Tea – if it was good enough for the Qin Dynasty of China about 5,000 years ago, it’s good enough for us in the year 2020. This beverage, originally made from the Camellia Sinensis plant, is the world’s most-consumed drink after water, making it a staple in kitchens around the world. Tea is a huge part of Middle Eastern and Asian cultures too, with each country having its own popular adaptations and yummy infusion recipes.
We all know how much ya’ll love a good cup of Karak chai! For those of you who haven’t been blessed with a tasting yet – it’s a sweet brew of black tea, cardamom, and evaporated milk. Loomi tea (also known as chai noomi basra or noomi basra tea) is a favorite across different Arab countries too, particularly Iraq, Kuwait, the UAE, and Oman. Meanwhile, Morocco is known for its digestion-friendly Maghrebi mint tea, and the Gulf countries love their aromatic sweet & sour black Sulaimani chai.
In addition to tea being just an awesome thing to sip on, what if we told you it’s a good investment opportunity too? Keep on reading to find out the tea – quite figuratively!
Tea farming & trade
The tea plant needs humid climates and acid soils to grow, which is why it’s so prevalent in countries with tropical or semi-tropical climates such as China, India, Kenya, Sri Lanka, and Indonesia. China has always been the world’s largest exporter, so tea has been a crucial part of shaping the Asian nation into today’s powerhouse. Meanwhile, the top importers of tea in 2019 were Pakistan, the United States, Russia (yep, Russians drink more than just vodka), Hong Kong, and the United Kingdom (where people are known for their love of “a good cuppa”).
The Gulf region’s trade relationship with black tea started over a thousand years ago, when Arab traders brought tea from Sri Lanka and southwest India to the Arabian Peninsula. Today, tea is not only one of the GCC’s top imported commodities but also a huge re-export (the UAE re-exports most of its tea to Iran and other Middle East countries – the fact that it enjoys a 0% tariff on tea imports helps too). Because of its ideal geographical location, Dubai serves as a regional commodity-trading center, especially since the Dubai Tea Trading Center (DTTC) opening in 2005, which stores raw tea from major producing countries and then ships it off to key regional players. In fact, the tea and coffee businesses are doing so well that the Dubai Multi Commodities Center (DMCC) just announced it is adding cacao to the list of commodities traded at its centers. Nicely done!
How to invest in tea
Now here’s the real tea: this amazing commodity can both warm you up through the coldest of evenings and make your pockets heavier at the same time. What else do you need?! Indeed, there are lots of ways you can get a return on all that money you’re spending on teabags.
One of the easiest routes might be to buy shares of major tea producer companies, such as Unilever (PG Tips) and Tata Global Beverages (Tetley, Tata Tea). But, people of many tastes may prefer to place their money in an exchange-traded fund that will invest in various tea-related stocks. Otherwise, you can support smaller-scale businesses, like local tea shops in your area, that might be looking for that extra capital boost to get their feet off the ground. However, unlike other crops (including rice, which we covered in the previous Ramadan-themed deep dive), you cannot buy futures in tea as a commodity.
Investors who think more long-term can consider directly investing in a tea plantation – that is, if they’re willing to put in the effort of studying topography, geography, climate, and overall agricultural trade landscape of a certain region, on top of developing relationships with the business and the people running it. It is quite a lot of work, but it might pay off in the long run if done correctly considering the demand for tea is growing each year. Alternatively, investors also invest in foundations or trade programs of their choosing under the International Fair Trade movement, which usually provide smaller-sized zero or low-interest loans to farmers looking to launch new project startups – a super cool way to drive the tea industry while supporting smaller businesses, win-win.
Tea in everyday life
Everywhere you go across MENA, tea is being enjoyed by people of all ages throughout the day – be it at home, at work, or at the mall. In fact, for many, no day is complete without a cup of chai! Tea houses are a popular hang-out spot for people of all ages, making them an essential part of everyone’s social life. That being said, out-of-home tea consumption (cafes, restaurants, etc) is expected to account for 52% of spending in the tea segment by 2025.
The biggest global players in the industry are Unilever (the Lipton peepz), Associated British Foods (any Twinings fans out there?), and Tata Global Beverages (shout out to the iconic Tetley brand). Lipton is the leading tea brand in the UAE, but it faces stiff competition in the Gulf countries from companies like Alokozay and Dilmah – the latter of which operates a series of upscale tea lounges across the GCC. And let’s not forget the big retail players like Starbucks, which capitalizes heavily on the humble chai by charging customers some hefty bucks for its chai latte (one of its most popular winter drinks around the globe).
Younger generations are now looking at the modest beverage as either a luxurious or trendy experience – who doesn’t love a good trip to a TWG Tea or AVANTCHA teashop? The latter, a UAE-based company, absolutely nails the retail experience by offering a whole range of products such as tea tins, seasonal gift hampers, and even matcha whisk holders. Moreover, people are increasingly likely to pay more for brands that elevate the tea experience, whether it is because of their quirky design, appealing marketing, or even ethically sourcing practices – making tea a great future investment opportunity.
Meanwhile, green tea is particularly loved by the health-conscious community. Plus, younger generations are more interested in exploring the health benefits of different teas and herbal infusions and often willing to spend extra cash on gourmet or specialty teas – which means that names like Pukka are quickly rising through the industry’s ranks (in 2016, Pukka Herbs was valued at €1.6b and considered the fastest-growing organic tea company in the world – so it’s no surprise it was bought by Unilever).