Opportunity for investors in growing tea demand

Tea consumption in Nigeria has been growing by 5 percent annually since 2008/2009. Annual per capita consumption of tea was 23 grams in 2009, according to Wikipedia. With a teabag weighing about 2 grams, this is about 12 teabags consumed by each person on average or per capita. In 2014, per capital consumption of tea is estimated at 29.3 grams, which is approximately about 15 teabags.

This increase per person may seem insignificant until calculated for the entire population in the country in that year. Annual per capita consumption of tea in 2009 was 23 grams, with a population of 160 million, this amount to 3.68 million kg. Per capita consumption of tea rose to 28 grams in 2013, with a population of 165 million, this amount to total tea consumption of 4.62 million kg last year.

If consumption annual growth rate continues at 5 percent in 2014, per capital tea consumption would be 29.3 grams. With a population of 170 million, this would amount to annual tea consumption of 5 million kg at year-end.

As most locally produced conventional tea brands, which are the highest in supply, are usually in 50 grams packs cost about N200, tea consumption estimated to reach 5 million kg this year would hit N20 billion by year-end. Imported, medicinal and flavoured teas cost much higher than N200, so the market-size is bigger than that.

According to Euromonitor, an international research organisation, which studies markets by categories in countries, tea sales are growing steadily in Nigeria, due to an increase in the formal working culture, westernisation, health reasons and the marketing activities of domestic key players. These key players dominating the market are Unilever, producer of Lipton Yellow Label tea which had a share of 35 percent of the market in 2013 and Promasidor Nigeria Limited producing Top tea.

But imported tea especially those that are health-related such as anti-hypertension tea, anti-malaria tea, cough-sputum removing tea, and Moringa tea from Asian countries particularly China are also flooding the market. Fruit -flavoured teas mainly from the United States and Britain also have remarkable market share.

The market has also seen the entry of medium and small sized indigenous manufacturers of tea in the last five years.

Teju Bolujoko, managing director, Ruchin Limited, producer of Master Tea bags and Moringa Herbal Tea, says there are many opportunities for investors along the value chain in large scale production of tea leaves, sales or leasing of the production equipment, servicing of equipment, production of the packages and in distribution.

Noting some of the challenges, he says, “though manufacturing cost is very high for local producers, the capacity we have to meet the market demand is also very high, even greater than that of countries like Kenya.”

On production of the tea leaves, he says, “no industry can depend on subsistence farming, even though we have the capacity to produce enough tea leaves on the Mambilla Plateau, the fact that it is produced mainly by subsistence farming is not sufficient for the industry. Therefore, foreign teas are being imported into the country, and by so doing jobs are being exported out of Nigeria.”

Patrick Inelo, managing director of Noble Icon, another tea bag production company also attest to the fact that opportunities exist bountifully along the value chain of tea bag production. He says, “The tea bags, the thread and the paper we use are food grade papers. Since they are food grade, one has to ensure the quality so that they would not dissolve in the water when being consumed and this is usually scarce and often not available locally, about 80 percent of these are imported. Due to the exchange rate, they are relatively expensive and the prices fluctuate. A tea producer cannot import less than a tonne and that is huge for a small business.

Euromonitor also reports that tea is mainly consumed on cold days during the rainy season or harsh harmattan weather, since it is drunk hot. However, this situation is changing slightly, with tea being served in an increasing number of offices, at conferences and other formal business meetings. Since offices are usually air conditioned, Nigerians do not mind drinking tea in the office, especially when they need to remain alert. This has resulted in more Nigerians acquiring a tea drinking habit. Furthermore, there is a trend towards herbal medicinal teas, which are believed to be cheaper ways of curing ailments, whilst green tea is thought to be important for preventative health.

OLUYINKA ALAWODE