Op-Ed Commentary: Chris Devonshire-Ellis
May 30 – Selling coal to Newcastle? Sand to the Arabs? Refrigerators to the Eskimos? Changing tastes and consumer behavior in China are seeing the country that invented tea – and has it by the millions of tons – importing increasing amounts of the same commodity from India.
For generations, the Chinese have been consuming green leaf tea. However, India treats its tea differently and produces a black tea, often consumed with milk, sugar or lemon. It’s that added sophistication that is now appealing to Chinese consumers – the image of hours-old, cold green tea swilling around in glass jars by the side of taxi drivers and workers across China is indicative of a low-end, proletarian product, and younger Chinese want no part of it.
“Young Chinese people find in black tea a lifestyle quotient, as they associate it more with the British or American way of life. It’s more of a psychological thing that is driving this shift from green tea to black tea,” says Ajay Kichlu, a veteran tea taster and director of Chamong Tea. Kichlu’s Kolkata-based company, which has started exporting black tea to China, expects to ship half-a-million kilograms this year.
India is the leading producer of black tea, with an annual output of 985 million kilograms, while China’s annual production of green leaf tea is much higher at 1,500 million kilograms.
Indian tea exporters expect to sell up to 10 million kilograms of black tea this year to China, where the demand is estimated to rise rapidly to 100 million kilograms by 2015. China’s current share of the 200 million kilogram black tea exported annually from India may be small, but it signifies the opening up of a vast new consumer market.
“Though the Chinese are used to drinking green tea, we have seen that they ask for black tea instead of other beverages when they venture out to fast-food joints,” said G. Boriah, director of tea development at the India Tea Board. “We are seeing that mainly tea from North India is being exported to China. The younger generation there prefers a stronger cup.”
The opening up of the Chinese market is great news for the Indian tea industry, said Aditya Khaitan, managing director of McLeod Russel India Ltd., the world’s biggest integrated tea company.
“We have also started exporting black leaf tea to China and the Chinese are willing to pay the price that we are asking for,” Khaitan said, adding that the export volumes were bound to pick up.
The growing acceptance of Indian tea in China appears to be part of a new global trend among younger consumers to try out different varieties of the beverage. Just as black tea is gaining ground in China, more Indians are also turning to green tea.
“We are planning something like green tea with green apple flavor, which may find a good market among the urban Indian youth,” said Kichlu of Chamong Tea.
The market share of green tea globally has risen from 17 percent to 31 percent over the past decade. Nonetheless, the departure from tradition is more significant in China than perhaps anywhere else, simply because tea is more deeply entrenched in the culture of the land where it originated.
In China, tea is considered among the seven necessities, along with wood, rice, oil, salt, soy sauce and vinegar. The growing demand for Indian tea in China is heartening news also because exports to Britain, the biggest European market for the beverage, have dwindled from 22 million kilograms a year to 16 million kilograms over the past five years. Kenyan tea is gaining at the expense of the “thick” India black tea in Britain, whose annual consumption of the beverage is about 100 million kilograms, of which nearly 60 million kilograms is imported from Africa.
Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates. Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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