Kenya's tea sector is navigating a turbulent but hopeful period as the Mombasa Tea Auction shows a dramatic recovery in demand, a welcome sign for farmers who have weathered significant price instability and reduced earnings. The auction's absorption rate has surged to 84%, a stark contrast to the 51% recorded last year when government pricing policies led to a massive surplus of unsold tea.

This rebound comes as a critical lifeline for an industry that forms the backbone of rural livelihoods. For the financial year ended June 2025, Kenya's tea export earnings saw their first decline in seven years, falling 13.4% to KSh 176.76 billion from a record KSh 204.14 billion the previous year. This slump directly impacted smallholder farmers, who saw bonus payments per kilogram of green leaf shrink by as much as KSh 19.10.

Navigating Market Headwinds

The downturn was fueled by a confluence of factors. A significant drop in orders from Pakistan, which traditionally buys about 40% of Kenya's tea, slashed earnings from that market to KSh 74.01 billion from KSh 85.03 billion. Simultaneously, a strengthening Kenyan shilling eroded dollar-based returns, compounding the financial pressure on exporters and farmers. The average price per kilogram at the auction also fell sharply, from KSh 385 in the 2023/24 period to KSh 322 in 2024/25.

Industry leaders have pointed to the government's minimum price directive, introduced in July 2021, as a key contributor to the glut. While intended to protect farmers, the policy led to a disconnect with market demand, causing a build-up of unsold stock. The Kenya Tea Growers' Association (KTGA) noted this resulted in the "worst decline in tea prices historically" due to oversupply. The reserve price was eventually abolished in late 2024 to make Kenyan tea more competitive.

A Strategic Pivot to New Horizons

In response to these challenges, Kenya is actively diversifying its export destinations beyond traditional strongholds. The government is spearheading a strategic shift away from bulk exports, which constitute 99% of shipments, towards higher-value processed and orthodox teas. This move is designed to capture more value within the country and boost farmer incomes.

Key initiatives underpinning this strategy include:

• Market Expansion: Trade missions are being planned to open new markets and strengthen Kenya's international presence. A significant agreement has been signed to boost tea exports to China, aiming for 50 million kilograms by 2030.
• Value Addition: The government has waived taxes on tea packaging materials to lower production costs and encourage local processing. President William Ruto has announced a plan to triple tea export revenue to over $2 billion (approx. KES 260 billion) by 2027 by modernizing factories and increasing the output of orthodox teas.
• Quality Enhancement: The Kenya Tea Development Agency (KTDA) and the Tea Board of Kenya (TBK) are focusing on improving tea quality throughout the value chain to attract competitive prices at the auction.

While the path ahead involves navigating challenges like climate change, global market volatility, and internal industry debates over grading and governance, the renewed focus on quality and market diversification offers a promising outlook. As George Omuga, Managing Director of the East African Tea Trade Association (EATTA), noted, the quality of tea offered at the auction remains a major determinant of price. This strategic pivot is not just about selling more tea, but about building a more resilient and profitable future for the hundreds of thousands of Kenyans who depend on it.