Tea Industry

• Tea industry in Nepal is growing rapidly due to the active participation

of the private sector. Now Nepal is self sufficient in CTC tea. There is a
huge international market for Orthodox tea. According to Nepal Tea and
Coffee Development Board, 20 million Kg of tea is produced in the
country annually. Out of this, only four million kg is orthodox. About
eight million kg of tea produced in the country is consumed
domestically and the rest 12 million Kg are exported.
• International demand for tea produced in Nepal was hit hard in Europe
ad USA when a test in Germany few months ago revealed that it
contained a harmful chemical called ‘anthraquinone’. However, the
situation has improved. Recently, a Chinese businessman contacted to
make a recurring deal of 200,000 Kg organic tea per year. Chinese are
also among the major customer of Nepali organic tea. Nepal produces
varieties of high quality tea that cater to the varied needs of global
customers. Quality tea is sold at Pound 100 per kg in foreign markets.
• Organic has become a minimum quality acceptable in Western
markets. Western customers have stated seeking other standards in
tea production, such as eco-friendliness and bio-friendliness. In the
past few weeks, Indian tea producers and traders have been seeking
ban on import of non-organic orthodox tea from Nepal in their
country.
• Keeping health issues in mind, some organic tea producers in the
country have demanded the government to make all the production
of tea organic in Nepal. They have argued that the step not only have
health benefits for customers, but also helps the economy grow.
• However, those in opposition say that the move could do more harm
than good. Organic production takes at least three years to complete.
And with the lengthy time, the production can be affected by
fertilizers shortage and other challenges, according to non-organic tea
producers.
• Frequent strikes by the workers, effect of climate change, low labor
productivity, poor support from government, high cost of capital, use
of modern technologies, competition with Indian tea, promotion at
international market etc. are some of the major issues confronting the
Nepalese tea industries.
 Questions
• Identify major internal and external environmental components in the
case.
• List the opportunities and threats existed in the external
environmental of tea business in Nepal according to the elements
identified by you.
• Mention a strategy for preparing a competitive global market for tea
business in Nepal
• Are you in favour of producing all organic tea in Nepal? Explain.
Internal Environmental Elements in the Case
• Workers as factors of production
• Organizational resources and capacity of orthodox tea production
• Lack of skilled labour and productivity
• Lack of quality control in absence of managerial capabilities : Out of 20
million, only 4 million kg. tea is orthodox.
• High cost of capital (costly financial sources) are some major elements
identified as components of internal elements. But as for tea industry, its
member based supreme body who makes policies, regulations and promotes
tea industry i.e. Nepal Tea and Coffee Development Board is also a major
internal environmental element in this case who set the mission, vision and
objectives to promote tea industry in Nepal.
External Environmental Factors
• International market (customers) : huge international market of
orthodox tea (india, china and USA, Germany etc.)
• Huge export market compared to total production : 20 million k.g.
produced where as 8 million kg is domestically consumed where as
remaining 12 million kg is exported
• Production alliances : Recurrent agreement with a Chinese producer
for production of 200,000 kg organic tea per year
• Government policy : to promote organic tea is lacking (No clear
mandate with production of organic tea. It is only guided by
international demand)
• Shortage of supplies : continuous supply of fertilizers is affected by
shortages. The production cycle is of 3 years.
• Labor strikes : Frequent strikes of labors have affected the tea
industry.
• Environmental protection : Being organic is only the minimum
demand of users. But the further demand of quality tea consumers of
Europe and USA is the fulfilment of eco-friendliness and bio-
friendliness during the production of orthodox tea. They are very
sensitive towards sustainable production and manufacturing issues.
• Health issues : The organic tea is good for health. Nepal is only self
sufficient in CTC tea production.
Opportunities and threats existed in tea
industry of Nepal
• Huge international market : For orthodox tea : India, china, Europe,
USA, Germany
• Growing health issues in national market : Sensitivity and awareness
towards drinking orthodox tea in Nepalese customers in increasing
due to education, communication
• Good image of Nepalese tea in international community
• Good price of orthodox tea in internal market
• Good climate in Nepal for production of Tea
Threats
• Labor strikes
• Quality control issues : Result of tests in Germany may cause negative
image of Nepalese tea business like it was the issue with Carpet and
Pashmina.
• Absence of government policy and unstable government rules
regulations
• Demand of banning Nepalese CTC tea in India by Indian
• Mention a strategy for preparing a competitive global market for tea
business in Nepal

• Quality upgrade
• Bio and eco friendly environment
• Competitive advantageous area (climate, policy, incentives)
• Labor issues : award, compensation, fair wage
• Production and management of required resources i.e. fertilizers etc.