How special is the ‘special offer’ on tea

11 years ago tea0

Enter any retail store today, other than maybe a luxury boutique, and a series of ‘special offers’ compete for your attention. This was always a strange phenomenon in relation to tea, for tea is cheap anyway, and for producers, good tea usually sold to packers (foreign brand owners) at less than its cost of production. A pack of 100 teabags in a supermarket costs around $5 in the US, and AED 13 in the UAE. When you calculate what that works out to per cup, you get a figure that is lower than the equivalent volume of most branded mineral waters. Discounts are good in some cases, but cheap, as defined by this Wal Mart era in which we live, and good tea, are simply not compatible.

Yet tea is always on discount and some brands in the Middle East have multiple free offers that amount to the same thing. The gift or ‘special price’ amount to a discount on the tea. Consumer psychology is such that certainly some element of occasional discount is necessary to encourage trial, but not the incessant and dramatic discounts with startling regularity and depth. Especially in these times when cost of tea, energy and packaging are growing dramatically.

Tea is available around the world for a cheap and correspondingly ordinary 40-50 US cents to $3 per kilogramme upwards. The latter is mostly in Sri Lanka where a traditional obsession with quality keeps prices at the highest levels in the world, for good tea. Yesterday’s quality Ceylon Tea brands have become todays cheap, multi origin blended teas for that reason. They can of course afford the discounts because the teas that are packed into these products is much cheaper and equally of lower quality, but that is not a good thing. A brand built on quality, even a century ago, enters into a covenant with the consumer, and has no moral right to change quality regardless of how strong the brand might have become.

Price is important of course, but when trying to save on the 5-10 cent cost per cup of tea, don’t expect quality.

There is a wider implication to all this though for with the commoditisation of tea, ruthless price competition amongst brands, and the relentless retailer pressure on price, the average price paid to producers for tea has fallen over the past three decades. Recent relief has been temporary for the price escalation is only due to supply issues.

That reduction has been more intense than the reductions happening in stores though, because it has been downward all the way until the recent global food price increases. The pressure on the producer has had a twofold impact – on quality, for producers of quality tea have had a tough time finding a market for their produce, demand being mainly for cheap teas. It has an impact also on welfare of the workers in the industry, for a producer who is suffering losses cannot really afford to take care of his workers and their families as he would normally. Whatever the CSR policies of the packers who buy tea for their brands, it is the price at which the producer sells his produce that most influences worker welfare.

It is a complex issue but the point I would like to share is that there is a cost to the ‘special offer’, and it is a cost that is unwittingly borne by the consumer, the raw material producer and possibly the environment. It usually does not cost the retailer or the offshore brandowner much. Good tea costs a few cents more than the teas that are perceived as cheap; good fresh tea, comes with the natural goodness of antioxidants and all the wonderful attributes in tea – that’s definitely worth paying a few cents more for your cuppa.

Ultimately there is usually nothing special about the tea that is on ‘special offer’.

Dilhan

Dilhan is the younger son of Dilmah Tea Founder Merrill J. Fernando. Together with brother Malik, Dilhan has taken on the passionate commitment of his father, for tea, ethics in business and the concept of business as a matter of human service.