Tea factories cutting down production cost to better produce prices

Kiru Tea Factory chairman Stephen Githiga addressing farmers during an Annual General Meeting.

Kiru tea factory in Mathioya, Murang’a County has assured farmers, it is employing a variety of measures to cushion them from unstable prices.

The factory has said it has significantly reduced its internal expenditure so that farmers do not suffer more.

Factory chairman Stephen Githiga said a hydropower project established by the four Zone 3 factories will also help improve farmers’ earnings.

Githiga noted that a kilogram of tea consumes power worth Sh10 to process and that cost will be done away with once the construction is cleared.

The Sh2.2 billion Metumi hydropower project is co-owned by Kiru, Githambo, Gatunguru, and Kanyenya-ini tea factories.

The plant is being constructed on the northern part of the Mathioya River and is expected to generate 5.6 megawatts.

It is expected to reduce the Kiru tea factory’s cost of production by more than 20 percent. The factory currently uses 15,000 cubic metres of firewood annually.

Cost-cutting

After its completion, the plant will enable factories to save approximately Sh2.1 billion annually from the cost of production.

Githiga who was speaking during the annual general meeting also cited the Sh100 million Orthodox tea processing plant that is now processing 10 percent of its tea.

“One of the ways we think will be effective in stabilizing our payments is diversifying our products to broaden our market,” Githiga said.

He noted that the factory is the only one in the county to establish an orthodox tea processing plant, noting that the specialized tea has a different market away from the traditional Arab countries that buy black tea. Specialised tea includes green, purple tea has a market in Russia, Iran and Iraq. The factory is now making efforts to penetrate the European market.

“Specialised tea fetches 4 U.S dollars per kilogram as compared to black CTC tea which fetches $4,” the chairman said.

Githiga said this after farmers challenged the management of the factory to seek ways of cushioning them from poor payments.

Farmers suggested that the factory should consider branding and fully processing its tea so that it can fetch competitive prices.

“We want our tea to go to consumers from the factory without having to sell to other processors who then brand it and sell it as their own,” Francis Kamau, a farmer said.

Mombasa auction

They said they want their tea not to be sold through the Mombasa auction and that selling a finished product will get more favorable markets.

Githiga announced that the factory was able to make payments amounting to Sh616.1 million to farmers this year which is significantly lower than the Sh1.03 billion paid out last year.

The average manufacturing cost per kilogram was Sh97.76 against the average manufacturing cost of Sh90.83 while a kilogram was sold at an average price of Sh271.37 against a price of Sh337.34 last year. The green leaf delivered by farmers for processing amounted to 19 million kilograms, producing 4.4 million kilograms of processed tea.

During the AGM, farmers said they want their tea to be branded in the hope that it would fetch better returns. The farmers decried selling of their tea in bulk at the Mombasa auction saying it was less profitable.

They told the factory’s management to come up with measures which would see their tea hit the market while branded.

The demand by farmers was triggered by a reduced bonus which was paid this year due to the fluctuation of international prices occasioned by political instability in some countries.

Bulk tea which is auctioned at Mombasa, the farmers argued, is being branded by the buyers where they earn more returns.

“As our board, we need you to work out a strategy that will ensure most of the tea we produce does not go through the Mombasa auction where tea prices are mostly never favorable,” Francis Kamau, a farmer, told the factory’s management.

He said branding the tea locally would also create more employment opportunities to Kenyans as more salespeople among other workers would be needed.

Last year, the factory established a Sh100 million plant to process specialized tea with the aim of venturing into the European market.

About 10 percent of the green leaf supplied in the factory is currently being processed into various products of specialized tea.


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