Tea trade starts to find the right blend

"Except Russia, other major tea importing countries such as the United Kingdom, France and the Netherlands are economically developed with strong purchasing power and higher sales prices," Wan said.

To deal with this new economic landscape, Hubei's tea sector has shifted its focus from Southeast Asia to emerging markets in Central Asia and Russia. Nations in western Europe, such as France, the UK, Ireland and Sweden, are also being targeted with upmarket products.

Annual tea drinking per capita in the UK is three times higher than in China at 2.4 kilograms. This makes the UK market attractive to Hubei growers, research released in May by Wuhan University showed.

Eager to promote the industry in Hubei, British brand Twinings, Liptons, owned by Unilever Plc, and TWG Tea, a gourmet label based in Singapore, are in talks to set up processing facilities, warehouses and offices in Wuhan. They already have a Chinese presence in Beijing.

"Favorable conditions will not only attract well-known international companies to set up businesses here, but also provide more opportunities for them to purchase tea from local markets and growers," Xiong Shuanglin, president of Hubei provincial tea industry association, said.

Tapping into new business opportunities will be important for tea growers in Hubei. Last year, the average profit for a farming family in the sector was only 72,000 yuan a year as labor and production costs soared.

On top of dwindling profit margins, tea growers faced tougher competition from competitors in Anhui, Jiangxi and Fujian provinces.

Relevant industries, including warehouse infrastructure, packaging, cold-chain logistics, e-commerce, finance and related tourism activities, will all benefit from the establishment of this new industry initiative in Hubei, Xiong said.

Companies are also playing their part in boosting trade.

Zhang Yuefeng is chairman of Hubei Yellow Crane Tower Tea Co, one of the largest in the industry in Wuhan. His company is planning to build three new storage terminals in Moscow, Ekaterinburg and Irkutsk at a cost of 170 million yuan. The terminals will supply black and dark green tea bricks to the Russian market in the next three years.

With annual sales of 300 million yuan, Hubei Yellow Crane Tower Tea aims to ship more high-end products from Hubei's five major tea-producing regions.

"It is still impossible for organic green teas to be produced on a huge industrial scale," Zhang said. "The leaves have to be handpicked and you need sophisticated staff in the roasting process. But I hope this high-value product will become a pillar of our operation in Russia in the future."

Another move to increase exports involves establishing a national commodity exchange for tea in Wuhan. This will strengthen Chinese companies in the sector against established foreign rivals in Europe, Japan and Turkey.

"Even though China is the world's biggest tea producer, it has a highly fragmented domestic market. To change this, the 71,400 producers need to form a bigger union," Zhang said.

In Hubei, less than 30 companies in the sector have reported annual revenue of over 100 million yuan. This has promoted the famous line in tea circles: "More than 70,000 domestic companies joined together can not beat Lipton tea."

To move the industry forward, the province will also need to diversify tea products.

"Although it is one of the few provinces that can mass produce tea, the global market is dominated by black tea, including English breakfast, Earl Grey, Empress Grey and Turkish varieties," Chen Zhi, a researcher at Hubei Academy of Social Sciences in Wuhan, said.

Contact the writers at zhongnan@chinadaily.com.cn

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