(Bloomberg) -- Pay demands in Kenya’s tea industry, the world’s biggest exporter of the leaf’s black variety, has increased pressure on growers already hit by depressed prices, with one issuing a profit warning, citing higher labor costs.
Workers, who last received an 8 percent increase for 2015 after a legal battle that ended in 2018, are demanding a further 9 percent this year, and backdated increases of 8 percent for 2016 and 2017, and 7 percent for 2018.
The Kenya Tea Growers’ Association, which represents the East African country’s biggest growers that account for 40 percent of total output, is offering a combined 31 percent increase for the four years through 2019, according to Chief Executive Officer Apollo Kiarie.
“We are asking the union to take our 31 percent as we wait for the market to improve and for pressure on the business to ease,” Kiarie said by phone Thursday. “With current auction prices below $2 per kilogram and our cost of $1.90 per kilogram, we are not in business.”
Francis Atwoli, the secretary-general of the Central Organization of Trade Unions of Kenya, wasn’t immediately available when phoned for comment.
The average tea price fell 1% to $1.96 per kilogram at the most recent sale on March 25-26 at the port city of Mombasa, according to Tea Brokers East Africa, which manages the country’s auctions.
Kapchorua Tea Co. expects profit for the 12 months through March to fall by more than 25 percent, due partly to the rising cost of labor. “Our anticipated wage and other benefits increases dating back to 2016 require huge financial provisions which if repeated will be unsustainable,” the company said in a statement Thursday.
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