Tea drinkers facing increased prices after tsunami
costs as the south east Asian countries devastated by December's
tsunami increase their prices in a bid to rekindle much-needed
economic growth, writes Angela Drujinina.
Russians drink around 160,000 tons of tea a year, roughly 1kg per person, and by far the largest supplier to the Russian market is Sri Lanka, one of the countries most badly hit by the tsunami disaster. With some 42 per cent of Russian tea imports coming from the Indian Ocean island (the remainder come from India, China, Indonesia and Kenya), the devastation caused by the giant wave will mean the loss of considerable revenues for Sri Lankan growers.
As a result, Ceylon tea prices in Russia are expected to rise by 5-10 per cent over the next three to four months as Sri Lankan producers seek to rebuild their businesses. "Tea plantations in Sri Lanka were largely unaffected by the tsunami, but considerable quantities of tea were stocked at the ports ready for export, and were inevitably destroyed," a spokesman for the Roschaicofe tea industry association told CEE-foodindustry.com.
"In addition, most of Sri Lanka's roads are washed out, making loading and transportation of new tea orders almost impossible, and prices will inevitably increase to compensate."
Russian packers and suppliers of Ceylon tea have already reported losses, which will have to be passed on to consumers through higher retail prices. Natalia Odintsova, tea industry analyst at Prospect, said: "Price increases will be mainly speculative. Many companies use brokers to buy their tea, and these third parties are likely to benefit the most from increasing prices. Russian companies which deal directly with growers are likely to find it easier to handle the price increases, but fewer than half of the tea importers in Russia do this, so price increases will certainly be felt by consumers.
"Ironically, the tea producers themselves are the least likely to benefit from increased prices, because the tea market is so competitive, meaning that prices have to be kept low. Sri Lankan growers face fierce competition from India in particular, which is the second largest supplier of the Russian market," she added.
There could be some succour for tea growers, however, if the governments from all the nations affected by the disaster agree to arbitrary price increases, a means of triggering economic growth without making producers from any one nation uncompetitive. It is unclear whether this is likely to happen, however, not least because it would require the agreement of all the major tea producing nations, not necessarily just those affected by the tsunami.
