Vietnamese tea industry sees recovery brewing

Vietnam’s tea exports for calendar year 2014 dipped 5.30% in volume and 0.20% in value on-year to 134,000 tonnes valued at US$229 million MARD reported.

According to MARD unfavourable weather conditions in the early months of 2014 including prolonged droughts and heavy rainfall in several key tea-growing areas during the main cropping season had a negative impact on tea production for exports in many localities.

Other factors impeding the industry were that countries like Taiwan applied stricter rules of origin and globally there was an over supply. However, more importantly MARD pointed out that Vietnamese producers have been stymied by a lack of branding and niche marketing.

Domestic tea producers have yet to develop a consumer oriented marketing strategy aimed at adding value and marketing select brands targeting specific foreign markets. Most producers still take a strategy of selling tea in bulk with low to no added value.

MARD cautions that the tea industry will remain vulnerable to downward demand-led price pressure as long as it continues to be treated as a commodity – fungible and indistinguishable from tea of any other country.

But after all the dire warnings, MARD believes the market has reached a bottom with prices and sales likely to rise in 2015.

To assist Vietnam’s tea producers open up new markets abroad, MARD has teamed up with the Ministry of Industry and Trade (MoIT) to help them regularly conduct  trade promotion and marketing activities at international fairs, expos and trade events.

Doan Trong Phuong, Chairman of the Management Board under the Lam Dong Tea Joint Stock Company (Ladotea) in turn said Vietnam has even encountered difficulties over  the past year exporting black and green tea products to traditional markets such as Taiwan, Russia, the Middle East and Pakistan.

Last year, the price of Vietnamese tea in the global marketplace jumped 5.76% compared to the sales price in 2013 and stood at US$1.711 per tonne.  However this was only  65% of the top world price for the highest quality tea.

Many traders have been reporting that the sales prices of Vietnamese tea is at bargain basement level prices because it is being plagued by rumours of high levels of pesticides and as a result is considered poor quality.

Fortunately, more and more tea growers have become aware of the pitfalls of the indiscriminate use of pesticides and this problem can be rectified through the use of more modern technologies they said.

An added complication has been the fact that 90% of tea was exported in bulk with no added value. In simple terms, they said a strategy of trying to compete in the world marketplace based solely on price is fruitless and futile and going forward – quality needs to be the buzzword in the industry.

Product differentiation, niche marketing, branding and customer focus have a proven track record as effective strategies adopted by the most successful producers in the industry world-wide they added. In addition, each successful tea producer has its own set of strategies, which differentiate it from others to give it competitive advantage.

Moreover, oversight in controlling the number of tea factories and the setting of quality control standards within the country needs to be strengthened, leading to more coordinated industrialised zones and investment in the industry.

Innovation, cultivation methods and applying advanced technologies

The Vietnam Tea Association (Vitas) reported the country is one of the world’s top five tea producers trailing India, Sri Lanka, Kenya and China with a cultivation area of 135,000 hectares. However, Vietnamese tea products are experiencing difficulties as markets around the globe are becoming  more demanding.

According to the results of recent surveys, old tea varieties are not in line with the modern requirements for higher quality organically grown and chemical free products. The association also emphasised the need for innovative varieties.

Vitas helped the industry make great advances by leading a delegation of tea producers to an international tea exhibition held in Moscow, Russia last September. With eight booths at the exhibition, they expanded their markets and located several partners in Eastern Europe, particularly the Far East and Siberia.

Prof. Dr. Nguyen Duy Thinh from the Institute of Biological and Food Technology under Hanoi University of Technology added that tea product quality can be achieved by farmers modifying their cultivation and harvest methods.

For his part, Dr. Nguyen Huu Tai, Vitas Chairman proposed that a value chain should be formed and fully developed in the time ahead for tea growers and processing enterprises to progressively develop the tea sector sustainably.

Le Van Duc, deputy director of the MARD plantation department is bullish on a recently established steering committee that has been formed to coordinate development of a sustainable tea industry and focus on removing difficulties for the tea sector by expanding the variety of teas and markets.

From now till 2020, the tea sector is expected to maintain 140,000 hectares of cultivation area and devise a zoning plan for tea development in the provinces of Nghe An, Son La, Yen Bai and apply Vietnamese Good Agricultural Practices (VietGAP) standards to improve the quality of tea exports.

The steering committee is confident that though current tea production is down with prices much too low, the Vietnamese tea industry is resilient and on the comeback trail with a revival brewing.

(VOV)