Lack of rain threatens the nation's cuppa

Click to follow
Black clouds, or rather the lack of them, are gathering round one of Britain's most important institutions. Under the combined weight of a severe drought in Kenya, shortage of rain in Sri Lanka and a late harvest in north India, tea prices are soaring. Since 1995, the cost of a kilogram of tea from Kenya, supplier of half the 170,000 tonnes imported into the UK every year, has doubled to around $2 (pounds 1.22).

The threat to the nation's cuppa has yet to register on the election campaign trail, but politicians may have to sit up and take notice: the impact on the electorate could be far-reaching. The British drink 185 million cups of the warm and wet stuff every day, more than the whole of North America and the rest of Europe put together. The London-based Tea Council claims that 42 per cent of every man-made beverage consumed in the UK is still tea, making it the second most popular drink after water.

But the experts say there is no need to rush out and stockpile. Illtyd Lewis of the Tea Council yesterday moved swiftly to calm the nerves of tea lovers. "Although 51 per cent of our tea comes from Kenya, the average tea bag has 20 to 30 different teas in it. The blending companies have to ride the prices out and may have bought ahead. It remains to be seen how long this will last. It all adds up to a fairly complicated matrix."

The pounds 640m market for tea in Britain also remains "massively competitive" and it is very difficult to detect any price rises coming through, he says. At 2.7p a cup, tea remains "ridiculously good value".

But it is all causing a lot of grief for James Finlay, one of Britain's dwindling band of plantation companies which, with Unilever's Brooke Bond, is one of the two biggest growers in Kenya. The Glasgow-based group saw its shares dip 9.5p to 95p yesterday after it warned that results for this year would be hit by the Kenyan drought.

Although rain had now started to fall, Pat Lockett, finance director, said it would take time for the tea bushes to recover. Whether current prices, the highest for four years, were maintained was "in the lap of the gods", he said.

All this is ironic, given that last year's 30 per cent rise in Kenyan prices helped Finlay yesterday report profits more than tripled, from pounds 3.62m to pounds 12m for last year.