By Michael Haddon
A shift toward trading tea like other commodities would increase
market transparency, but could also lead to financial speculation
and more price volatility, according to a coalition of leading
companies and organizations in the sector, including Unilever PLC
(UL) and Tata Global Beverages Ltd. (500800.BY).
Some experts think the global tea trade could move away from its
current reliance on auctions and private sales to be
exchange-traded by 2030, the group said, as it launched the Tea
2030 project to understand the major challenges facing the
sector.
Several attempts to develop tea futures contracts have been
thwarted in recent years due to the complexity involved. The market
has no precedent to draw upon, unlike coffee, where robusta beans
are traded on NYSE Euronext's (NYX) Liffe exchange and arabica
beans are traded by the Intercontinental Exchange Inc. (ICE).
Tea is the world's most consumed beverage after water, and is
produced in 35 countries around the globe, the group said, adding
the sector faces a host of challenges, ranging from climate change
and competition for land to rapidly changing markets.
Climate change and competition for land could result in tea
plantations being converted to other uses, the group said, noting
that 13,000 hectares of land in Indonesia was converted from
growing tea to other purposes such as growing rubber, palm oil and
fruit between 2005 and 2010.
Changing consumers trends also need to be recognized, the group
said, with those in developing markets like Brazil, China and India
more than twice as likely as those in developed markets like
Germany, the U.K. and the U.S. to buy products because of social
and environment benefits or to pay more for sustainable
products.
It is critical the industry responds innovatively to these
trends and challenges, many of which require collaborative action
as they are too big for one organization to tackle alone, the group
said.
As a result, Tata, which owns the Tetley tea brand, and
Unilever, which owns the Lipton tea brand, have joined forces with
Bettys & Taylors of Harrogate Ltd. and James Finlay Ltd., owned
by John Swire & Sons, for the Tea 2030 project. The Ethical Tea
Partnership, Sustainable Trade Initiative, Rainforest Alliance and
Fairtrade International are also involved, with the group managed
by global sustainability non-profit Forum for the Future.
"This unique project bodes well for a sustainable future at a
crucial time for a tea industry that is facing many economic,
environmental and social challenges," said Michael Pennant-Jones,
group sustainable business manager for Finlays.
Write to Michael Haddon at michael.haddon@dowjones.com or on
Twitter @MichaelHaddonDJ
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