Global trading house sees immense potential for tea business in China
After opening its first tea trading office in China, Finlays, the London-based major independent tea trader, is now eyeing other sectors of the tea industry in the country.
"For the moment we are just a trading office. But there is a lot of land and potential here for tea growing. If we move onto to the growing and processing side, we will think about opening a second office here, so that we can better cover the Taiwan, Hong Kong and Southeast Asia markets," says Sally Henderson, general manager of Xiamen James Finlay Trading Co Ltd.
According to data from Bosi Data Research Center, an industry research firm, annual sales of bottled tea drinks in China grew from 34.3 billion yuan ($5.44 billion, 4.21 billion euros) in 2006 to 48.2 billion yuan in 2010.
Henderson says that the huge market potential for bottled tea will pep up demand for tea extracts in China.
"Earlier, Finlays used to import tea extracts from factories in Chile and Kenya for making the beverage in China. Since China is capable of making similar products, Finlays will consider more investments in the tea processing sector," she says.
Headquartered in London, Finlays has 11 tea trading offices around the world, including the newest one in Xiamen, East China's Fujian province. Some of them are in consuming countries and some in tea growing countries.
"Finlays has been trading tea with China for 25 years, and it is really hard to understand the market from outside. That is why we set up an office in Xiamen to know more about the local industry and build up connections," Henderson says.
But she says that the Xiamen office is different from other offices. It will export Chinese tea as well as import tea extracts from overseas.
"Finlays' office in the United Kingdom and the United States focus more on dealing with customers, while the offices in Hanover and Jakarta are more in the tea export business. The China office is planning to do both, exporting Chinese tea leaf and covering tea extract business in Asia-Pacific."
Founded in 1750, Finlays became a wholly-owned subsidiary of the Swire Group in 2000. It is one of the leading tea traders in the world, with trades of over 100 million kilograms every year.
What drew Finlays to Xiamen was its geographical position and the good foundation of the tea industry.
"Fujian has tea, tea experts and traders along with good connections to markets in Southeast Asia and Hong Kong. Xiamen also has local tea research institutes and scientists, working on the betterment of the tea industry."
Though there have been reports of rare earth and pesticide contamination in Chinese tea recently, Henderson is not unduly perturbed.
"Everything we export or import will be analyzed in our laboratory in Germany, to make sure the tea sample is up to the requirement of different standards in different markets."
"We will also select tea with the support of our worldwide network. If we select tea for exports, we will send samples to other Finlays offices in the target countries and check what is suitable for their customers there."
For export, instead of high quality tea, the company is looking at the lower grade green and broken black tea from Zhejiang, Hunan and Hubei provinces, mainly for industrial processing in the Western countries.
She says when foreign buyers look at Fujian tea, they tend to fall into two groups, with most buyers from Europe and Russia wanting special and high quality tea in small volumes.
The bigger volume comes from low quality and cheap tea that goes to the US for the iced tea business, with some even going to the EU for blending or as tea bags.
"Because of the low quality Chinese black tea is very light and does not have strong character. But it becomes good after blending with tea from other countries or adding certain flavors."
Though Finlays is still in its early stages, the company is looking at Chinese tea exports of over 1 million kilograms every year.
Henderson has been in the tea business for over eight years now, first in London as a tea buyer and then in Hong Kong. In March 2011, she relocated to Xiamen to help set up the Finlays office. Personally, she is also a big fan of Chinese tea.
"When I was a student in Taiwan, I had oolong tea for the first time and really remember the unique taste clearly."
She likes both black tea and Tieguanyin, an oolong tea produced in Anxi county in Fujian province. She also likes Biluochun and Longjing green teas from Zhejiang province.
What she likes most about Chinese tea is its taste and spiritual enjoyment.
"Drinking tea makes me feel better and healthy. Making tea is relaxing as well. You can sit down and have a chat with your friends. I am not sure whether I can get along with people who do not drink tea," she says.
"Also, the tea trade is a nice industry to work in, involving lots of people and travel. They are passionate, and willing to go out of the offices and into the field."
Finlays has its own tea gardens in Kenya and Sri Lanka, covering more than 39,000 acres (15,800 hectares) and produce 40 million kilograms of black tea each year.
It has already started its flower growing business in Songming county, Yunnan province in 2007.
Today, the Yunnan Taikoo Flowers farm has a production area of 9.5 hectares, growing over 12 million stems of carnations per annum.
Though the Chinese operation does not grow tea right now, it will be on their agenda in the future, Henderson says.
"Having our own tea garden is something we will definitely think about seriously."
She says that over the next few years, supply would not be enough to cater to the demand and many tea companies are looking to augment their tea sources.
"Countries such as Kenya do not have a stable political climate and are also prone to extremities like drought. So it is better to expand our tea gardens in other countries."
Henderson says China is suitable for growing tea due to its low labor costs and environment. The company considers inland regions such as Hubei and Sichuan provinces as ideal locations.
"With our own tea production, we will have full control of tea sources and quality, and do not have to worry about contamination issues."
"China is exporting a very small proportion of its tea production. With so much expertise and land for growing tea, there is no doubt that China will soon play an increasingly important role in the global tea industry," Henderson says.