Sustainable Development for Vietnam Tea Industry: Experiences from Kenya

 

Located in Africa with limited socio-economic development, Kenya has adopted the right strategy for the tea industry which has brought very encouraging success in all stages from planting, harvesting, production, packaging and exporting and promoting the brand of Kenyan tea. Kenya’s tea industry is the main agricultural product which has been contributing significantly to the economy of this East African country with export turnover much higher than Vietnam. According to statistics from the General Department of Customs, in 2011 Kenya's exports reached US$1.06 billion, while Vietnam’s was US$204 million; Kenya's tea exports account for 17-20 percent of total export earnings of Pakistan, the UK, Egypt which are its largest tea importers.

 

These achievements stemmed from the successful cultivation, production, sales and especially product marketing. Organisational systems as well as methods of tea consumption in Kenya are very effective, 80 percent of tea is consumed through the Kenya Tea Development Agency (KTDA); the agency acts as a broker rather than tea owner. Most tea is sold through an auction floor holding 2 sessions a week, which is the effective distribution channel that the Vietnam Tea Association is looking to apply to Vietnam.

 

Kenya became the world famous tea producing country mainly due to the scientific management which ensures the consistent direction of the Government and promotes creativity and initiative among all members of the value chain. Kenya’s success is a useful lesson for Vietnam’s tea industry in all aspects, through which we can find solutions for the development of Vietnam's tea industry.

 

While ranking 5^th among countries having largest tea planted areas and standing in the "top" of the world's largest tea exporters, Vietnam's tea industry does not have a prominent mark in the international arena. According to the report of the Vietnam Tea Association in 2012, Vietnam's tea industry export target was 135,000 tonnes, worth US$220 million and by 2015, fresh tea leaf production will be 1.2 million tonnes, dried tea leaf will reach 260,000 tonnes, with 200,000 tonnes for export, exports turnover of US$440 million, and the average export price equal to the price of the world (US$2,200 / tonne).

 

In fact, Vietnam also has large processing facilities, but considering the whole industry, they are highly fragmented, the majority are small-scale plants, large-scale plants are limited. Besides, the management system is weak and system of production, processing and trade is too loose, the tea trade is dependent on and pressured by foreign intermediate customers. Because there are so many companies involved in tea export, in which many integrated export companies engaged in multi-product exports, those not specializing in tea are willing to sell low-quality tea. This is one of the causes for the production facilities continuing to produce cheap and low quality tea affecting the reputation of the tea industry in Vietnam.

 

Recently, Vietnam has issued many preferential policies to attract investment from the non-state sector into the agricultural sector, including the tea industry. However, investment in this field is still limited. In addition, an area of ​high yield and quality varieties is small; tea growers still have fragmented production, and are not capable of supplying stable amounts of raw materials to processing facilities; they lack business connection, and have not implemented advertising and product branding well.

To help tea products really stand firm on the market, Vietnam needs to start from quality. According to economic experts, along with the brand, quality tea must be placed on top. Therefore, along with the application of more scientific methods to production techniques, especially on the structure of new varieties, harvesting, and processing quality assurance, tea production enterprises should strengthen production and guarantee quality to produce standard tea for food safety.

 

In addition, according to Mr Doan Anh Tuan, Chairman of the Vietnam Tea Association, Vietnam needs to instances where some tea companies purchase seasonally with no business prestige. They are not associated with the tea company, and operate simply for business purpose, so they are ready to offer all kinds of low quality tea. In particular, according to Tuan, the need to organize a tea trading floor for businesses to introduce and sell their products in a transparent and fair way, to set the stage for the birth of the tea auction centre in the future. Doing this not only helps businesses enhance the tea brand, but also limits sewn-mediated sales, and eliminates indecent tactics of the traders. In addition, the units of production and tea processing should actively seek domestic and foreign markets in order to develop appropriate strategies to meet their markets.