Tea is the most popular manufactured drink consumed in the world, including coffee, chocolate, and soft drinks. Most teas are consumed outside East Asia, which is produced on large plantations in the hilly regions of India and Sri Lanka and is destined to be sold to large businesses.
India is the world’s largest tea-drinking nation, though the per capita consumption of tea remains a modest 750 grams per person every year.
However, tea is one of the aromatic beverages that people consume every day. Workers who pick and pack tea on plantations in developing countries can face harsh working conditions and may earn below the living wage. A number of bodies independently certify the production of tea, as tea from certified estates can be sold with a certification label on the pack.
We can say that tea has a stimulating effect in people primarily due to its caffeine content, as there are many different types of tea, which includes Darjeeling and Chinese greens that have a cooling, slightly bitter, and astringent flavor, while others include sweet, nutty, floral, or grassy notes.
Coming to production trends in major global centers during the first half of 2020, Kenyan production has increased significantly by 76 million kg.
So, how is tea linked with blockchain? Well, according to a report, due to busy lifestyles, 66% of people use blockchain for just some products, including tea (55%), coffee (56%), and bottled water (50%). And, 39% of people say that they would be willing to pay more for brands if they registered information on such a source.
Blockchain and Tea
Blockchain technology brings innovation to the tea industry. Several companies are adopting blockchain, such as Long Island Iced Tea Co. and Ping Shan Tea Group Co. Ltd. have been rebranded to Long Blockchain and Blockchain Group Co. Ltd. respectively.
There are several other companies who are rebranding to incorporate blockchain and FinTech related facets into their names, but one such company, The Crypto Company is being investigated for share manipulation. Their stock has been frozen from trades since it rose more than 17,000% within only a couple of months after going public.
On October 23, 2019, Assam Company India Limited (ACIL), an Indian corporation engaged in tea plantation, has put up a plan to integrate blockchain technology, Artificial Intelligence (AI), and Big Data into its processes and reward tea farmers for their hard work. The team said that the blockchain solution will come with a barcode scanner along with a unique reader, taking care of the traceability, identification, verification of authenticity, and quality assurance processes. Also, ACIL said that it has inked a partnership deal with SmartFarms Inc, an American firm, to roll out the “Farm to Cup” initiative, which was aimed at promoting transparency in the entire tea supply chain by allowing consumers to get the entire details of their tea straight from the farm.
BR Shetty, the Chairman of Assam Company India Limited, noted that the primary objective of the project is to retransform the tea industry with DLT, while also transforming people’s lives.
“Our aim is to bring technology and innovation at the forefront of the tea industry. This will not only impact the lives of 26,000 farmers at our estates, but the entire workforce employed in the tea sector across the country.”
Long Island Iced Tea Co. Ltd. becomes Long Blockchain Corp.
After its rebranding, Long Blockchain public share value climbed by over 180% on the day. Though it has expressed a desire to pivot into the realm of blockchain, LTEA has not released any news of official partnerships or purchases.
They have stated that they intend to partner with or acquire some blockchain-related businesses, mainly in the area of software development. Bloomberg has compared LTEA to businesses around the world who are also attempting to pivot into the blockchain space such as Carrus Capital Corp. (now Global Blockchain Technologies Corp.) and Bioptix (now Riot Blockchain).
Ping Shan Tea Group Co. Ltd. becomes Blockchain Group Co. Ltd.
In a similar way, Ping Shan Tea Group Co. Ltd. rebranded to Blockchain Group Co. Ltd. in 2014. Blockchain Group Co. Ltd. produces more than one million kg of green tea annually and was responsible for creating the first automated oolong tea processing production line in China in 2012. High-end tea production has been highlighted as a valid use case for blockchain technology because it enables tea producers to document the location and conditions of the tea as it is being produced. Unilever recently announced that it will be applying blockchain to its tea supply chain in the coming days.
Unilever taps into Blockchain to improve Tea Supply Chain
Unilever expects that the market will be willing to pay a premium for tea that has its conditions monitored and visible to the public, as well as being sustainably sourced. Sustainability has become a significant consideration within many markets and has shown that the consumer is frequently willing to pay for products that can be made sustainably.
Since the time blockchain came into existence, Unilever is eyeing at this technology to be a powerful source of change in business operations. It has started exploring blockchain applications in the tea supply chain. The primary objective behind this is to establish a transparent system of the supply chain.
What makes Blockchain Technology work in Tea Industry?
Transparency, decentralization, and safety are the underpinnings of the blockchain. These are the features that have made it such a useful technology. It’s because of these features that many companies and nations are trying to sync their operations with blockchain. Unilever is one of the examples that is coming up with blockchain-based solutions.
The functioning of this technology is simple, for any transaction to take place, the user must enter a key to record the transaction data. Once this data is encrypted as a block, it is submitted for verification by different nodes. Once validated, the record gets duplicated across the network servers making it impossible for anyone to alter the data without authorization. Unilever is making use of this feature to enhance the transparency in the tea supply chain.
How Unilever helps improving Tea Industry?
Unilever is working together with Provenance, a blockchain-based company, to start off its blockchain project for tracking the tea supply chain. Before this, Provenance has done the project on tracking the origin of tuna fish from the fisheries in Indonesia to the final consumer. However, Unilever is making a strong attempt towards the use of blockchain-based technology to strengthen its supply chain management. It is not only a step to improve its functioning but also to provide the customer with the best product.
Chinese Province of Yunnan Track their Tea Supply Chain using Blockchain Technology
Recently, on June 3, 2020, a report said that the Chinese province of Yunnan announced the official launch of a blockchain-powered traceability platform for its Pu’er tea farms. It was first announced in the 2020 Phoenix Nest Ancient Tree Spring Tea New Product Launch Conference in Kunming, Yunnan. They planned to use the platform to conduct quality control, sales, and loan financing operations on 42,000 hectares of farmland across the province. According to the report, the province is famous for its dark, fermented variety of tea. It’s the major Chinese agricultural products exporter and hit almost $33 million in 2018.
The Pu’er tea industry’s products yield a total of $2.5 billion on average. By scanning QR codes within the blockchain-powered platform, customers may be able to review information about each product’s raw material base, production process, warehousing, quality testing, product sales, and financial support, and other data.
The origins of the Pu’er tea industry’s interest in blockchain dates back to 2019, as the province wanted to integrate traceability solutions based on blockchain technology. They built a pilot program in March 2020 called the “Quality blockchain traceability platform.” Moreover, 25 products from 25 companies have been “successfully launched” through the platform, and the province hopes to integrate new technologies in the future. These include texture imaging recognition technology, anti-counterfeiting technology, and NFC encryption chip solutions.
Darjeeling Tea on Blockchain
Darjeeling tea is grown in an area of India at the foot of the Himalayas that are less than 70 square miles large. Small scale tea planters, food manufacturers, weavers, handlooms, etc. that create exciting products rich in cultural history or have local environmental advantages could benefit from deploying blockchain technologies. Often such products reach urban markets through so many hoops and links that very little of the proceeds of their sale make it back to the producers. However, there are still deeper challenges to confront in making the supply chain durable and accountable to consumers and producers.
In October 2019, the Tea Board of India has considered the use of blockchain to implement complete traceability of tea right from the plantation stage till the time it sold to the buyer. This not only helped eliminate the adulteration of Indian tea and improve consumers’ experience, but it also helped preserve the identity of Indian tea. The Tea Board has floated an expression of interest for designing, developing, and commissioning end-to-end technology to ensure traceability of the entire value chain of the tea trade.
It captures all the details of the supply chain from the procurement of raw materials by the manufacturers to the disposal of made teas to the primary buyers through an auction. This integration helps end consumers trace Indian origin teas by the digitization of the marketing channel and bring the Indian tea industry into the mainstream of the digital economy.
As estimated, it also helps foster quick resolution pertaining to the quality of tea and other issues when highlighted by the consumers through digitized applications.
Vivek Goenka, the Chairman at the Indian Tea Association, said:
“It is good for the industry if traceability can actually be implemented. Not only the consumers will be able to know that origin of the tea like from which garden and region, the adulteration of tea, if any, can also be tracked.”
According to the report, the Tea Board has advised the tea industry not to mix any color in tea. At times, the tea which is offered in the auctions or is sold privately contains extraneous colors to impart glossiness as well as hide defects.
Darjeeling is not only one of the costliest of all teas in the world, but it also carries various quality certifications and is protected with a Geographical Indication tag.
Bijoy Gopal Chakraborty, the President of Confederation of Indian Small Tea Growers Association, said:
“Traceability will also make it clear from where sub-standard teas are being manufactured or procured and it will help stop haemorrhaging prices.”
Indonesian Tea Association (ATI)
Indonesia has a long history of tea cultivation which can be traced back to the Dutch colonial era. Unfortunately, due to mismanagement and the lack of new investment, the country’s tea sector has been suffering setbacks since the early 2000s which has been marked by a decline in production.
Based on plantation statistics data from 2014, Indonesia has a total tea plantation area of 121,034 hectares. West Java province has the most tea plantation areas with a total of 89,978 hectares or around 73% of total national tea planted areas and supplies around 70% of the country’s tea production. Most of these plantations are owned by smallholders (50.96%), followed by state-owned plantations (25.80%) and private plantations (23.24%). Other tea producing regions in the country are Central Java and North Sumatra.
According to the Food and Agriculture Organisation, Indonesia has not been able to catch up with other tea producing countries in terms of production, particularly India and Sri Lanka, for the past decade. India and Sri Lanka each produce an average of 1 million and 329,000 tonnes of black tea per year with an annual growth of 1.2% and 2.5%, respectively. Indonesia only produced an average of 147,000 tonnes per year with an annual decline of 1.7%.
The Indonesian Tea Association (ATI) recorded that the country’s tea production has been declining since 2001 due to the gradual reduction in planted areas at a rate of 1,113 hectares a year. In 2005, for example, Indonesia produced 166,000 tonnes of black tea. Ten years later, that figure was down to 130,000 tonnes. This was only 2.5% of global tea production which equated to 5.2 million tonnes.
However, the world’s demand for tea is growing at an average rate of 0.6% a year. In 2015, tea-producing countries exported 1.75 million tonnes or 34% of their total harvest. Indonesia contributed around 70,000 tonnes or 4% to the world’s tea export market which generated foreign exchange revenue of approximately 2 trillion IDR annually. Most of the tea that is exported is in the form of powder. Only around 6% is exported in the form of processed products. The country’s major export destination countries are Malaysia, the United Kingdom, Russia, and Pakistan, followed by the United States, Germany, United Arab Emirates, Ukraine, the Netherlands, and Poland.
The majority of the tea exported to overseas countries is of high-quality tea leaves, therefore leaving only medium to low-quality tea leaves for the domestic market. There has been an increased demand from Indonesia’s domestic market in recent years, especially from the beverage industry where packaged, ready-to-serve tea drinks have been quite popular among the country’s youth. According to the ATI, the total sales of domestic processed tea products reached an average of 10 billion IDR on a yearly basis which is five times higher than that of exports.
Unfortunately, the lack of supply has prompted the domestic downstream industry to resort to imports to keep pace with the growing demand. In 2014, Indonesia imported 24,000 tonnes of tea. To protect the local tea plantation business, the government increased the import levy from 5% to 20% in 2015. This policy has successfully curbed tea imports by half to 12,000 tonnes.
Challenges and Competition in Indonesia
One of the major constraints hampering the tea industry’s growth in Indonesia is a decline in production. This is mainly due to the fact that smallholder farmers, who make up the majority of tea plantation owners in Indonesia, consider the tea business as no longer profitable. As a result, many tea growers have switched to other crops such as palm oil or vegetables.
The reasons behind this decision are multifaceted, from aging plants, shrinking land ownership, lack of skills and knowledge of best agricultural practices and technology, to climate change. These factors have dramatically reduced the productivity and profitability of tea plantations in Indonesia.
According to the Ministry of Agriculture, the majority of Indonesian tea plants are old and in poor condition. The average productivity level for tea is only 900 kilograms/hectare, far below the ideal figure of 2,500 kilograms per hectare. Moreover, the average land ownership of each smallholder is comparatively low at only 0.6 hectares.
The lack of skilled human resources with knowledge of best agricultural practices as well as technology has resulted in poor quality products. That is why Indonesian tea prices, especially from small plantations, are cheaper. For example, the average tea price at three auction sites (Colombo, Kolkata, Mombasa) in 2015 was $2.70 USD per kg. In contrast, the average price of Indonesian tea at the KBP Nusantara in the same year was around $1.50 – $1.70 USD per kg
The Indonesian tea price is lower because a large proportion of tea products are sold unbranded; moreover, high-intensity rainfall has also reduced their taste and quality. Most importantly, some of the country’s tea products have a high anthraquinone level which is considered an issue in the European market.
Other challenges that contribute to the decline in Indonesia’s tea production are weather and climate change. There has been an increase in temperature in tea producing areas, including in Puncak, Bogor, West Java, due to climate change. The ideal temperature for tea cultivation is 25°C. Every 1°C increase in temperature reduces tea production levels by 5%.
The El Nino occurrence has also impacted tea production in 2015 and 2016. According to the Ministry of Agriculture, El Nino was responsible for the decline in tea production by 15% to 30% in 2015, especially during the months of October and November, where some tea plants stopped producing any yield due to this weather occurrence.
Furthermore, the increase in labor wages and logistics costs have further reduced the competitiveness of the Indonesian tea industry. This was used by Vietnam and Sri Lanka, two major competitors in the international tea market, to capitalize on Indonesia’s market share in numerous export markets. The former even went further by exporting tea to Indonesia and competing head-to-head with local tea producers. Vietnam has an advantage because as an ASEAN country it is exempted from import duties.
Beleaf and Co.
The tea industry can utilize innovative technology to show visibility in current supply chain systems. The company Beleaf and Co. has deliberately chosen to disrupt the conventional supply chain by providing our customers with ‘leaf to cup’ information.
Blockchain solutions for supply chain management capture information about harvesting, processing methods, packing, and shipping of single and/or multi-ingredients. The information stored is accessible for consumers, farmers and other parties involved creating transparency and reflect ‘frank’ trade.
Combining Tea and Tech enables the following:
Transparency on a fair value exchange along the supply chain
‘Leaf to cup’ traceability
Food safety and quality checks
All steps of movement of the product are made visible
The company aims to launch its blockchain 1.0 project in 2019 in collaboration with its partner farms in Malawi. They have also partnered with an experienced blockchain player which is specialized in the agrifood sector.
Although tea is one of the most enjoyed beverages worldwide, its culture can be very local.
As blockchain creates full traceability, transparency, and the potential for conveying gateway criteria throughout the commercial passage from bush to cup, tea is a truly special, uniting thing, especially when you imagine how so many tea-drinking cultures developed all on their own.
Tea is in high demand from packet tea companies to ensure the quality of blend in the packet.
Thus, with a much higher proportion of tea being exported, prices are influenced more by global trends.
Cover Image: Pixabay