Mombasa Tea Auction Poised for Change
MOMBASA, Kenya — In a whitewashed room in old Mombasa, its windows frosted with age, Tom Muchura is working his way through a seemingly endless line of teacups. He slurps each reddish-brown brew in turn, gives it a quick swirl around his mouth and spits into a giant steel spittoon.
He will taste around six hundred teas, Muchura said one recent afternoon while taking a break from the tasting, which he uses to prepare for the city’s famed weekly tea auctions.
“A good tea is said to be bright,” he said. “In this case, brightness is in the cleanness of the cup. Strength is the heaviness of the cup. You’re talking about aroma, you’re talking about flavor. One is able to actually pick the difference between each and every cup.”
“And as much tea as I taste during the week”, Muchura said with a smile, “I still drink about eight cups a day.”
Just like a wine merchant, Muchura’s business rests on his highly refined taste buds. He has been in the tea industry for over 40 years, and his company, Africa Tea Brokers, sells 20 percent of the tea auctioned off in Mombasa, where around 380,000 tons of tea are moved every year. In 2011, Kenya was the third-largest producer of tea in the world, after China and India, according to data from the International Tea Committee reported by World Tea News.
Mombasa’s tea auction, which dates back to colonial times, is poised to abandon the decades-old open-outcry system that has seen it rise to the top of the international tea scene and replace it with an entirely electronic auction by 2013. The new system is meant to increase efficiency and boost Mombasa’s already high profile in the tea world. But the change will sweep away decades of tradition, and some fear the city isn’t ready for such a dramatic shift.
The auction itself takes place in an elegant building in the center of town, across the street from Muchura’s office. Here, around 70 buyers gather every Monday and Tuesday to purchase tea from nine East African countries. Once, the tea from this part of the world would have been destined for British parlors, but now the bulk of it goes to Muslim countries including Egypt and Pakistan.
“Pakistan looks for very high quality teas — these are teas grown by the small scale farmers, high quality and very expensive,” said buyer Aweys Mohamed of Juja Coffee Exporters, which sells primarily to the Muslim market. “In Egypt it’s a blend — we’re mixing high quality teas and low quality and medium, so you’re averaging the price out.”
East Africa’s tea is sold by the kilogram, with premium tea so far this year selling at around $2.85 per kilo in Mombasa. Both brokers and buyers do their tasting in advance, so that by the time they step into the elegant, mahogany-trimmed auction room they have a sense of what the price should be.
Neckties and decorum
The auction is steeped in old-world gentility. Etiquette is strict — neckties for the brokers, or auctioneers; smart collared shirts for the buyers (the vast majority of whom are men). They address one another as “sir”, accepting an offer with “yes sir!”, and despite the absence of microphones, you’ll rarely hear anyone raise his voice.
“Every year we have a workshop on etiquette and decorum in the auction room”, said Geoffrey Rimbere, the auction’s manager. “You can’t use language which is not acceptable there, or behave in a manner which is abnormal. That’s the culture up here. Even if you don’t get the tea, you still have manners.”
But once the electronic auction is introduced, Rimbere said, buyers and brokers will no longer be meeting every week to sip tea and haggle over prices, as they have since the 1950s. Soon all the buying will be done on computer screens.
The switch should improve transparency and save on warehousing costs, allowing tea to be shipped immediately without waiting in Mombasa to be sold. “In the world today, if you don’t change you’ll be left behind,” said Rimbere. But the e-auction has detractors. Most of the buyers, Rimbere admitted, are against it.
“The Internet connection in this country is very bad, the bandwidth is not that good,” Mohamed pointed out. “What happens when you are bidding some tea and suddenly your connection goes down? What happens to some of the clients? They can bid from anywhere. What happens to the interests of the local companies who are employing local people here to handle all of that?
“It will take the fun out of the market as well,” he added, “but that’s another thing.”
East Africa’s tea industry dates back to 1903, when a European settler planted the first bush in Kenya. Although 62% of the region’s tea is still grown by small-scale farmers, the auction today moves more black tea every year than any other auction house in the world. The biggest buyer in Mombasa is Cargill, buying for Lipton, but other major players include Global Tea, Van Rees and James Finlay.
“Mombasa is the biggest auction center, and the only center dealing in multi-origin teas,” said Peter Kimanga, chairman of the East African Tea Trade Association, adding that the East African region provides around 20 percent of the world’s exports. “We are strategically placed, particularly to Asia, which is one of the largest tea-consuming areas. If Mombasa rises, all the other auctions will rise.”
But, he added, the opposite is also true — Egypt’s revolution last year sent world tea prices plummeting, as Egyptian orders from Mombasa dried up.
“Our market portfolio is quite narrow”, said Kimanga. “We’ve got about five countries taking about 75% of our tea. So when any of those countries get into a problem, you get ripple effects here.”
There are several reasons for Mombasa’s prominence in the tea world, not least of which is the fact that tea can be grown in East Africa year round. Unlike India, East Africans don’t drink much tea, and are able to export 95% of their crop. Then there is Mombasa itself — the city boasts a busy port with the capacity to export large quantities of tea, saving buyers the cost of overland transport.
Dan Bolton, editor of World Tea News, said the Mombasa auction’s profile is also bolstered by the consistent quality and large quantity of the tea sold there.
“The tea marketed in the Mombasa auctions consistently brings among the highest pries of any tea in the world,” he said.
Kimanga said another point in Mombasa’s favor is that other tea auctions are carried out in local currency, which can be confusing for international buyers. “We trade in dollars, which lets buyers easily understand the price dynamics”, he said.
Demand for East African tea has been steadily rising since the 1960s. Tea, cut flowers and tourism are the country’s top foreign exchange earners. The region’s staple is black tea, but growers are expanding to include white tea, green tea and even a new purple tea for the Japanese market.
Looking back on his 40 years selling tea, Muchura said the explosive growth of the industry is the most significant change he has witnessed.
But, he said, the transition to electronic auctions won’t be an easy one. “By nature I’m conservative, and I’ve known the tea industry in that form all my life”, he said. “As a broker, I am able to tell whether a buyer probably has an extra cent or so, because I can see him, I can see his body language. That physical presence is important.”
“We will miss the way we have operated in the past”, he added. “But because of the volumes that we are having to trade with, I think it is only natural that this change comes about.”