An assessment of the effects of value addition activities on earnings in Kenya’s tea sector

Abstract

The study sought to assess the effects of value addition activities on tea earnings in Kenya’s tea sector, identify incentives that can encourage value addition in the sector and propose value addition activities with the potential of increasing Kenya’s tea earnings. Qualitative and quantitative data was collected through a semi structured questionnaire administered to the tea factories and a semi structured interview schedule used to interview the tea sector experts. Secondary data on tea export figures for value added tea and bulk tea from the Tea Board of Kenya was used to supplement the primary data collected. Quantitative data was analyzed using SPSS, qualitative data was content analyzed and descriptive and inferential statistics used to summarize the data. Findings showed that value addition increases tea earnings with 83.3% of the factories indicating that value addition increases earnings by up to 25%. Industry experts indicated that the price of value added tea was higher than that of bulk CTC tea with the lowest price difference ranging between 0 to 25% and the highest price difference ranging between 76-100%. An analysis of tea export figures for 2008 to 2013 showed that the mean unit price of instant tea, which is a value-added tea, doubled that of bulk tea. The research established that value addition activities in Kenya’s tea sector increase tea earnings. Monetary and fiscal incentives, promotional support, branding support and investments in overseas markets are incentives that can encourage value addition in Kenya’s tea sector. Packaging, branding and blending have the highest potential of increasing Kenya’s tea earnings. Although flavouring and instant tea were rated low in terms of increasing Kenya’s earning potential, the research proposed that if positioned to meet the growing demand for convenient forms of tea, they have the potential of increasing Kenya’s tea earnings. Other tea varieties such as Purple tea, Black Orthodox, Green Orthodox and Green CTC tea also have the potential of increasing Kenya’s tea earnings. The research identified areas for further research which include: the role of diversification into other tea varieties in creating new markets for Kenyan tea, the role of value addition in creating employment in Kenya’s agricultural sector and the contribution of tea value addition activities to Kenya’s agricultural GDP among other areas.