Changes in Russian tea and its tea machine market under the Russian-Ukrainian conflict

  Russian tea consumers are discerning, preferring packaged black tea imported from Sri Lanka and India to tea grown on the Black Sea coast. Neighboring Georgia, which supplied 95 percent of its tea to the Soviet Union in 1991, had produced just 5,000 tons of tea garden machinery in 2020, and only 200 tons had been exported to Russia, according to the International Tea Council. The rest of the tea is exported to neighboring countries. With some tea companies and brands avoiding the Russian market, can the nearby “Stan countries” fill the void?

Russia’s 140 million kilograms of tea demand will soon be met by an unexpected group of Asian core suppliers with less business dealings, including neighboring Pakistan, Kazakhstan, Azerbaijan, Turkey, Georgia, Vietnam and China. Before the Ukraine crisis, market researchers predicted that the Russian tea industry’s revenue was expected to reach $4.1 billion in 2022. The latest round of sanctions has left inflation-adjusted economic activity likely to fall from 10% to 25%.India’s decision to bypass international sanctions and a production crisis in Sri Lanka’s tea processing machinery means India will overtake Sri Lanka as Russia’s largest tea trading partner by value in 2022.

  The Russian-Ukrainian conflict in February reset the relationship overnight, as almost all Western European countries, including the European Union and the United Kingdom, suspended business with Russia. Germany and Poland are among the largest suppliers of premium packaged tea in Russia. In addition to government sanctions, individual tea brands have announced that they will no longer supply products to Russia as long as Ukraine remains under siege. With the stock market down, logistics is a top concern for Russian tea sellers, who have embraced prepayment in a depreciating currency when sales have fallen. The exit of Western rivals like Yorkshire Tea and some popular German brands is irrelevant for grocers forced to mark up local brands to premium prices. 35 brands vying for attention this year saw a discount sign on a tea box at a traditional Moscow grocery store. A month later, prices were up 10% to 15%, and I couldn’t see any discounts on items. After two months, almost all Western brands will disappear from the shelves.