Specialty Tea Prices On The Rise

2020 brought about an unusual amount of surprises, and unfortunately, its effects will continue to be felt throughout the year and future years to come. The pandemic brought an increase in business to some, closures and standstills for others, but problems throughout the entire industry. Among these changes include a rise in cost for specialty tea products.

Branching Out to Specialty Teas During the Pandemic

The global standstill brought on by the pandemic has changed the way people drink tea. Instead of relying on coffee shops, people are making their tea at home. Tiring of the same ten tea bag options at the grocery store and finding time to up their game, more and more people are branching out to higher quality teas to fill their cups and fuel their hectic schedules of working from home with kids. 

Fearing for their lives amid this serious virus, people have also been more interested in healthy living and DIY projects. Both of these factors have created a stark interest among consumers in specialty teas and herbs. The hospitality sector (typically the safe and steady market for most companies) has seen an unprecedented decline, but the independently owned specialty sector is thriving. Being a small specialty tea company, we cannot complain. However, we do not expect this growth to last forever.

Strain On Global Supply of Tea and Herbs

One unexpected consequence of this surge in business is the fact that the global supply of tea and herbs has been strained. Many of these products are only harvested once or twice a year. Thus, supply cannot be made on demand. For the first time that I have ever seen in 10 years, herb companies have stopped taking on new accounts, only allowing a certain number of orders a day, or had shipments backed up by weeks. Tea and herbal companies quickly began hoarding herbs as they were not sure when they would be able to restock. Out of Stock notifications, often uncommon in normal years, are the new norm.

Reduced Yields Caused By to Distancing Measures

In addition to unprecedented demand, producing countries had shutdowns and reduced yields due to distancing measures and quarantines, which caused entire harvests to go to waste because people could not get to the fields. The famous Darjeeling first flush was nearly lost due to the shutdown. Harvests of some materials, such as organic cardamom pods (which we go through a considerable quantity of), fluctuate year to year. Due to the unpredictability of climate change, there is also an increasing number of bad years and short harvests. Short supply means higher prices.

Rise In Shipping Costs for Tea

Freight has been another factor in the sweeping price increases. Shipping from many producing countries has more than doubled due to several COVID-induced factors. Small parcels used to make their way on airplanes traveling across the globe, but as air travel took such a sharp decline, packages are backed up, waiting for a plane to board. As nearly all of the teas and herbs we enjoy on a daily basis are imported, this has no small impact.

Limited Access to Packaging Materials

As if this was not enough, raw materials, such as aluminum for the tea tins we use, rose in price due to tariffs on Chinese goods put into effect by the last administration. Shipping containers are scarce, and companies who rely on a variety of packaging materials from China are unable to get their products, or if they are, they are late and far more costly.

Specialty Tea Prices Will Rise Until Supply Levels Out

All of this, unfortunately, trickles down to costs that need to be absorbed by the companies until they raise their prices. The volatility of prices and the desire to keep prices low have kept many companies from implementing steep price increases. However, as I told one of my suppliers, "I want you to do well because I want to continue doing business with you. It does not help me for you to go under because you cannot cover your overhead costs." Companies are facing the reality that it's increase or sink, and slowly that is what they are doing. Costs of any specialty tea and herbal products will be continuing to increase for the foreseeable future until supply levels out.