- Indian tea producers must be prepared to sacrifice volume for the sake of quality to remain viable, argues J. Thomas, the world’s largest tea broker, in its annual tea market report.
A large section of the Indian tea industry fared very badly last year as there was poor local and foreign demand for low-grade teas, reported The Financial Times recently.
J. Thomas says a well planned quality campaign is what the industry needs most. The gardens in the southern Indian states, which account for nearly a quarter of the county’s tea production, Dooars in West Bengal, Cachar in Assam and the factories processing leaves bought from small producers, “need to enhance their quality parameters substantially,” says the report.
Southern India, which relies heavily on selling cheap tea to the Commonwealth of Independent States, could sell to the domestic market if quality improved.
Demand in India, which is the world’s biggest market for the beverage but where per capita consumption is only 66 grams a year against nearly 3kg in Ireland, is rapidly shifting towards good quality teas.
The report says prices of good quality teas appreciated considerably during 1999 as a result of demand from the domestic and international trade resulting in wide price differentials between good and plain teas.
Last year’s unfavorable weather caused a big fall in production in Assam and West Bengal but high prices for good teas “ensured a healthy bottom line for quality gardens.”
In contrast, the average price of south Indian teas fell 17% to Rs55.65 ($1.28) a kg, as much due to the poor quality as to less demand from CIS buyers.
The report says India, the world’s largest tea producer, must be able to export more than 200m kg to achieve price stability in the domestic market. However, the “over-dependence” on the CIS is not helping Indian exports. Russia did buy the whole of the committed amount of 100m kg of Indian tea last year.
As a result, Indian tea exports in 1999 fell 20.16m kg to 190.18m kg. The unit value realization from exports dropped to Rs97.20 ($2.24) per kg from Rs109.80 in 1998.
However, what is encouraging, says the report, is that exports to hard currency markets such as the U.K., western Europe, Japan, the U.S. and Poland have been showing steady gains. Germany and Japan, in particular, are willing to pay a premium for bright liquoring Assam and Darjeeling teas.
J. Thomas says markets to be targeted for export should be Pakistan, west Asia, north Africa and the U.S.