Kenyan Tea Market

Overview Of The Kenyan Tea Market

Kenya is the third-largest exporter of tea globally, after China and Sri Lanka, and the largest exporter of black tea. In 2021 Kenya produced 45.1 thousand tons of tea; this was a 2.5% increase from 2020, in which Kenya produced 44 thousand tons of tea.

Most of the tea produced in Kenya supplies the international market; 22% of the country's tea production is exported. In 2021, Kenyan tea was imported by 50 nations, a 16.28% increase from the 43 countries which imported Kenyan tea in 2020.

Yet, only a small number of countries import the majority of Kenya’s tea.

Pakistan purchases approximately 40% of Kenya’s tea exports (18.6 thousand tons of tea). Egypt (9.06 metric tons), Sudan (4.26 metric tons), and the United Kingdom (3.37 metric tons) are significant importers, too, accounting for 20.4%, 9.6%, and 7.6%. These four nations purchase roughly 77.6% of Kenya’s tea exports combined.

The tea industry in Kenya is an important contributor to the nation's economy. Tea exports contributed approximately 33% ($34.98 billion) to Kenya’s 2021 GDP, $106.04 billion. Tea, coffee, mate, and spices account for a quarter ($160.5 billion) of Kenya’s total 2020 exports.

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Some of the top five tea exporters in Kenya include:

• The Kenya Tea Development Agency Ltd. (KTDA),
• Kenya Tea Packers Ltd. (KETEPA),
• Unilever Tea Kenya Ltd.,
• James Finlay (Kenya) Ltd., and
• Eastern Produce Kenya Ltd.

The national government recognizes the importance of tea production in Kenya. The Kenya Tea Development Association (KTDA) oversees the production and sale of most Kenyan tea. Much of the tea produced under this governing body is black tea destined for blends and tea bags.

In addition, KTDA also oversees Kenya's specialty tea production, an increasingly important segment. Specialty tea includes Keynan white tea, orthodox tea, oolong tea, and varieties exclusive to Africa. Specialty tea is vital to the Kenyan economy because it sells at significantly higher prices than crush tear curl (CTC) tea.

In 2021 the price per pound at the Mombasa tea auction was:

• CTC black tea 170 shillings (USD 1.5) per pound
• Orthodox black tea 220 shillings (USD 2.0) per pound
• Purple tea 250 shillings (USD 2.3) per pound
• White tea 190 shillings (USD1.73) per pound
• Oolong tea 203 shillings (USD1.85 ) per pound
• Green tea 217 shillings (USD1.97) per pound

Kenyan orthodox tea accounts for 25% of the country's specialty tea segment. The KTDA plans to further invest in developing this segment of tea production.

The KTDA also plans to diversify into orthodox tea manufacturing and expand further into the international market. To this end, the KTDA plans to install orthodox processing facilities in 10 factories where tea is grown.

Kenya's Domestic Tea Market

While Kenya embraces tea (e.g., Chai maziwa), the domestic market for Kenyan tea is significantly smaller than the export market. Domestic tea sales in Kenya reached nearly three thousand metric tons (79 billion shillings or USD 731.8 million).

Most tea sold in the Kenyan market is single-serve packages of tea powder and tea bags. Single-serve packages of tea powder cater to microeconomics - small independent vendors selling necessities (e.g., maize, pop, tea) within their communities. Teabags offer tea drinkers great convenience and quality which has made this type of tea packaging popular the world over. Supermarkets and hypermarkets are the distribution channel of Kenyan tea, accounting for around 60% of all sales.

While black tea is traditionally the most popular form of tea, other types of tea are trending. Green tea is becoming popular in the Kenyan market, as people are increasingly aware of its health benefits. In 2017, 17,630 tons of green tea was consumed in Kenya; in 2020, 23,546 tons were consumed, a 10.13% increase. Green tea produced locally/imported green tea meets the domestic market demand.

While the Kenyan tea market is small in comparison with the export market, the domestic market continues to grow.

In 2020, Kenyans bought a total of 40 million kilograms of tea. This 2020 consumption was a 7.73% increase from the 19 million kilograms of tea Kenyans bought in 2010. Market experts project that by 2027 Kenyans will consume around 57 thousand tons of tea annually.

Such expectations of growing tea demand in the Kenyan market are related closely to expectations of increased revenue. The revenue of the Kenyan tea market is expected to increase from USD 1.6 billion in 2021 to USD 2 billion in 2025, growing at a positive CAGR of 5.74% over the period.

Tea companies in Kenya with significant market shares include:

• KTDA Management Services Ltd with a 44.9% market share (USD 718 million annual revenue)
• Williamson Tea Kenya Plc with a 1.72% market share (USD 27.5 million annual revenue)
• Sasini with a 0.8% market share (USD 12.4 million annual revenue)
• Kapchorua Tea Kenya Plc with a 0.6% market share (USD 10.3 million annual revenue)
• Limuru Tea Plc (Unilever) with a 0.1% market share (USD 0.9 million annual revenue)

Tea Marketing In Kenya

The marketing of tea in Kenya is led by the KTDA, the major tea marketer.

KTDA markets tea mainly through the following outlets:

• Factory door sale of tea in polythene bags to farmers accounting for 3% of sales.
• Through the Mombasa auction where it exports to other countries such as Britain, France, and Afghanistan. It accounts for 75% of sales.
• Dealing directly with interested buyers which accounts for 15% of sales.

Tea Farming In Kenya

Kenyan tea has been in production for over 100 years; tea was first planted in Kenya in 1903.

Tea production occurs primarily along the east and west slopes of the Great Rift Valley, and each of these two regions has a slightly different climate. These two Kenya's tea growing regions are endowed with ideal climate: tropical, volcanic red soils, well-distributed rainfall ranging between 1200 mm to 1400 mm per annum, and long sunny days. These two regions of the Great Rift Valley produce approximately 22% of the world's tea exports, and the tea yield per acre in Kenya is about 900 Kgs.

Tea production in Kenya is divided between plantations and smallholders. The contribution of plantations and smallholder tea farms is divided relatively equally; plantations account for 44.5% of tea produced, while smallholder tea estates in Kenya account for 55.5%.

"Many small Kenyan Tea producers have diversified into orthodox and specialty teas. More SME tea producers offer herbal teas, white, oolong, purple, green, and black orthodox teas in bulk and blends. Producing these teas is not cheap, but market access remains hard to crack."

Joyce Maina,

Founder and Director of Cambridge Tea Consultancy

Tea plantations produce average yields about 29% higher than smallholder farms because of economies of scale and greater capital investment. Given the discrepancy of yields, Kenya’s invested in improving the yields and quality of smallholder farms, which increases exports and revenue.

Tea farming in Kenya occurs within several districts, including Kericho, Bomet, Nandi, Kiambu, Thika, Maragua, and Muranga. The largest tea plantation in Kenya is owned by Unilever Tea and is 16,223 acres (6,565.28 hectares or 25.34 square miles).

Kenyan tea is grown between 1,500 and 2,700 metres above sea level, along the equator. Plants are exposed to twelve hours of sunlight year-round. The average rainfall for Kenyan tea ranges from 1,200 to 1,400 millimetres, applied throughout the year.

This climate allows Kenya to produce tea of consistent quantity and quality. Such favourable conditions allow for the production of premium teas, such as handcrafted Kenya black tea from Nandi hills.

Kenya takes steps to ensure high product integrity, increasing the value of their tea. The Kenyan tea Mark of Origin has strict quality and source requirements, assuring buyers that Kenya’s tea is free of pests and diseases.

"Whether CTC tea or specialty tea is produced, Kenyan black tea is renowned for its quality. Kenyan tea factories typically receive high-quality leaf, and hold themselves to high processing standards, ensuring quality products."

Vinod Gudka,

Partner at Evergreen Tea Factory

Kenya’s heavy reliance on manual plucking contributes to Kenyan tea's superior flavour and aroma; over 90% of Kenyan tea is hand-picked. In contrast, other major tea-producing countries use mechanical pickers that shear stems with up to five or six leaves.

The high quality of tea produced in Kenyan tea factories and production facilities meets global standards.

The standards met by some Kenyan tea include:

• The ISO 22000 certification,
• Hazard Analysis and Critical Control Points (HACCP),
• Rainforest Alliance, and
• Fair Trade Federation.

Kenya produces around 50 varieties, or cultivars, of tea. The Tea Research Foundation of Kenya invests in the research and development of new tea varieties. Such research focuses on improving tea's flavour, colour, taste, and health-supporting attributes.

Kenya focuses on specialty teas, including purple tea, which sells for a price premium. Purple tea farming in Kenya yields 900 kilograms of purple tea per month per acre; this is comparable with black tea. The nation also invests in producing herbal teas, such as Moringa tea, which allegedly has health benefits.

"The Tea Research Institute developed and released a purple tea cultivar (TRFK 306), rich in a pigment called anthocyanin, which is highly medicinal."

Samson Kamunya,

Director of the Tea Research Institute

SWOT Analysis

Strengths

• Over 90% of tea from Kenya is hand-picked. Only the finest top leaves and the buds are used for tea production, which is the reason for the high quality and aroma, hence creating a competitive advantage in the global market.

• The ideal tea growing conditions in Kenya limit the need for agrochemicals to treat pests and diseases.

Weaknesses

• The international buyers who buy Kenya’s tea from the Mombasa Tea Auction blend the tea abroad and brand it in their individual company names. This has reduced Kenya’s competitive advantage to the point where it is estimated that with the quality of tea in the country, branding could yield an additional 100 to 200 million dollars in GDP.

Opportunities

• Growing recognition of the flavour and quality of Kenyan tea globally
• Growing awareness of the health benefits associated with tea is fuelling the local demand for tea

Threats

• Climate change is affecting tea production in Kenya, the biggest global supplier of black tea
• Low domestic consumption
• Dominance by a few multinational companies in the Mombasa Tea Auction (the largest in the world) who determine the prices
• Limited number of tea export destinations
• High competition from other tea producing countries such as India, and Sri Lanka
• Rising costs of tea production

The Appeal Of Kenyan Tea

Kenyan teas offer tea blends strength, body, flavour, and briskness.

Some Kenyan specialty tea is exceptionally high quality, especially where the liquors are concerned. One contributor to the quality of Kenyan orthodox black tea is the quality of the raw ingredients.

Much of the tea manufactured in Kenya includes CTC (crush, tear, curl) or LTP (Lawrie Tea Processor) tea, which is often used in tea bags and blends, such as English Breakfast.

Some retail brands take steps to imbue Kenyan tea with added intangible value. Such value may take the form of a specific social cause that appeals to consumers.