In recent years, business was tough for tea growers in Caucasia, comprised of Armenia, Azerbaijan, and Georgia. The importance of tea production at the world’s most northern plantations is even recognised at the state level, but in the face of stiff competition with imports, this is still not enough to help the industry out of its current predicament.

The Caucasus region has a rich history in tea production, which might surprise many. In the 1970s, this area was a significant contributor to the global tea industry, with an impressive output of nearly 140,000 metric tonnes (mt) of tea. Georgia played a major role in this, accounting for 60 percent of the total production. At its peak, Georgia’s tea production alone reached an impressive 95,000 mt per year.

Caucasus tea largely met the demand of the tea market on one-fifth of the world’s land surface. It was also exported across countries of the socialistic camp, as well as to Afghanistan, Iran, Syria, Yemen, Mongolia, and some African states. In the 1980s, the Soviet Union was the fourth largest tea producer, following India, China, and Sri Lanka.

Those days are long gone now. In the 2020s, Caucasus tea accounts for only around 0.05 percent of the global production, as estimated by the Food and Agriculture Organization (FAO) of the United Nations. The transition to a market economy has been brutal for the tea industry in the Caucasus. Over 90 percent of cooperative farms involved in tea production have gone bankrupt, leaving behind vast swathes of abandoned tea plantations across the region.

Now, Georgian tea is even losing the domestic market, as estimated by Tengiz Svanadze, head of the Georgian Tea Association. In fact, Georgian tea meets only 25 percent of the local demand, while the rest is covered by imports.
Despite the bleak situation, there are glimmers of hope. In 2016, Georgia launched a tea industry revival programme, aiming to rejuvenate 7,000 hectares (ha) of abandoned tea plantations. A similar initiative was undertaken in Azerbaijan in 2018, with a goal of increasing tea production eightfold by 2027 to 8,500 mt.

However, these efforts have yet to pay off. Svanadze estimated that as of 2022, Azerbaijan manufactured between 500 and 1,000 mt of its own tea. A substantial share of the tea imported on the Georgian market comes from Azerbaijan, he admitted, adding that those were not locally grown products.

Georgian tea brand. Image: Friends in Georgia

Over the last several years, Azerbaijan heavily invested in several tea factories, which import tea leaves from Asia, instead of cooperating with local farmers.

In Armenia, the tea industry has a much smaller scale and is primarily concentrated in several high mountain areas nearly 1,700 meters above sea level, where farmers focus on herbal tea production. As reported by a local news outlet, Mir, Armenian mountain herbal tea is exported to Russia, Europe, and North America, though in small quantities.

In fact, tea growing has never been popular in Armenia – a country of coffee lovers. For example, BusinesStat, a local think tank, calculated that sales in the domestic tea market between 2018 and 2022 dropped from 370 to 346 mt, and the trend is likely to continue. The analysts emphasised that, on the other hand, Armenia has some of the highest coffee consumption levels per capita in the entire post-Soviet space.

A hard-to-forget bad name

It has been over three decades since the Soviet Union ceased to exist, but Caucasus tea growers still blame it for the ruined reputation of their brands.

“They [Soviet managers] tried to pump up Georgia to produce large quantities of tea to cover the Soviet’s needs for the drink. But this was an impossible task for a small country,” commented Andrey Skidan, tea production technologist. As a result, the quality of Georgian tea at that time was poor. Tea leaves were mixed with pieces of wood and other components, sometimes of unknown origin. “In the end, the drink was poorly brewed; its taste was dull and unsaturated,” he said.

Similar practices were introduced in Azerbaijan, but poor-quality tea is primarily associated with Georgia since it was the largest tea manufacturing republic at the time.

“We tried to break out to the Russian market with our tea, but the memories of Soviet-era quality are still blood-curdling,” a manager of a Georgian tea company revealed, admitting that some Russian importers still refrain from working with Georgian tea suppliers, though there are signs of improvement in this field.

Unfortunately, official figures suggest that the Georgian tea industry revival programme has gone sideways. In 2023, the country exported 1,522 mt of tea, worth only USD $2.2 million. Exports have been steadily shrinking during the last five years, plummeting by 27.5 percent during this time. In monetary terms, sales to foreign customers are halved compared with 2019, when they generated $4.4 million for the Georgian tea companies.

Georgian tea exports are shrinking but prospects are bright. Image: Organict Store

Svanadze insisted that the downward dynamics are not a sign of a crisis. He explained that the drop in sales is primarily attributed to a gradual switch of Georgian farmers towards manufacturing better quality products, which entails a temporary decline in output. “Georgian firms have switched to the production of high-quality tea. Everyone wants to brew high-quality tea, while the low-quality tea production, in practice, is no longer profitable, and accordingly, the harvest has shrunk.”

Svanadze said the change in quality helps Georgian tea better compete with imports on the domestic market, and the share of locally grown products has been steadily growing in recent years.

Some Georgian firms have reported a burgeoning tea-export renaissance. Tornike Shekiladze, director of tea manufacturing company, Gezruli Tea, disclosed that the company exported 400 kg of tea last year, primarily to the European Union (EU). Nearly 60 percent landed in France, 30 percent in the Czech Republic and the rest in Germany.

There might be other reasons for the negative production dynamics. Recently, Georgian farmers growing tea have faced fierce competition for land with other agricultural manufacturers and even investors from other economic segments. An ongoing boom in solar power generation in the country promises to drive the cost of land even higher, meaning that only high-margin businesses can sustain the rising costs.

Organic tea potential

Shote Bitatdze, founder of the Association of Georgian Organic Tea Manufacturers, is one of the enthusiasts struggling to give a new life to the local tea production. Bitatdze, who was engaged in successful business in China until 2006, moved back to his country where he saw a potential in growing high-quality ‘specialty’ tea.

Organic tea production perked up to 30 mt in Georgia in 2023, Bitatdze estimated. He added that this figure has a potential to grow to 200 mt if there is sufficient demand in the global market. Since 2009, the Chinese government has supported organic tea production in Georgia, helping to train local farmers and their personnel, Bitatdze said. “As practice showed, there are no preconditions for the development of mass tea production in Georgia,” he said, adding that at the end of the day, production costs at Georgian tea plantations appear to be higher than that of those from countries with tropical climates.

Exports in the spotlight

Analysts believe exports will largely determine the future of the Caucasus tea industry.

Natalya Zhukova, director of the European Bank for Reconstruction and Development’s (EBRD) Agribusiness Department, for example, expressed confidence that the region can benefit from its strategic location, close to the big markets of the post-Soviet space and the EU. However, he emphasised that to grasp its opportunities, the tea industry should play its cards right and not repeat the mistakes of the past.

“The international tea market continues to develop, with trends showing strong demand for a variety of quality tea products such as oolong and white leaf tea. By ensuring improved product quality and efficiency throughout the supply chain, as well as diversification of production, Georgia and Azerbaijan have much to offer tea lovers,” Zhukova said.

High quality Caucasus tea is on demand on the global market. Image: TeaTerra

Georgia, with a population of 3.7 million, Azerbaijan, with 10.1 million, and Armenia, with 2.8 million, are markets not comparable in size with the nearly 200 million Eurasia Economic Union and 450 million EU populations.

Dodging the reputational damage, Azerbaijan’s tea industry, in recent years, has been successfully utilising the export-oriented development model. In fact, there is more high-quality Azerbaijani tea abroad than in Azerbaijan itself, Rauf Garayev, a local agricultural economist, said. “For example, if you buy Azerbaijani tea in Russia, you will see that it is of higher quality and tastes better than what is sold here.”

Remarkably, tea consumption in Azerbaijan has jumped by nearly 50 percent over the past decade. However, local customers are still unwilling to pay extra for high-quality tea, while in Russia and the EU, Azerbaijani tea is perceived as a premium exotic product.

“We can sometimes hear from our citizens that the [locally grown] tea is impossible to drink, while foreigners who bought our tea in their countries [report] that it is of excellent quality,” Garayev said.

Azerbaijani tea companies are confident that some measures are needed to help them regain their market from importers. Uncontrolled tea imports into the country reportedly threaten the industry, including its premium segment. “In the near future, Azerbaijan can become a net tea importer instead of a tea manufacturer. And no steps are being taken to prevent this from happening,” Garayev stated.

Tea exports are now on the agenda even in Abkhazia and South Ossetia – breakaway unrecognised regions of Georgia. The Abkhazian government has purchased and installed a line for processing premium tea products from China for $22,000 million. Thanks to these investments, several tea plantations were revived in the country, securing an output of eight metric tonnes of tea. A part of this volume is due to be exported to Russia.

It is unlikely that the Caucasus tea industry will ever again achieve the Soviet-era production performance. However, by focusing more on quality and less on quantity, local growers have every chance of finding a comfortable niche in the global market.

• Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industries since 2012.

The post The rise and fall of the Caucasus tea industry appeared first on Tea & Coffee Trade Journal.

“Let food be thy medicine and medicine be thy food” harkens back to Hippocrates, the Greek founder of western medicine. This famous quote is a thousand years old, though it has never been as relevant as in the post-Covid era.

Functionality is the most prevalent trend in the non-alcoholic beverage industry, said Jochen Kistner, director of category marketing, EMEA, at Chicago-based Archer Daniels Midland, adding that what originally began in Europe in the 1980s with energy drinks for athletes has now turned into a much broader social phenomenon, with 68 percent of consumers worldwide in 2021 preferring to buy drinks with additional functional benefits.

The list of functional ingredients used in the coffee industry is long and constantly grows as more companies enter the segment with new offerings. Cannabidiol, mushrooms, superfruits, spices, antioxidants, and herb extracts are the most common examples, but the opportunities in this area are far from being exhausted.

The market is heading up

Analysts expect functional coffee to enjoy a strong growth in popularity in this decade. International think tank, Research and Markets, projects global sales to rise on average 5.9 percent per year between 2022 and 2027.

Image: Capsoil FoodTech, by Prodalim, Ltd

Technavio, a London-based consulting firm, forecasts a similar growth pace in 2021-2026, resulting in a rise in global sales by USD $2.36 billion during this period.

There is no consensus between the analysts about the current size of the global market, though. ReAnIn, an Indian research and consulting firm, also puts the compound annual growth rate of the global functional coffee market at 5.9 percent in 2018-2028, calculating however, that this would boost sales by only $1.1 billion to around $3.3 billion. This confusion primarily comes from the difference in research methodology and criteria of what coffee to attribute to functional.

Nevertheless, all analyst groups agree that the demand will rise in the next several years as consumers want double-duty from their favourite beverages.

“Consumers are developing an affinity for functional beverages seeing them as a suitable, convenient, and healthy alternative to soft drinks. The organoleptic versatility associated with functional coffee makes it open to manufacturers to innovate alongside the healthy trends,” Research and Markets said.

Technavio estimated that one of the key factors driving the global functional coffee market growth is the increasing popularity of coffee among millennials.

“An improvement in economic conditions and an increase in job opportunities have made different types of coffee more affordable to young consumers. Millennials tend to spend more on premium beverage brands and are also keen to experiment with new types, brands, and flavours of beverages,” the analysts said.

Millennials also tend to socialise more, especially in coffee shops. This has led to a surge in the number of coffee shops, which has further strengthened the global functional coffee market. In addition, rising disposable incomes in emerging Asian, Eastern European, and Latin American consumers is also contributing to the growth.

No compromises

“The challenge for developers is to find the right balance between functionality and taste,” Kistner said, adding that consumers want targeted nutrition, including ingredients benefitting alertness, relaxation, or concentration. On the other hand, consumers don’t want to compromise on taste to enjoy the product.

When functional ingredients become part of a beverage formulation, product appearance, taste, and even texture can all be impacted, which often becomes a challenge.

“Our first attempts at functional coffee were ridiculous as hell. We just took ginger root, grated it and kneaded it into the coffee. It was still ugly. But more importantly, it had nothing to do with that idea of a functional drink,” said Alexander Afanasiev, spokesperson for Biwell International SA, the manufacturer of Swiss premium, functional infused coffees. In 2019, the company launched Da Maestri capsules, a family of offerings compatible with Nescafé Dolce Gusto’s professional-grade single-serve coffee machine.

“At this point, we clearly realised the obvious — we will have to work very hard and for a very long time,” Afanasiev said, adding that it took the company years of time and tonnes of R&D to make a range of coffee that is functional and has an appealing taste.

Image: Biwell International/Da Maestri

The types of functional coffee mostly in demand on the market are those improving brain and memory function and cardiovascular system. The Covid-19 pandemic also bolstered the demand in the segment of coffee for immunity and digestive system, Afanasiev said.

SolaBev, a US-based proprietary single-serve capsule system for making filter coffee, also spent a lot of time developing functional coffee drinks, said Michael Szyliowicz, the founder. “The two types of drinks we have developed are CBD-infused and mushroom coffees. Both types represent trends that I believe will continue to grow as more consumers become aware of the benefits of both,” he added.

One of the most surprising discoveries the SolaBev team made was that the functional coffee market was full of misleading information about the available products. “Last year, one of our coffee roasters partnered with a CBD company to provide single-serve capsules infused with their CBD. Although there are many different coffees available with CBD, we found that most of the claims that were made were very misleading. Most of the CBD coffees for sale tout the amount of CBD in the bag or in the K-Cup, but do not address the issue of how much CBD is actually present in the cup after brewing,” Szyliowicz said.

“We tested a number of brands and found that most of the claims were wildly inaccurate. Because SolaBev is a proprietary capsule, we were able to ensure that the amount of CBD claimed, in this case, 15mg, was the amount measured in the cup,” he added.

CBD-infused coffee is believed to be one of the fastest-growing segments of the functional coffee market. Analysts put the annual growth in sales on the CBD coffee market between 14 percent and 27 percent in the coming years. On the other hand, coffee with mushrooms is a slow-growing category, Szyliowicz said.

Health benefits under question

The concept of functional coffee is tightly linked to adaptogens — plants and mushrooms believed to help your body respond to stress, anxiety, fatigue and overall well-being.

Over the years, people used to take adaptogens by adding them to food or beverages or take them as tinctures. Their popularity spiked during the Covid-19 pandemic, but so far, the science of adaptogens remains disappointing.

Image: Haley Sliwa

The term ‘adaptogen’ was first proposed in 1940 by Soviet scientist Nikolay Lazarev when he described “Schisandra chinensis” (plant with high potential for beneficial health effects such as anti-cancer, anti-aging; anti-obesity, anti-diabetes) and other herbs with the following definition: plant-originated adaptogens that can non-specifically enhance the human body.

Soviet nutritionists heavily studied several adaptogens during the World War II in an attempt to improve the performance of soldiers on the battlefield. In the following years, more than 1,000 studies were conducted on dozens of various adaptogens. In the 1980s, adaptogens even became a part of the popular myth of the Kremlin Pill – a legendary top-secret medicine that was said to cure all diseases.

A 2018 review conducted by a group of Chinese researchers on studies of adaptogens showed the clinical application of plant-originated adaptogens and their use in healthcare products remains in the preliminary stage. Some of the most widely used and popular adaptogens have never been adequately tested or appeared to have no suggested health benefits.

In a blog at the website of McGill University, Jonathan Jarry, MSc, pointed out that adaptogens have had a thick glop of marketing smeared all over them. “Product labels and social media influencers will parade limitless claims: adaptogens are said to sharpen your memory, boost your sex drive, rid yourself of exhaustion, help stabilise your blood sugar, and fight cancer. They might also assemble your IKEA furniture for you and help you with your financial investments if they had opposable thumbs and direct access to your bank account,” he said.

The relatively few studies on adaptogens done in humans tend to be disappointing. They often lack randomisation, recruit only healthy people, and they don’t specify the dose of the herb that was tested. Reviews of the evidence often conclude that, at best, adaptogens may help with stress and fatigue and that more studies are needed. At worst, there is no indication they have the claimed clinical benefit, according to Jarry.

The same goes for CBD, which seems to be everywhere, but scientists still don’t know much about it. The Food and Drug Administration (FDA) of the United States has approved only one drug containing CBD, Epidiolex, after clinical trials found it reduced seizures in children with two rare, severe forms of epilepsy. However, most studies on the effect of CBD on the human body remain controversial.

Scientists admit that CBD, as well as some other ingredients currently widely used to produce functional coffee, enjoy a lot of hype, but as customers are constantly becoming more demanding and knowledgeable, the long-term growth of the market is not guaranteed.

• Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

The post Functional coffee’s popularity is surging but the ‘true’ benefits remain questionable appeared first on Tea & Coffee Trade Journal.