Chinese traders appear to compete to buy tea materials
While the world's demand for tea remains very high, Vietnam's tea exports in the first 8 months of 2018 have decreased sharply in both volume and value. At the same time, there has been a situation where Chinese traders have entered famous tea regions in Vietnam to compete for raw materials, and there have even been Vietnamese tea processing enterprises owned by Chinese people.
“The tea industry is in turmoil”
According to the report of the Department of Agricultural Product Processing and Market Development (Ministry of Agriculture and Rural Development), tea exports in August 2018 were estimated at 13,000 tons with a value of 21 million USD. Accumulated tea exports in the first 8 months of 2018 were estimated at 81,000 tons and 133 million USD, down 10.1% in volume and 7.4% in value compared to the same period in 2017.
Unhealthy competition is emerging in tea growing areas. Photo: TL
The main markets for Vietnamese tea in the first 7 months of 2018 continued to be Pakistan (with 37.3 million USD, accounting for 33.6%), Taiwan (15.6 million USD, accounting for 14.0%), Russia (12.8 million USD, accounting for 11.5%), China (9.5 million USD, accounting for 5%), Indonesia (5.4 million USD, accounting for 4.8%) and the US (4.3 million USD, accounting for 3.8%).
The highlight of tea exports in the first 7 months of 2018 was the growth of the Pakistani market, with a total volume increase of 1,500 tons (equivalent to 9.7%) compared to the same period in 2017. However, Vietnam's tea export volume decreased sharply in two major markets: Russia, down 1,300 tons (equivalent to 13.2%) and the United Arab Emirates down nearly 2,000 tons (equivalent to 60.9%), causing a decrease in Vietnam's total tea export volume. The average export price of tea in the first 8 months of 2018 is estimated at 1,642 USD/ton, up 3.7% compared to the same period in 2017.
However, the report of the Department of Agricultural Product Processing and Market Development also has a noteworthy point. That is, in the context of the tense US-China trade conflict, more and more Vietnamese enterprises but owned by Chinese people are appearing, fiercely competing with domestic tea enterprises in purchasing raw materials. This causes domestic enterprises to face many difficulties.
Ms. Nguyen Thi Anh Hong - General Secretary of the Vietnam Tea Association also acknowledged this at the annual meeting of the PPP working group of the Vietnam Sustainable Agriculture Development Partnership. "The tea industry has never been so turbulent. Exchange rate fluctuations have not had much impact on the industry, but for more than a month now, selling tea has become difficult, while businesses still have to purchase raw materials" - Ms. Hong stated a fact.
According to Ms. Hong, more and more Vietnamese businesses are appearing, but because Chinese people buy tea materials and are willing to buy at higher prices than domestic businesses, many businesses cannot compete.
Need to diversify products
From the difficulties of the tea industry, the Department of Processing and Development of Agricultural Products Market recommends that there should be policies to support capital and technology for tea enterprises in investing in deep processing of tea products. In addition, there should be appropriate mechanisms to prevent Chinese enterprises from manipulating prices in the tea market, causing great impacts on Vietnamese enterprises.
To promote the development of the tea industry, in addition to improving quality, the tea industry needs to have measures to encourage increased domestic consumption, especially in the context of the current downward trend in export volume. At the same time, it is necessary to diversify products into segments such as organic tea and specialty tea to increase the added value of tea.
In fact, up to now, international customers still “default” Vietnamese tea producers as those who are capable of supplying large volumes of goods but with average quality and low prices. Compared to other countries in the region, Vietnamese tea has the lowest export price, only 60-70% of the world tea price. The reason is said to be due to the lack of food safety assurance and poor tea quality. Therefore, Ms. Hong believes that in order to penetrate demanding markets, what needs to be done is to improve tea quality, ensure food safety and hygiene, and meet the requirements of importers.
 |
| Harvesting tea in Thanh Thinh tea raw material area, Thanh Chuong. Photo courtesy of BNA: Phu Huong |
Many opinions say that the tea industry is facing many opportunities but has not yet taken advantage of them because the demand for this drink among world consumers is still very large. According to statistics, there are up to 158 million Americans drinking tea every day, each year Americans spend up to 80 billion USD on tea products, so the figure of 4.3 million USD in tea export turnover to the US in the first 8 months of 2018 is too small. But finding a way to enter the US is not simple, because this is a difficult market, demanding high quality and food safety.
To establish a foothold in the market, there is no other way but for the tea industry to change both its image and quality. According to Ms. Hong, besides the bad news, the industry still has bright spots, which is that there are businesses that have boldly invested in deep processing (matcha tea) to increase the added value of the product. Hopefully, with these factors, the tea industry will flourish.
