Tea exports to Russia soar 21%, belying war worries; some lost share gained

Sri Lanka crisis, sanctions on Russia that made sourcing from other countries difficult help domestic industry post better numbers

Apprehensions of widespread disruptions had put the Indian tea industry on the edge when Russia, a top buyer, waged war on Ukraine. But tea growers managed to retain a hold on the market and even regained some lost share.

Tea Board data shows that exports to Russia stood at 41.13 million kg (mkg) in Calendar year 2022, up 20.7 per cent from 34.06 mkg the preceding year.

Total tea exports from India in 2022 were 226.98 mkg, up 15.49 per cent from 196.53 mkg a year ago. A combination of factors made this possible such as export opportunities created by the Sri Lanka crisis and sanctions on Russia that made sourcing from other countries difficult.

Tea Board chairman Saurav Pahari said, among the top three destinations, where UAE, Russia and Iran feature in that order, Russia had significantly increased purchase of Indian tea in the weeks following July 2022.

“However, owing to the prolonged Russia-Ukraine war affecting the economy, the Russian importers have started looking for cheaper teas. This trend has been in conformity with the rise in Indian tea exports in the other prominent export destinations such as Saudi Arabia, Turkey and Iraq, because of the ongoing supply-side disruptions arising out of economic distress in Sri Lanka, the closest competitor in these markets,” he added.

The economic crisis in Sri Lanka, which accounts for half the global trade in orthodox tea, had taken a toll on production. According to information available on the website of the Tea Exporters Association Sri Lanka, the island nation recorded its steepest decline of 44-48 mkg production in 2022 compared to 2021. Sri Lanka’s top five buyers in 2021 were Iraq, Turkey, Russia, UAE and Iran.

Industry sources confirmed that higher exports to Russia were also partly due to the crisis in Sri Lanka. Azam Monem of McLeod Russel India, said the increase had mainly come on the back of the deficit of the Sri Lankan crop. “Also, Kenya has faced challenges of payments following the Russian conflict.”

According to Kaushik Das, vice president, Icra, it was the Sri Lanka effect and the country’s preference for Indian teas, combined with favourable payment mechanisms that saw the spike in shipments.

South India Tea Exporters Association chairman, Dipak Shah, also said Russia had been a great supporter of Indian tea. “We can see constant buying by its importers from the auction system.”

The major jump, however, has come from the UAE, a major re-exporting hub. Exports to the UAE were 42.38 mkg during January-December 2022, compared to 17.25 mkg in the same period previous year.

“A lot of Iran buying was routed through the UAE as direct exports suffered due to payment issues,” said Himanshu Shah, chairman, M K Shah Exports.

The Tea Board chairman pointed out that UAE has been one of the top export destinations for Indian tea during the last several years. “During 2022, the combined exports for Iran and UAE have registered incremental growth of $90.91 million on value (61.26 per  cent growth YoY) and 20.38 million kg on volume (46.74 per cent growth YoY) due to the compulsions arising out of international geopolitical phenomenon.”

As Dubai has been the largest trading hub, it is quite natural that lot of teas being sourced from different origins including India are being blended and packaged therein for catering to the requirements of the packers and the retailers in the tea-consuming regions including CIS and MENA (the top two regions in the world for tea drinking), he explained.

After hitting a low in exports in 2021, India recorded some solid gains in 2022 led by supply side disruptions, but holding on to it would be key.

In bits and pieces, we have captured some of the Sri Lankan market whether it is increasing our presence in Saudi Arabia or Turkey, Anshuman Kanoria, chairman, Indian Tea Exporters Association, said. “We were always present in these markets, but we have been able to increase volumes. However, the challenge will be to retain share once Sri Lanka normalizes.”