ASSAM TEA INDUSTRYA brief Study On Policy Optimization Towards Global

Competiveness Improvement

~ Anwesh Kumar Chakraborty

CURRENT GLOBAL TEA SCENARIO

1850

1200

432.4340.2

134

China India Kenya Sri Lanka Indonesia

All data are from FY 2013

CURRENT GLOBAL TEA SCENARIO

725.7

890

26.5 2798.4

China India Kenya Sri Lanka Indonesia

All data are from FY 2013

CURRENT GLOBAL TEA SCENARIO

300.4

219.1

415

256.4

53.2

China India Kenya Sri Lanka Indonesia

All data are from FY 2013

Year Export (Mio Kg) Value (INR Crores)

1950-51 200.78 80.42

1960-61 193.06 119.98

1970-71 202.33 149.54

1980-81 224.78 432.54

1990-91 210.02 1113.35

1995-96 163.74 1191.19

2000-01 206.81 1898.61

2005-06 199.05 1830.97

2012-13 216.23 4005.93

0

50

100

150

200

250

0

1000

2000

3000

4000

5000

1950-51 1960-61 1970-71 1980-81 1990-91 1995-96 2000-01 2005-06 2012-13

Value (INR Crores) Export (Mio Kg)

Quantity and value: Indian tea export

INDIAN TEA INDUSTRY STATISTICS

INDIAN TEA INDUSTRY STATISTICS

Year Share (%)

1951-52 45

1981-82 29

1991-92 19

1995-96 15

1998-99 17

2000-01 16

2005-06 13

2012-13 11

1951-52 1981-82 1991-92 1995-96 1998-99 2000-01 2005-06 2012-13

0

10

20

30

40

50

Share (%)

Share of Indian tea exports in world market

INDIAN TEA INDUSTRY STATISTICS

1951-61 1961-71 1071-81 1981-91 1991-01 2001-11

0

2

4

6

8

Production Domestic Availability

Growth of production and domestic availability of Indian tea

Period Production CAGR (%) Domestic Availability CAGR

(%)

1951-61 2.19 6.73

1961-71 2.08 4.67

1071-81 2.55 5

1981-91 3.02 3.74

1991-01 2.46 5.03

2001-11 2.32 5.62

INDIAN TEA INDUSTRY STATISTICS

Year Internal availability (Mio Kg)

1971-72 221

1981-82 360

1991-92 511

2001-02 673

2004-05 735

2007-08 786

2011-12 873

2012-13 890

1971-72 1981-82 1991-92 2001-02 2004-05 2007-08 2011-12 2012-13

0

200

400

600

800

1000

Internal availability (Mio Kg)

Internal availability of tea in India

INDIAN TEA INDUSTRY STATISTICS

Country Qty (Mio Kg)

CIS 52.81

UK 15.4

Netherlands 2.89

Germany 7.47

Australia 3.05

Poland 4.26

USA 14.07

UAE 22.09

Iran 22.34

Japan 3.24

Pakistan 18.97

Region-wise break-up of Indian tea export

CIS, 52.81

UK, 15.4

Netherlands, 2.89

Germany, 7.47Australia, 3.05

Poland,

4.26

USA,

14.07

UAE, 22.09

Iran, 22.34

Japan, 3.24 Pakistan,

18.97

ASSAM TEA- FACTS AND FIGURES

Assam alone accounts for 12% - 13% (50% of Indian

production) of world’s tea production

Assam’s black tea (CTC & orthodox) contributes the lion’s

share of India’s bulk tea trade.

China and Assam are the only two regions in the world with

native tea plants.

There are around 2500 small tea gardens in Assam.

About 17 percent of the workers of Assam are engaged in

the tea industry & women constitute nearly 51% of the total

workforce

ASSAM TEA- TIMELINE

1815-1831

Samples of indigenous Indian tea plants are accepted as bona fide tea plants

1835

The East India Company starts the first tea plantations in Assam, India

1838

The first tea from Indian soil is sold

1867

The Assam tea seeds are planted in Ceylon (now known as Sri Lanka)

1895

Assam tea plants take over imported Chinese plants in India and its tea market booms

Assam

50%

West

Bengal

28%

Tamil

Nadu

14%

Kerala

5%

Karnataka

1%Others

2%

2014

Assam stands as the single largest producer of tea in INDIA

ASSAM TEA- PORTER’S 5 FORCES ANALYSIS

Industry Rivalry

Bargaining Power Of

Buyers

Threat Of Substitutes

Bargaining Power Of Suppliers

Threat Of New

Entrants

Controlling

Power Of

Other Stake

Holders

Low Bargaining Power Of Suppliers

• Large number of micro suppliers

• Perishable nature of the product

• Mostly unorganized nature of

suppliers

High Bargaining Power Of Buyers

• Large number of buyers

• Multiple alternative options

available to buyers

• Very low product differentiation

Moderate Threat Of Substitutes

• Large number of available

substitutes

• Loyal base of buyers

• Many substitute products are not

climate dependent

Moderate Threat Of New Entrants

• Huge market demand

• Low product differentiation

• Cheaper labour resources at

disposal

• Largely climate/ soil dependent

product

• Has high gestation period for

product maturation

• Slow industry growth rate

High Industry Rivalry

• Large number of existing players

• Low product differentiation

• Cheaper labour resources & better

technology at the disposal of rivals

High Controlling Power Of Other Stake Holders

• Largely regulated by Government Policies,

Trade Agreements etc.

High LowModerate

ASSAM TEA- PESTLE ANALYSIS

g Government Policy

g Stability of the Government

g Interest Rates g Lifestyle Changes

g Language

g New Machinery

g Advertising through Internet

g Foreign Laws g Climate

g Soil

Political Economical Socio-cultural Technological Legal Environmental

• FDA norms &

other

government

policies control

the industry

• Political

conditions like

civil unrest,

government

changes etc.

control the

international

trade

• Raises in rate of

interest

depresses the

business and

causes

redundancies

and lower

expenditures

• Profit is

impacted by

commodity &

allied cost

increases

• Lifestyle of

buyers/

consumers

govern the

consumption of

the product

• Consumers

generally prefer

labels and

instructions in

their own

language

• New

machineries

increase the

efficiency of

operation

impacting the

bottom line

• Newer

advertising

techniques

increase the

overall

consumer touch

points

• Various laws,

sanctions etc.

control the

penetration in

the international

market and also

influence the

strategic

alliances

• Climate not

only controls

the production

but also

ensures a

certain degree

of product

differentiation

• Soil conditions

similarly affect

the overall

produce

ASSAM TEA- SWOT ANALYSIS

Strengths Weaknesses

ThreatsOpportunities

• A one-stop shop for high quality

specialty teas

• Strong production base (70%

organised sector)

• Competent managerial

manpower

• Strong research backing from

well established research

institutions

• Labour welfare laws protecting

workmen

• Emerging small grower sector

with young plantation profiles

• Old age of the tea bushes (nearly

38% more than 50 years old)

• Remote location of the plantations

(increasing distance between

plantation and sale point)

• Difficulties in introduction of

mechanisation of field operations due

to topographical and quality

limitations

• Unorganised nature of small growers

• Lack of quality monitoring

mechanism for teas particularly sold

through private sales

• Good awareness level world over

as to the health attributes of tea

• Producing countries reaching an

agreement for forming an

exclusive forum for resolving

their differences over common

issues

• Special purpose tea fund and

quality upgradation

• Increasing strength of small

growers and showing good

response to the suggestion of Tea

Board for collective approach

towards adopting GAP and GMP

• Round the year production in

competing countries

• Younger age of bushes (better quality

of tea) of other producing countries

• Consistency in quality commitment

and high service quality perception

of exporters of other countries

• Better developed packaging and

bagging capacity of some countries

• Low gap between production and

domestic consumption

ASSAM TEA- MAJOR CONCERN AREAS

Climate

Change

Small Tea

Growers

Infrastructure

Export

oriented

product mix

InvestmentsPolicy

Pest

ManagementCosts

Present: Low yield Future: Plantation zones will shrink

Present: Increased cost making

estates commercially unviable

Future: Commercial unviability of

estates will increase

Present: Ailing industry due to lack

of infrastructural support

Future: COGS and logistics cost

will increase

Present: Restrictions on number of

chemicals for pest control as per

current PPC

Future: Pest infestation leading to

poor yields due to lack of

innovative approaches

Present: Industry has not been

able to meet changing customer

needs

Future: Will lose advantage to

more competitive/ aggressive

countries

Present: Lack of expertise leading to poor quality ratingsFuture: Reduced revenue realisation due to

disproportionate value increase vis-à-vis volume increase

Present: Marginal

investment leading to

quality degradation and

poor price realisation

Future: Manufacturing

facilities will increasingly

become obsolete

Present: Low focus on

bio-diversity, sustainable

tea plantations and R&D

due to policy gaps

between state & centre

Future: Limited emphasis

on R&D will lead to

stagnation in the

industry in terms of

innovations

ASSAM TEA- WAY FORWARD• Rationalisation of the tax structure at the central, state and local levels

• Hiring experts to aggressively market in international markets & also for value addition (flavoured and speciality teas)

• Standardise protocols to meet export specs and grades

• Support to increase export surplus through extension planting and small tea grower operations

• Support for organic inputs and certifications & focussed production policy for export of green tea

Export Competitiveness

• Promoting Assam Tea in various forum as Pride of Assam

• Social Media Campaign to maximise customer reach amalgamating MAKE IN INDIA with MADE FOR INDIA

• Engaging well known celebrities as Brand Ambassadors & promoting tea tourism

• Geographical Identity (GI) for Assam Tea specially for Orthodox

• Focus on key strength of Assam Tea i.e. its liquor and promote the same

Make in India

• Water harvesting and recharging, soil nutrient management, afforestation and reforestation, subsidy on bio fertiliser usage, stress on vermin-compost/organic manures usage, drip irrigation etc. to manage environmental resources

• Measures for replanting, soft loans for manufacturing upgradation, power schemes and subsidies, wage review and social welfare schemes etc. should be looked at to control increasing costs in various areas of plantation

• Small tea growers should be made more quality conscious, provided with tech support and included in the growth plan

• Mechanization of various production processes should be planned

• Land utilization policy to be reviewed & relevant measures to be taken to increase the returns in terms of production

Plantations

• Establishment of culture centers & vocational training centers for tribal people

• Exhibitions and various shows to promote this inherent culture of Tea Tribe and Assam

Culture and Empowerment

• Develop non chemical based and safer methods of plant protections.

• Developing appropriate package of practices for sustainable organic cultivations.

• R & D on manufacturing of new technologies to extract better value from the tea leaf and new products for the markets.

• Develop cultivars which are of improved yield and quality and drought tolerant and resistant to pests and diseases.

• R & D to focus on new processes and machinery for optimizations and reduction of energy cost.

• Improve quality of tea by infusion of enzymes

R&D

References:

Tea Board of India (2012), Annual Reports 2011-12, Tea Board of India, Kolkata.

Tea Board of India (2003), Tea Digest, Tea Board of India, Kolkata.

Tea Board of India (2006), India Tea Portal, Online database.

Tea Board of India (2006), Tea Statistics