TEA GROWING REGIONS:
CHALLENGES

TABLE OF CONTENTS

Introduction: Why Tea's Economics Are Under Strain

Tea remains the world's most-consumed manufactured beverage after water, yet the regions that grow it face mounting structural pressures. From the smallholder gardens of Kenya and Assam to the plantation estates of Sri Lanka and South India, the business of producing Camellia sinensis is caught between stagnant farm-gate prices, rising input costs, an ageing workforce, and the escalating demands of global supply chains. Where once labour was abundant and land cheap, today's reality is one of chronic shortages, compliance complexity, and thin—or negative—margins.

This guide is written for government officials, development practitioners, NGO programme managers, and the commercial buyers and estate managers who shape policy and investment decisions. It is also for the serious tea professional or enthusiast who wants to understand why supply chains are fragile, where intervention levers exist, and what the trade-offs look like on the ground. We do not offer folklore or generalisations; every claim is grounded in observable economics, agronomic reality, or documented policy experience as of mid-2026.

The guide is organised around the six most critical structural challenges: labour shortages and wage pressures; the diverging economics of smallholder versus plantation models; the mounting costs and risks of replanting ageing tea; the pesticide and agrochemical compliance burden; the overlapping weight of certification schemes; and the logistics and infrastructure bottlenecks that erode value before tea leaves the origin. In each section we describe the challenge, quantify its scale where data permit, and outline the policy and market levers—subsidy schemes, mechanisation pilots, certification harmonisation, infrastructure investment—that governments, donors, and industry coalitions are deploying or debating.

Tea production is not in crisis everywhere, but it is under strain almost everywhere. Understanding these pressures is the first step toward interventions that preserve livelihoods, sustain quality, and keep the global tea trade viable for another generation.

1. Labour Shortages and the Wage-Price Squeeze

Labour is the single largest variable cost in tea production, typically accounting for 50–70 % of total on-estate expenses. Yet across almost every major origin, growers report chronic shortages of pluckers, difficulty retaining seasonal workers, and upward wage pressure that outpaces any corresponding rise in the price paid for made tea.

Why workers are leaving

The causes are structural and demographic. Tea plucking is physically demanding, often performed in remote hill areas with limited amenities, and carries low social prestige. Younger generations—especially in India, Sri Lanka, and increasingly Kenya—migrate to urban centres or shift into construction, domestic work, or the gig economy, all of which offer higher or more flexible pay. In Assam and the Dooars, estate managers report that school-leavers from traditional tea-worker families now refuse plucking jobs outright. In Sri Lanka's central highlands, the resident Tamil labour force is ageing rapidly, with birth rates well below replacement and negligible in-migration.

Simultaneously, mechanised alternatives remain limited. Small-leaf orthodox production and the selective 'two leaves and a bud' standard both require dextrous hand plucking; only CTC production from mature, flat fields tolerates mechanical harvesters, and even then quality suffers and capital costs are prohibitive for smallholders. The result is a labour market where supply is falling, quality expectations remain high, and growers have few substitutes.

Wage trends versus auction prices

Statutory minimum wages for tea workers have risen steadily. In India's principal tea states, daily wages (including in-kind benefits) increased by roughly 60–80 % in nominal terms between 2016 and 2026, while average auction realisations for bulk CTC grades rose by only 15–25 % over the same period—and in some years fell. In Kenya, where smallholders dominate, the price per kilo paid by factories has stagnated in real terms even as fertiliser, transport, and labour hire costs have climbed. Sri Lankan estates face a similar bind: government-mandated wage hikes in 2023 and 2025 added approximately 25 % to payroll costs, yet Colombo auction averages for low-grown teas barely moved.

This wage-price wedge compresses margins to the point where many estates operate at a loss during lean months, relying on peak-season premiums and ancillary income (tourism, timber, hydroelectric leases) to stay solvent. For smallholders the picture is simpler but no less harsh: labour is usually family or reciprocal, so the 'cost' is invisible until opportunity cost is counted—and increasingly, the opportunity cost of staying in tea is judged too high.

2. Smallholder versus Plantation Models: Diverging Economics

Tea is grown under two fundamentally different ownership and production models, and their economics, vulnerabilities, and policy needs diverge sharply. Roughly 60 % of global tea by volume now comes from smallholders—farmers cultivating between 0.5 and 5 hectares—while large estates (≥50 ha) still dominate in Sri Lanka, parts of India, and increasingly in China's export-oriented regions.

Smallholder strengths and fragilities

Smallholders benefit from family labour, lower overhead, and the flexibility to interplant tea with other crops (maize, beans, shade trees) or livestock. In Kenya, where smallholders produce over 60 % of national output, this model has proven remarkably resilient: smallholders can absorb price shocks by adjusting labour input or diverting land temporarily, and they have lower sunk costs than estates burdened by legacy infrastructure and permanent payrolls.

But smallholders face acute disadvantages in access to credit, inputs, and technical knowledge. Few can afford the upfront cost of replanting or the two-to-four-year income gap before new bushes mature. Fertiliser and pesticide use is often sub-optimal—either over-applied (raising costs and residue risk) or under-applied (depressing yield). Quality control is inconsistent: leaf is delivered to buying centres or factory gates with minimal grading, and price differentiation for quality is weak or absent. Finally, smallholders have negligible bargaining power. In Kenya and Malawi, regional factories set a single 'green leaf' price per kilo; in India, traders and middlemen capture much of the margin between farm gate and auction.

Plantation realities: scale, compliance, and stranded assets

Large estates enjoy economies of scale in processing, quality control, certification (one audit covers hundreds of hectares), and direct market access. They can invest in mechanisation, on-site factories, worker housing, and clinics—infrastructure that helps attract and retain labour. Yet the same scale creates rigidity. Estates cannot easily shed labour or pivot production; they are locked into tea. Compliance costs—health and safety, environmental permits, labour law, pesticide records, multiple certifications—are borne entirely by the estate, whereas smallholder compliance is often notional or outsourced to co-operatives.

Many estates also carry legacy burdens: ageing processing machinery, obsolete workers' housing requiring costly upgrades, and bushes planted in the 1960s–80s now past economic life. Replanting at scale is prohibitively expensive (see Section 4), and financing is scarce because tea land is often held under leasehold or statutory tenure that banks will not accept as collateral. In Sri Lanka, dozens of regional plantation companies operate under government-imposed wage and welfare obligations that make restructuring nearly impossible, trapping estates in a high-cost, low-margin equilibrium.

3. Ageing Bushes and the Replanting Crisis

Tea bushes are perennials with an economic life of 50–80 years under good management, but yield and quality decline markedly after 40–50 years. Across India, Sri Lanka, and parts of East Africa, a large share of the area under tea was planted in the 1960s through 1980s during post-independence expansion. By 2026, much of this acreage is exhausted, yet replanting rates lag far behind agronomic need.

The replanting deficit

India's Tea Board estimates that approximately 25–30 % of the country's tea area requires immediate replanting, yet actual replanting covers less than 1 % of the area annually. In Sri Lanka, the Planters' Association reports a similar backlog. The shortfall reflects three constraints: cost, cash flow, and risk.

Replanting a hectare of tea—clearing old bushes, land preparation, sourcing certified clonal plants, planting, gap-filling, and maintenance—costs between £2,500 and £4,500 depending on terrain, labour rates, and plant source. The replanted area yields nothing for two years and reaches mature yield only in year four or five. For an estate or smallholder already operating on thin margins, this represents a cash-flow chasm. Banks are reluctant to lend against tea land (as noted above), and even when credit is available, the loan term (typically 5–7 years) is too short relative to the 15–20 year payback period, leaving borrowers over-leveraged.

Government subsidy schemes

Recognising the crisis, several governments have launched replanting subsidy programmes. India's Tea Board offers grants covering up to 50 % of replanting costs (capped per hectare), but disbursement is slow, documentation burdensome, and total funding falls far short of the area needing attention. Sri Lanka's Ministry of Plantation Industries piloted a similar scheme in 2024–25, tied to use of certified clonal material from state nurseries; uptake has been modest because the subsidy does not cover the income gap during immaturity, only the planting cost.

Kenya's Tea Development Agency supports smallholder replanting through its 'Chai Tycoon' revolving fund, which advances seedlings and inputs on credit, repayable over five years once the new bushes bear. Early results (2023–26) show higher uptake than grant schemes, because the model aligns repayment with cash flow. The World Bank and several bilateral donors are now exploring similar blended-finance structures—part grant, part long-tenor loan—elsewhere.

4. Price Stagnation and the Cost-Price Scissors

Even as input costs—fertiliser, fuel, labour, agrochemicals, packaging—have risen sharply over the past decade, the price received by tea producers has remained stubbornly flat or declined in real terms. This cost-price scissors is the overarching economic challenge, underpinning labour shortages (workers leave because estates cannot pay more) and replanting inertia (investments cannot be justified at current returns).

Auction price trends: a deflationary decade

At the four major auction centres—Mombasa, Kolkata, Guwahati, and Colombo—average prices for bulk black CTC and low-grown orthodox teas have been essentially flat in nominal terms since 2016, and down 15–25 % in real (inflation-adjusted) terms. Premiums for origin-specific or certified teas exist but are narrow (typically 5–15 %) and confined to a small share of volume. The mass market, which absorbs 70–80 % of production, is fiercely price-competitive, and retail buyers (multinational packers, supermarket own-labels) have consolidated purchasing power and low willingness to absorb cost increases.

In Kenya, the average price paid to smallholders for green leaf peaked in 2016–17 and has since drifted lower. In India, the 'Below Best' CTC category—accounting for the majority of North Indian production—traded in mid-2026 at levels last seen in 2018–19, despite a cumulative ~30 % rise in the retail price index over the same period. Price spikes do occur (drought, frost, or geopolitical supply shocks), but they are short-lived and often do not translate into sustained higher farm-gate returns.

Input cost inflation

Fertiliser costs surged following the 2021–22 global energy crisis and have not retreated to pre-crisis levels. Urea, DAP, and potash—tea's principal nutrient inputs—are all petroleum-derivative or energy-intensive, and in import-dependent countries (India, Kenya, Sri Lanka) prices track international commodity markets and exchange rates. Transport fuel, electricity, and packaging (paper, polypropylene) have followed similar trajectories. The result: total variable costs per kilogram of made tea rose by an estimated 35–50 % between 2019 and 2026, while sale prices rose less than 10 %.

This table illustrates the scissors in stark terms: input inflation has far outpaced output price growth, compressing margins to the point where many producers now lose money per kilogram at prevailing spot prices.

Levers to address the scissors

• Input subsidies and fertiliser stabilisation funds: Several governments (India, Sri Lanka, Kenya) provide targeted subsidies or cap retail prices for key inputs. Effectiveness varies; subsidies help in the short term but can distort agronomic practice and are fiscally costly.
• Quality differentiation and direct trade: Shifting volume from bulk commodity channels into differentiated, origin-labelled, or direct-trade relationships can unlock price premiums of 20–100 %. This requires investment in processing, branding, and market access—feasible for estates and well-organised co-operatives, difficult for dispersed smallholders.
• Retail price transparency and fair-trade mechanisms: Some NGOs and trade associations advocate for mandatory farm-gate price disclosure and minimum price floors, but such schemes have limited traction in liberalised markets and can reduce buyer demand if prices rise above competitive levels.
• Productivity improvement: Raising yield per hectare (through better agronomy, replanting with high-yielding clones, precision fertiliser use) lowers per-kilo costs and improves resilience. This is the most sustainable lever but requires upfront investment and technical capacity.