TEA

BY :
ANJALI (202)
ANKITA(203)
ANKUR(204)
ANSHUL(205)
ANURADHA(206)
NIKITA(233)
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TIMOTHEE
 AGENDA
Tea Producing Nations
World Tea Production
World export import Data
Indian Tea Industry
Types of Tea
Manufacturing Process
Characterstics of Tea Industry
SWOT Analysis
Auctions
Present Scenario

Climatic Conditions
India Vs Top Producers
Trade Policy
Area of Concern
Recommendations
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TEA PRODUCING
NATIONS 3
World tea production(2009)
TOTAL : 3.5 Bn Kg

OTHERS CHINA
29% 29%

SRI LANKA INDIA

9% 26%
KENYA
7%

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World Export/Import data(exp 2010)
IMPORTS : 1.15 Bn Kg

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 India – Tea Industry
• Industry is 172 years old.
• World tea market is dominated by India-2nd
largest producer and the largest consumer of tea 
• Annual turnover of about $2 billion
• Tea is being cultivated in the high ranges of
Northern and Southern India.
• The best quality Tea are CTC and Orthodox
Assam Tea respectively.
• The consumption is above 600 Million kgs per
year.  
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tea is produced in 14 States in India, five of them Assam and West
Bengal in North India, and Tamil Nadu, Kerala and Karnataka in South
India account for over 98% of India’s tea production.

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 India – Tea Industry(cotd..)
• The Tea Board of India states that it has 1,692
registered tea manufacturers, 2,200 tea
exporters, 5,848 tea buyers and nine official
tea auction centers.
• India’s demand for tea is growing at 3.5%
annually, to face a 45 million kg tea shortfall
to meet domestic demand.

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TYPES OF TEA

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 Auctions
• In India, nearly 55 percent of total tea produce is
sold through auction houses, with the rest sold
through private sales.
• There are five important stake holders in any
public tea auction – Auction-Organizers,
Seller/Manufacturers, Brokers/Auctioneers,
Buyers & Warehouse keepers.
• Nine auction centres- Kolkata, Guwahati, Siliguri,
Jalpaiguri, Amritsar, Cochin, Coonor, Coimbatore.
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 Steps of Manual Auction
• Despatch of lot-wise tea.
• Garden invoice.
• Arrival & Weighment Report.
• Cataloging
• Inspection of tea
• Preparation of small packs of trade sample and
despatch to eligible buyers.
• Tasting of tea
• Valuation exercise
• Bidding through public outcry system.
• Selection of highest bidder
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 Present scenario
• Domestic demand accounts for over 86% of
the country’s tea output and since tea imports
are permitted only for re-export, India’s share
of the global tea trade is on the lower side.
•  Tea prices, after reaching a peak in 1998,
went into a steady decline thereafter, with
average domestic prices dwindling from
around Rs.76.43 per kg in 1998 to a low of
around Rs. 58.05 per kg in 2005

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Although global tea prices also declined 1999 onwards, driven
primarily by oversupply, the decline in average prices was
sharper and of a longer duration for Indian teas vis-à-vis the
teas from Kenya and Sri Lanka , India’s two main rivals in the
exports market.

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According to ICRA’s estimates , while the average growth in production
during the period 2003-08 was just 2.0% or so, domestic consumption
would have increased annually at around 3.5% during the same period.
The steady increase in domestic demand, range-bound export volumes
and low growth in production absorbed the pipeline stock over the
years and left virtually no carry-forward stock at the end of the
2008 season.

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 CHARACTERISTICS OF TEA INDUSTRY
• Productivity and Quality
The art of plucking, fine tuned requires two fresh
leaves and a bud to be plucked manually
• Labour Intensity
Very labour Intensity , with labour cost fixed and
thus lower production will lead to higher unit cost
of production
• Long Gestation
Tea bushes mature for commercial exploration in
5-7 years and remain productive for 50-60 yrs
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• Commodity Nature
Prices fluctuate widely with demand supply
imbalances
• Organized Industry
Labor laws exist , dominant mode of trade is
through auctions
• Domestic Competition
About 1000 tea brands in India with 90%
represented by regional brands

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 SWOT ANALYSIS
• STRENGTH
 Demand growing at some 2% pa
 Technical and manpower skill
 Good research support by tea growers
• WEAKNESSES
 Labor Intensive : 2nd generation reluctant
 No effective cost management system adopted
 Supply from more efficient players like Kenya,
China
 Declining export of india over years
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• OPPORTUNITIES
 Export Potential if India can increase production
capacity
 To make tea more acceptable and fashionable like
coffee
 Large untapped rural market for branded
companies
• THREATS
 Global competition
 Low cost in some countries like China,Sri Lanka
 Import of tea
 Cost escalation due to increase in cost of
production
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 Climatic conditions taking there toll
on Tea Industry
• Unfavourable weather conditions for tea
plantations coupled with global slowdown
have badly affected tea exports of Assam.
• Statistics say that India, the second-largest
tea producer in the world experienced a
slump by 25 per cent in January 2009.
• The tea industry is going through a rough
patch for last three years due to rain
deficiency’s

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INDIA Vs OTHER TOP TEA PRODUCING
COUNTRIES
• During 1951-60, India was producing around 40
percent of world production, declined to 26 per
cent in 2008.
• The declining trend can be observed in case of Sri
Lanka as well. Only China and Kenya are able to
increase their share in world production
considerably.
• The share of China and Kenya during 1951-60
was13.59 per cent and 2.67 per cent respectively,
increased to 31 per cent and 9 per cent in 2008
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 INDIA’s TRADE POLICY 2009-14
• The existing minimum value addition under
advance authorization scheme for export of
tea is 100%. It has been reduced from existing
100% to 50%.
• DTA sale limit of instant tea by EOU units
increased from 30% to 50%.
• Export of tea has been included under VKGUY
scheme benefits.
 
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 AREAS OF CONCERN
a)Decline in demand for Indian tea in the global
market:
Traditional markets of Indian tea like USSR and
UK have drastically reduced the import of tea
from India

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(b) Defects in auction system:
A report for the ILO notes that the large tea
companies are benefiting from fall in auction
prices and rise in retail prices for tea.
The longer transaction time and higher
transaction cost
(c)Poor Price realizations
Competition between producing countries for
a share of the world market

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• Demand for tea is rising very slowly (1.5-2 per
cent)
• Dominance of auction system as a day to day
intermediary between producers and buyers
• Tea is a perishable product. Its quality and
flavour deteriorates very quickly
• There is a major shift in the consumption and
thereby composition of demand for tea in the
developed (importing) countries which has
had unfavorable effect on aggregate export
earnings from tea
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(d) Defective market structure:
While tea is ready to drink item, the downstream
stages such as blending, packing and ultimate
marketing are the most profitable one . This part
of the value chain is controlled by a handful
multinational tea packers and brokers.
(e) Increase in cost of production:
• Productivity in terms of volume per hectare
• Labour cost accounts for around 60% of the
unit cost of production and approximately 55
to75 percent of that labour cost is on plucking
• Inflationary pressures are now pushing up
these fixed costs further
• Social cost(5-8%)
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 RECOMMENDATIONS FOR
IMPROVEMENT
• Unlike its key competitors, India does not
have any powerful brand to support its
promotion drive in the international market
.To win back the confidence of lost foreign
markets, Indian tea producers have to identify
the need to revitalize the image of Indian tea
in that international market.
• There is an urgent need for reducing the unit
cost of production

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• International brands like Liptons, Brooke Bond
of HUL and Tetley tea of Tata Tea; and Wagh
Bakri Chai etc are the market leaders and have
great power in price determination in both
domestic and international market .This needs
to be stopped and proper investigation is
needed to curb the wrong practices in the tea
market by introducing new laws to regulate
the price movements.
• Despite being the largest producer and
consumer of tea, the Indian plantation sector
lacks appropriate mapping of production and
consumption levels.
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