The cost of a British cuppa is expected to rise by as much 10 per cent this year as tight supplies send tea prices higher and Chinese consumption surges past that of India for the first time.

“Tea will be a bull market in 2008,” Kaison Chang, of the United Nations Food and Agriculture Organisation (FAO), said. “The fundamentals have changed and consumers are likely to see price rises.”

Prices have firmed by nearly a fifth over the past two years as the gap between tea production and consumption has narrowed to its lowest level in a decade. In December, with concerns mounting already over a possible shortfall in supplies, political violence in Kenya, the main exporter of the black tea that goes into the standard British mug,- triggered a price spike.

In Mombasa, the world's largest market, in which leaves from Uganda, Tanzania, Rwanda and Burundi are also sold, the commodity hit a record high yesterday, at $2.48 a kilogram.

A spokesman for Unilever, the world's biggest tea company, which owns Lipton and PG Tips, said that the “Kenya shock”, combined with increasing transport and packaging costs, was finally likely to halt 20 years of falling tea prices on British shelves.

“If the price rises are sustained, we would expect some element to be passed on to consumers,” he said. “This would buck a very long-term downward trend.”

William Gorman, chairman of the UK Tea Council, said that the rising price resulted from higher fuel and labour costs. A backlog of tea at ports in Kenya after the recent troubles was also a factor. “Tea has been in deflation since the mid-1990s and this rise will not be out of line with other foodstuffs,” he said.

With global levels of production and consumption converging at about 3.6million tonnes a year, any suggestion of bad weather, further political violence in a leading supplier or an increased thirst for tea will lift prices higher still, the FAO predicted this week.

It also highlighted China's surging appetite for black tea, a factor that tea buyers say could trigger another market shock. After a 13 per cent increase in 2006, the most recent year for which figures are available, Chinese tea consumption surpassed that of India for the first time. In particular, buyers say that Chinese consumers have developed a taste for Pu-erh, a type of black tea that is fermented for up to three weeks, renowned for its “musty” taste and is marketed as a slimming aid.

“One hundred million kilos of Puerh was sold in China last year. The stuff is so popular they are struggling to keep up,” Ian Brabbin, head of buying at Taylors of Harrogate, said.

“We are at a point now where supply and demand are so finely balanced that any hint, say, of drought in tea-producing countries would really affect prices.”

Producers, especially those who supply high-end leaves, already expected 2008 to be a vintage year. Sri Lanka, renowned for its fine black teas, exported $1 billion worth in 2007, the highest sales recorded since British planters started to grow the commodity in the country, then Ceylon, 150 years ago.

“Looked at on a per-cup basis, tea is not going to be expensive, but prices in the shops will rise in 2008,” Anil Cooke, of Asia Siyaka, a Colombo-based broker, said.

“Supermarkets in big markets such as the UK put downward pressure on prices for years, but will not be able to continue. Once prices go up on the shelves, you don't really see them go down in a hurry.”

A British staple

3 cups Number of cups of tea that British people drink each day, with about 70 per cent of the population drinking tea on a regular basis

165m The number of cups that the British drink every day or 60.2billion per year. The number of cups of coffee drunk each day is estimated at 70 million

80% The percentage of office workers who claim that they find out more at work over a cup of tea than in any other way

1.03m China produced 1,028,000 tonnes of tea in 2006, making it the world's largest producer. India is second with 956,000 tonnes

40% Tea makes up approximately this percentage of the nation's daily fluid intake

1,500 The approximate number of varieties of tea

4 The number of recommended cups of tea to drink each day

Source: UK Tea Council

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