Analysis of Tea Industry in India

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Tea Industry has seen a lot of changes in the past few years.
India, lost its first position as tea producer to China for the first time, in the last 110 years. www.unitedworld.edu.in

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Analysis of Tea Industry in India

  1. 1.  Tea is one of the most popular and widely consumed hot beverage worldwide.  Scientific name of tea is Camellia Sinesis.  Tea is an aromatic beverage.  Commonly prepared by pouring hot or boiling water over cured leaves of the tea plant.  After water, tea is the most widely consumed beverage in the world.  It has a slightly bitter, and astringent flavor that many people enjoy.  Tea is consumed in both hot & cold ways
  2. 2.  Tea was likely originated in Yunnan, China during the Shang Dynasty (1500 BC–1046 BC) as a medicinal drink.  Tea was first introduced to Portuguese priests and merchants in China during the 16th century.  Drinking tea became popular in Britain during the 17th century.  The British introduced tea to India, in order to compete with the Chinese monopoly on tea.
  3. 3.  More than 30 countries grow tea.  Indian Tea Industry is about 172 years old.  Tea is the country's primary beverage, with almost 85% of total households in the country consuming tea.  Tea Industry has seen a lot of changes in the past few years.  India, lost its first position as tea producer to China for the first time, in the last 110 years.  Despite its fluctuating position in the world market, India is a key source for tea as well as the largest market.  India accounting for 27% of the world tea production.
  4. 4.  In India, tea cultivation on commercial scale was first started in Assam in 1839.  it was extended to other parts of the country between 50’s and 60’s of the 19th century.  However, due to certain specific soil and climatic requirements its cultivation was confined to only certain parts of the country.  Major tea producing states in the country are Assam, West Bengal, Tamil Nadu & Kerala.  75% of the total tea produced in India is accounted by Assam and West Bengal together.
  5. 5.  Some of the world’s finest teas are produced in India.  India accounting for around 12-13% of world tea exports  Assam teas are famous for their strong, brisk and full bodied liquor  Nilgiri teas are well known for their delicate flavor, strength and brightness;  Certain varieties of tea (for example Darjeeling) are grown only in India  They have great demand across the world.  All Darjeeling teas possess the lightness of flavour and fine colouring that set them apart from all other teas  Production of the famous Darjeeling tea is aided by the low temperature in the hills of Darjeeling
  6. 6.  In India , tea industry is one of the oldest agro based well organized industries.  Indian Tea Industry is one of the largest in the world with over 13,000 garden  More than a million workers get direct employment from this industry  A sizeable number of workers are women.  A large number of temporary workers are also engaged during the plucking season  Workers who pick and pack tea on plantations in developing countries like India are facing harsh working conditions  Workers are earning below the living wage
  7. 7.  The total turnover of the tea industry is around Rs. 10,000 crores.  Since independence tea production has grown over 250%, while land area has just grown by 40%.  There has been a considerable increase in export too in the past few years.  Total net foreign exchange earned per annum is around Rs. 1847 crores.  Indian Tea Industry is having 1692 registered tea manufacturers, 2200 registered tea exporters 5548 number of registered tea buyers
  8. 8.  Tea trading in the domestic market is done in two ways- Auction and Private Selling  There are 9 auction centers- Calcutta ,Guwahati, Siliguri, Cochin, Coonoor ,Coimbatore and N.I. teauction.com  Bulk trading is done through the auctions held in these centers.  Packaged tea market is 213 million kg in volumes & valued at Rs.60 billion.  Urban:Rural split of tea consumption is 56:44
  9. 9. TOP 10 LEADING COMPANY IN INDIA  Hindustan Unilever.  Tata Tea Ltd  Ducans Industries  Wagh Bakri Ltd  Goodricke Group Ltd  Hasmukhrai & Co  Girnar Food & Beverages P Ltd  Sapat Packaging Industries.
  10. 10.  The labor cost is the largest cost overhead accounting for about 60% of the total cost of production.  Tea production units in India are not just economical units but rather social institutions  It controls the lives of the work force to a large extent.  Apart from employment, the plantations are also responsible for providing house, water, welfare and many other facilities to the workers  This is because most of the employees come from socially and economically weaker sections of the society  Majority of employees are women who work and reside in an ideal industrial community.  Their livelihood is directly linked with the prosperity of the tea industry
  11. 11.  The industry faced steep decline in prices during 1999 to 2006.  Around 130 gardens were closed, abandoned or suspended their operations for some time.  Majority of tea gardens have reopened with the gradual improvement in tea prices from 2008 onwards.  The decline in the prices has mainly been due to strong growth in supply in the face of sluggish demand.  In the past, tea prices have shown brief periods of boom followed by longer periods of depression.  This fluctuating trends of pricing are due to agricultural nature of the operations, eg. long gestation periods, dependency on rainfall etc.
  12. 12.  Gardens were inherently weak .  Suffered from low productivity .  Lack of investment on developmental activities.  Inadequate technical support.  Cost effectivity was not present.  Scattered nature of holding.  Inefficiency in value chain management i.e land management , plucking efficiency and manufacturing cost.  Lacks properly organized production systems.  Labour problem.  Political problem.
  13. 13.  The additional duty excise of Re. 1 per kg on tea has been withdrawn in the Union Budget for 2005-06.  Subsidy for the production of orthodox teas.  Assistance to the two tea Research and Development Institutions.  A Special Tea Term Loan (STTL) for the tea sector was announced  Implementation of a price sharing formula between small tea growers and manufacturers of tea  Reduction in the import duty on items of machinery used to improve productivity and quality of tea  Plan for rejuvenation and re-plantation of old tea bushes with a view to raise productivity
  14. 14. STRENGTH  Strong research backed by well established research institutes.  Availability of modernized &upgraded facilities .  Strong domestic market.  Second consistent supplier after China. CAPABILITIES:  Production of wide range of teas- black, (ctc, orthodox), organic teas, green teas.  High quality specialty teas- Assam, Darjeeling, high range Nilgiris, orthodox etc.
  15. 15. OBSTACLES:  Terror  Government Interference.  Poor communication facilities.  Trade Unionism.  Low level of Professionalism  Export Bottlenecks.  Plantation Labor Acts.  Environmental degradation- floods and soil erosion BARRIERS  Inadequate Land  Different Climatic conditions  Unskilled labor  Lack of mechanization  Lack of infrastructural facilities in terms of power  Erratic supply of inputs such as fertilizers, gas etc.  No control over price realization
  16. 16. WEAKNESSES:  Antiquated Machines.  Lack of vision.  Low level of motivation of staff.  Poor health of work force.  High fixed cost.  Low productivity levels.  High cost of production.  Research & Development transfer too slow.  Poor operations of Tea Board.  Declining prices.  Disregard in quality.  Social fronts.  Trade front issues.  Inefficient auction system.  Poor infrastructure for transportation.  Sales and taxation.  No effective cost management system  Slow increase in yield
  17. 17.  According to ASSOCHAM ,the apex industry body the total turnover of the tea industry in India is likely to reach Rs 33,000 crore by 2015 from the current level of about Rs 19,500 crore  Tea industry is growing at a compound annual growth rate (CAGR) of about 15%  Estimate the tea production during the current year is likely to stay over 950 million kilograms as against 966.4 million kilograms in 2010.  Health benefit associated with tea is a very significant factor in increasing the demand of tea.  With rapidly changing market scenario and technological advancement in agri business there is tremendous scope and potential for growth and development of tea industry
  18. 18.  To improve the quality of black tea.  To expand the domestic market .  To diversify the product portfolio.  To add value in Packaged and Blended teas  Focus on quality improvement.  Revitalization of image of India Tea in the international market .  Tailor made marketing activities specific toindividual country’s demand.  Propagation of health benefits of black tea.  Keeping a check on the quality of tea exported.  Reduction in cost of production.  Introduction of new laws to discourage the price movements by big players.  Improving supply chain management by fullutilization of e- auctioning.  Redefining Tea Board activities and duties.
  19. 19. Ahmedabad Campus: Karnavati Knowledge Village, A/907,Uvarsad, S.G.Highway, Gandhinagar Kolkata Campus: Infinity Benchmark Tower 10th Floor, Plot - G1, Block - EP& GP, Sec - V, Salt Lake, Kolkata. Reg. Office: 407, Zodiac Square, 4th Floor Opp. Gurudwara, S.G. Road, Bodakdev, Ahmedabad.

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