The coronavirus pandemic has forced more people to brew their morning cups of tea at home instead of paying someone else to do it for them in a café. Now, the prices of wholesale tea leaves are on the rise, so consumers are paying more. But is this jump in prices the result of increasing demand or falling supply?
The Wall Street Journal reports that wholesale tea leaves cost 50% more today than in March. Prices for the tea that most consumers purchase are also going up: Packaged tea bags cost 1.7% more, and liquid tea (bottled concentrate) is 9.6% more expensive compared to last year.
Have exhausted consumers who are in search of the distraction that comes from sipping on a warm beverage during a pandemic raised the demand for tea? Or have well-meaning experts who praise the antioxidant benefits of tea encouraged more people to drink the beverage for their health during a global crisis?
Although more people may be drinking tea at home, changes in drinking habits are not the sole reason for the price increases. It is not enough to consider the impact consumers have on the cost of packaged tea or other varieties.
In addition to rising demand, there is a supply problem with tea. According to Reuters, the coronavirus pandemic started creating disruptions in the global tea market because of lockdowns in the spring. From harvesting to shipping, multiple areas of the supply chain are affected.
“Five countries – China, India, Kenya, Sri Lanka and Vietnam – account for 82% of global tea exports, but strict restrictions on movement to contain the coronavirus pandemic have already disrupted the key leaf-picking season, delayed some shipments by about a month and triggered a spike in prices. Fewer pickers combined with colder-than-normal temperatures last month are expected to trim output in top producer China this year, while production in No.2 grower India and Sri Lanka have also been impacted by labor and weather issues,” Reuters reports.
Droughts are also hurting tea production, and the expectation is that climate change will continue to affect the industry in the future. The end of the coronavirus pandemic may not mean the end of supply problems for tea drinkers. Tea can only grow in specific areas with a limited temperature range and is highly sensitive to droughts.
Your next cup of tea may cost more, but you cannot blame the heavy tea drinkers during the coronavirus pandemic for the change. Supply problems are having a greater impact on prices than changes in demand.