Tea Co Ltd, a large producer and distributor.

"The real issue is how the whole Chinese tea industry will be able to confront powerful foreign competitors such as Lipton in our own domestic market."

Over the past few months, Chinese tea producers have faced crippling drought and unusual weather patterns, reducing output and forcing prices to rise notably.

In March, eastern China's Zhejiang, Jiangsu and Fujian provinces lost production due to frost. Zhejiang, for example, lost almost 100,000 hectares of tea fields due to the destructive weather.

In Yunnan, in the southwest, output in the first quarter of this year dropped by 51 percent compared with the same period last year, due to the drought.

These weather-related problems are adding to the woes of producers who are facing changes in taste from domestic consumers.

An Yufa, from the China Agricultural University in Beijing, said with an increasing pace of life in society, many young Chinese are preferring the convenience of teabags, instead of spending more time making real tea.

"Western influence and education have also pushed many Chinese to drink tea with milk and sugar, which means the foreign teabag industry is now in a position to dominate the future market," An said.

Lipton, the biggest tea company in the world, has had a huge market share in China since 1992. Owned by Unilever, the giant Anglo-Dutch multinational consumer corporation, Lipton sells its products to more than 110 countries.

While Lipton would not disclose its China sales figures, JyS - a business service company for foreign enterprises in China - said on its website that in 2008, Lipton's sales in China was about 23 billion yuan ($3.4 billion).

JyS said Lipton also carried out intensive research on trends as well as on consumer preferences for color, taste and packaging.

Lipton has also launched green, herbal and jasmine teas in addition to its instant teas such as milk tea and lemon tea.

"As China does not have world-class tea groups or influential brands, it is difficult for Chinese tea firms to compete with Lipton, which grew quickly in China by targeting white-collar workers, students and housewives," An said.

Various types of tea, such as green, black, oolong, jasmine, chrysanthemum and Pu'er, are grown in provinces such as Anhui, Jiangsu, Zhejiang, Hunan, Hubei, Sichuan, Yunnan and Fujian, most of which were affected by the reduction of output.

Some distributors, however, are confident consumption will not be affected, despite the rise in prices.

"The business is the same as usual and I don't think people will stop drinking tea due to the price rise," said Feng Xuemei, a sales assistant from the Aojichun Pu'er Tea retailer at the Maliandao Tea Street, in south Beijing.

"For tea lovers and the elderly, tea is more a routine and they wouldn't mind spending more on tea."

Feng said suppliers have been prudent in watching the supply-demand situation and have been readjusting prices by small margins.

Zheng Liang, an assistant manager from the Mantangxiang Tea Group, a medium-sized grower, said the recent price increases are due to the relatively high inflation rate and the reduction of raw materials.

"Tea prices are now higher by between 10 percent and 20 percent," Zheng said.

"But Chinese consumers will continue to drink various teas as they had before as the country has an ancient tea history and culture.

"Many men of the post-1980s era switch from Coca-Cola to tea when they reach 28 or 30. This is the amazing fascination of Chinese tea culture.

"Besides, drinking tea has been a part of social etiquette for thousands of years."

Zheng said the shortage of laborers in tea fields was another reason for the price rise.

"It used to only cost 30 to 50 yuan a day to hire a leaf picker to pick spring tea. But this year the price has gone up to between 80 and 100 yuan per day," Zheng said.

Giles Hilton, product director of Whittard of Chelsea, a British-owned international coffee and tea enterprise, told China Daily that his company would "never wish to desert the very good suppliers of Chinese tea, nor upset our UK customers who expect the best from us. So inevitable price changes are accepted."

Zhang, from Beijing Gengxiang Tea Co Ltd, said the price of Chinese tea internationally is low and "sometimes is even lower than in the domestic market".

China Daily