Tea

SOUTHERN UNIVERSITY

Muhammed Alee Mansur ID: 026-13-13 Date of Submission September 2006 Program: MBA

“BANGLADESHI TEA IN THE INTERNATIONAL MARKET”- PROBLEMS AND PROSPECTS

DISSERTATION REPORT (For the partial fulfillment of the degree of MBA, in Southern University, Bangladesh, Chittagong Campus)

Prepared for Dr. Md. Shawquatul Meher Professor & Chairman, Deptt. of Marketing University of Chittagong And Faculty Member, Deptt. of Business Administration Southern University, Chittagong.

Prepared By Muhammed Alee Mansur ID: 026-13-13 Session: 2004-2006 Program: MBA

Southern University, Chittagong, Bangladesh

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Acknowledgement

It is the Almighty Allah who enabled me to successfully complete the Dissertation “Bangladeshi Tea in the International Market”- Problems and Prospects. A large number of individuals have helped directly & indirectly to prepare this report. I am grateful to them. Especially, I am grateful to my honorable Supervisor Dr. Md. Shawquatul Meher, Professor and Chairman, Deptt. of Marketing, University of Chittagong and Faculty Member of the Deptt. Of Business Administration of Southern University, to find some time from his very busy schedule and give accurate direction about the Dissertation preparation. Without his active co-operation the preparation of this report couldn’t have been completed.

................................................. Muhammed Alee Mansur

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Preface A commerce graduate would rarely find a scope to get familiarized with the practical aspects before the launching of M.B.A. The authority has opened an opportunity for the students to be practical oriented through preparation of Thesis paper. It is an essential part for the MBA student. It provides a chance to acquire knowledge from global business and earmark for new business executives. Through study the tea market one can realise the problems and prospects of our tea market beyond the boundary. As a student of Business Administration I have to gain the analytical ability through this type of stady, on International tea market. It is tremendous exortion and challenging for me to complete the thesis on tea marketing, which is fully depending on auctionbased trading system. Tea holds a special place in the agricultural sector of Bangladesh economy. It is a major cash crop well as an important export item; it accounts for about 0.81% of the GDP and provides employment in the country. Marketing system of Bangladesh tea is defined as the process of sale of manufacture tea in bulk or packed from tea estates to the buyers at Chittagong Auction or at estates levels from where teas are sold either directly to overseas buyers or internal traders. In conclusion, I would like to say that, my effort will become flourishing if any person or organisation will enrich their knowledge from this report.

____________________ Muhammed Alee Mansur

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DECLARATION

Date: 30.09.2006

To, Dr. Md. Shawquatul Meher, Professor & Chairman, Deptt. of Marketing University of Chittagong and Faculty Member of Business Administration The Southern University, Chittagong.

Subject:

Submission of Dissertation on “Bangladeshi Tea in the International Market”- Problems and Prospects.

Dear Sir: I am pleased to inform you that I have completed the dissertation in compliance with your skillful guidance and cordial supervision. I sincerely believe that the findings of this report will be of immense help to the young learners for academic reference. For any explanation and clarification of any aspect of this report I might held responsible. I sincerely hope this report will receive your kind approval. Yours Sincerely,

................................................. Muhammed Alee Mansur ID: 026-13-13 Session: 2004-2006 Program: MBA

Southern University, Chittagong. 5

OBJECTIVES OF THE STUDY The explicit objective of the study is to fulfill the academic requirements of MBA Program. The implicit but major purpose is to be familiar with the Bangladeshi Tea and its marketing to International market. In order to accomplish this objective, the present dissertation covers the succeeding particular objectives: 1. To highlight the present Market Scenario of Bangladeshi Tea. 2. To examine the prospects of Bangladeshi Tea in the International Market 3. To identify the problems of Bangladeshi Tea Export to the International Market. 4. To know the scenario of World Tea Market. 5. To recommend some corrective measures to resolve the problem.

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METHODOLOGY OF THE STUDY The word ‘Method’ derives its origin from the Greek word ‘Meta’ and ‘Hodos’ meaning ‘a way ’.A method involves a process or technique in which various stages or steps of collecting data are explained and the analytical techniques are defined . According to Urdong, ‘A Method or Methodology is the underlying principles and rules of organisation of a philosophical system or inquiry procedure’. A dictionary of Social Sciences observes, ‘methodology is the systematic and logical study of the principles guiding scientific investigation’ (Gould and Kolb, 1964). In simple‘a method is the way of doing something’? This research is an elaborate study to enable us to understand the whole scenario of Bangladeshi tea to the International market. Collected data and information were tabulated, processed and analyzed critically in order to make the paper more informative, fruitful and purposeful. In preparing this report I have used data and information of the following category: a) Primary data b) Secondary data The primary data had been collected by direct interview & informal discussions with the important persons of cach department. Most of the data have been collected from secondary sources. The secondary information is collected from various books, financial papers, and documents, articles related with the Tea Plantation, Tea Marketing, Bangladesh Newspapers, Bangladesh Tea Board, Project Development Unit, BTB, Web portal, Bangladesh Tea Reasearch Institute (BTRI), Tea Traders Association of Bangladesh, International Tea Boards, EPB, Bangladesh Bank, Board of Investment, Food and Agricultural Organization (FAO) etc. Annual report, Tea Market procedures, Tea exports were also consulted and helped to fulfill the objectives of the study. Preparing the Dissertation on the Bangladeshi Tea Marketing beyond the boundary, all these primary and secondary data were collected, corrected, organised, analysed and interpreted to draw some findings.

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SCOPE OF THE STUDY This report is obviously far from being perfect. Despite of my sincerest endeavor in preparing a perfect report, some of the limitations were inescapable. This study is conducted at Bangladesh Tea Board, Export Promotion Bureau, Bangladesh and Tea Traders Association of Bangladesh, Bangladesh Tea Research Institute (BTRI) to be acquainted with the real life situations especially with Tea Marketing and its problems and prospects. To study the Marketing of Bangladeshi Tea beyond the boundary covering the entire Tea export procedures, auctions, history and current situation of Bangladesh Tea, its Production, major competitors, Tea consumptions, World Tea Export is really a vast work. Because of time constraint the author focused the work from the Bangladesh perspective. This is a major limitation of this study. Moreover, the present study is limited to the Bangladesh Tea Board its head office is situated in Chittagong and their various types of publications. In spite of these limitations the author tried with all his efforts to know and find out the response pattern of the subjects and conclusion of relevant record and document. Data have reached a fairly acceptable degree of accuracy.

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TABLE OF CONTENTS

Sl 01 02 03 04 05 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

Contents Introduction History of Tea Tea Scenario of the World Tea Production in Bangladesh Basic Facts of Bangladesh Tea Industry Tea Market Procedure Export of Tea Black Tea Consumption in the World Major Tea Importing Countries from Bangladesh Prospects of Basngladeshi Tea in the International Market Bangladesh Tea Market Demand for Bangladeshi Tea Major Competitors in Tea Market Institutions Involved in Tea Sector Value Addition in Tea Products Tea & Health International Tea Market Situation Problems relating to Tea Export and Tea Market Expansion Suggestions Conclusion Bibliography

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Page 10 13 17 26 28 33 38 45 50 55 61 63 64 71 77 78 80 87 103 104 105

INTRODUCTION Tea is processed from the leaves or buds of the tea bush. It is made by steeping the processed leaves in hot water for a few minutes. The flavour of the raw tea is developed by processing including oxidation (fermentation), heating, drying or the addition of other herbs, spices, or fruit. Tea is a natural source of caffeine and theophylline, and has a cooling, slightly bitter and astringent taste. Today, tea is the second most consumable beverage in the world after water. A total of 3,200,000 tonnes of tea were produced worldwide in 2004, (Source: FAO website www.fao.org) India, China, Sri Lanka and Kenya, in that order, are the major producers of tea leaves. During the pre-liberation period the total tea production was entirely consumed within the country i.e. the then West and East Pakistan. Soon after liberation, the scenario had been changed dramatically and the country was left with a surplus which required alternative outlets. Strenuous efforts were made jointly by the Government, producers and traders to find markets abroad for Bangladeshi tea. Some of the major tea producing companies began consigning tea to the London auction, barter agreements were signed with countries like the USSR, Poland, other East European countries and Egypt against import of capital machinery, chemicals source. In 1980, a Special Trade Agreement (STA) was signed with Pakistan, as a result of which export during 1980 was increased to 31 m. kgs i.e. roughly 76% of the total production. The USSR, Poland, Egypt and Pakistan emerged as major markets for Bangladeshi Tea (source: Srilankan Tea Board website). These ‘captive’ markets ensured protection to the industry and whatever, irrespective of quality, found its way to these markets. The price received for Bangladeshi tea was higher than its actual value in the open international market. Hence we lost our position as a supplier to those markets e.g. the U.K. who found alternative sources of similar quality of tea to meet their demand. There was hardly any effort to improve quality as we were able to sell the quality product that could be we were producing quite easily. Neither was there much effort made to run the industry efficiently by investing in inputs to increase yields and reduce costs. Therefore, when barter and STA’s were withdrawn our tea came into stiff competition with tea from other origins to gain access to these markets. It was during this period that the Bangladesh

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Tea Rehabilitation Project (BTRP) financed by the ODA was taken up. The project was to help the industry improve quality and productivity in the existing plantations. The producers had to think of fresh ways and means to produce the quality required to suit the need of the export markets. At the same time exporters had to find new strategies to market their tea against stiff competition from other origins. Most ‘free’ markets had been lost in this period partly due to the wild fluctuation in prices of our teas. This was caused by the barter buyers buying only during a short part of the Tea Season which tended to push up prices for that period. The market would get depressed again as soon as their buying was complete. At those times of year their prices were out of line with prices in the International market. No free market blender could depend on getting a consistent supply of Bangladesh teas at reasonable prices. Hence they looked for, and found, alternate sources as consistency is the most important component of any brand. The tea season of 1991-92 was termed as a year of losses. A major broker in their tea review 1992-93 remarked “Depressed tea prices caused serious difficulties for the tea industry during the last season and as it came hard on the heels of poor results of 1991-92 season producers found the situation to be very grave as they faced yet another year of losses”. Egypt, USSR, Iraq, Iran and China were all gone. Poland emerged as the largest buyer, thanks to the marketing effort of the private sector exporters. Between, 1995-2000 private sector exporters virtually by their own initiative and effort created new markets for Bangladesh tea in Jordan, Middle East, CIS, Japan, Afghanistan etc. By the year 2000, exports to Poland reduced substantially as cheaper teas of other origins made inroads into this market. However the total volume of export started declining, as there was a continued growth in Bangladesh’s internal consumption with little noticeable increase in production. As a result of the greater demand and shrinking exportable surplus their teas once again became expensive compared to similar quality teas available from other producing countries, including producers like China and Malawi and new ones like Vietnam (Source: Srilankan Tea Board website). In 1985, the domestic consumption of tea was 13 million out of a total crop of 43.3 m. kgs. In 2001 consumption reached a record high of approximately 40 m. kgs. out of a total crop of 55 m.kgs.

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Domestic consumption increased due to some of the following reasons: •

Urbanization and improved standard of living in the country.

•

Better distribution as a result of the improved road communication network.

•

Better marketing and promotional techniques ensuring of high level of consistency and quality of the product.

•

Re entry of multinational companies in the branded tea market, and Removal of price control which presented better quality teas reaching the branded market.

In the early days, tea was seen as one of the major foreign exchange earners and thus internal consumption was discouraged. There was an ad valorem excise duty on branded packet teas and the price was controlled by the Tea Board. Although the domestic market always wanted the best quality teas produced it was not possible for the packers to include these in their blends because of the controls. The higher price good quality teas were available in ‘loose’ form tea shops. There were times when the retailer would buy branded packet tea at artificially controlled prices and would open the packet and sell the ‘loose’ tea at much higher prices. With the onset of the free market economy the packers were allowed to sell their teas in competition with the loose tea traders. This gave the consumer a greater choice and the inherent advantages of branded teas soon started to sell in the market place. This is the period when the largest tea multinational company re-entered the branded Tea Market in Bangladesh. It was this entry, and the competition which resulted from it, that gave the initial boost to increase in domestic consumption. The challenge posed by the multinational was well taken by the organized local private blenders and packers and huge capital was invested by them to improve the overall infrastructure from production to marketing. As a result, the sluggish growth of the market has gradually converted to rapid and sustainable growth. With the improvement of the rural economic environment, steady population growth as well as the emergence of an economically stable middle class the domestic consumption may reach approximately 55m.kgs by 2010. Today almost all the tea consumed domestically is in branded form. There are several nationwide brands and hundreds of localized brands competing for this growing market. Producers have also reacted to the changed scenario and have concentrated more than ever on improving quality as much as it is possible with a view to cater to the domestic market.

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It is significant to note that in 2001, Pakistan’s production was 55 m. kgs. During this year the global supply growth exceeded demand growth and major auction centers in the world registered a downward trend in price. However, in Bangladesh the situation was quite different as tea export in 2001 plummeted to 12.9 m. kgs (yearwise) down by almost 30% on the previous year but domestic consumption touched 42.2 m.kgs (against 31 m.kgs), as a result of which the industry survived. In this context what affect the recent duty free access of Pakistan to Bangladesh tea will have on our tea industry remains to be seen. It is already apparent that though prices have gone up the total volume of our exports has not risen. This duty free access will ensure that our prices are once again out of line with International prices. Those export markets that had been developed in recent year are already looking for alternative sources. With continued pressure from domestic demand it is unlikely that Pakistan will be able to purchase their target of 10 thousand tons per annum from Bangladesh. If we cannot ensure sufficient quantity of tea in the country in keeping with the increase of consumption in the domestic sector, it can lead to import of tea from other origins. This is something the producers have to be very careful about.

HISTORY OF TEA: The art of tea cultivation in Bangladesh began over a century and a half ago in the 1840s near the Chittagong Club. The first tea garden to be established was Malnicherra in Sylhet in 1854. Its commercial production began shortly thereafter in 1857. Today, the main tea-growing areas lie to the east of the Ganga-Jumma flood plain in the hill areas bordering India's Cachar tea-growing district. Most of Bangladesh tea grows at only 80300 ft. above sea level northeast of Sylhet in the Seven Valleys. Tea is still grown in Chittagong as well as in the Hill Tracts. During pre-partition days and up to the year 1947, all teas produced in the Sylhet and Surmah valleys were called Indian teas, but were also known as eSweet liquoring Surmah valley teas. Crop figures for the region during the mid-1940s were approximately 10-15 million kg per year. The teas were all of Orthodox manufacture, their quality being fairly similar to that of neighboring Cachar district teas. There was also some Legg-Cut and green tea manufacture prior to 1947 (Source: Salman Ispahani, Member, Bangladeshiya Cha Sangsad). Post-Partition 1947-1971

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After partition, the subcontinent was broadly divided into two political regions - India and Pakistan (comprising West and East Pakistan). When Pakistan became independent in 1947, there were 133 tea gardens. By 1971, this number had risen to 147, with roughly 90,000 workers out of a total country population of 249,000 people. In 1950, under the Pakistan Tea Act, the Pakistan Tea Board was established in Dhaka and in 1957; the Tea Research Institute was founded in Srimangal in 1957. Together, these organizations aimed at promoting the sale and consumption of tea in Pakistan and abroad, and at assisting in the research and development of the tea industry.

The Tea Ordinance Act of 1959 replaced the earlier Pakistan Tea Act of 1950 to enhance the Board's role in promoting tea cultivation and quality control. During the 1952-1953 seasons, buyers, sellers, and brokers in Chittagong got together, under the auspices of the Pakistan Tea Association, to form the Tea Traders Association of Chittagong. This association's duty was to promote the common interests of tea sellers and buyers in the Chittagong market. In 1960, the Tea Traders Association of Pakistan was registered.

However, by the late 1960s, the need for better quality teas was strong and, with the gradual decline in the availability of Orthodox teas, CTC teas, particularly the better liquoring types, received strong support. It was noticeable during this period that the consumer gradually demanded brighter and better teas, and at the same time, became partial to the strong liquor produced by the CTC and the Legg-Cut methods of manufacture.

Until 1971, teas continued to be imported to meet the growing internal demand while production was inadequate. With export restrictions and the captive market of West Pakistan, the tea industry operated in a seller's market with the 1969 crop being sold in the Chittagong auctions at Rs 3.50 per lb., against the CIF Chittagong cost of imported tea at Rs 1.50 per lb.

The 1971 War of Liberation

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During the War of Liberation in 1971, the tea industry suffered many setbacks. In addition to the fact that many factories were damaged, two-thirds of the experienced planters of British and Pakistan origin left the industry, whilst many senior Bangladeshi planters joined the war. This meant that inexperienced men who had to combat disturbed conditions were running the estates. Some of the battles even took place in the tea garden areas, which were very near the borders. In fact, for the first time after the crackdown on April 4, 1971, the available senior offices of the Eastern Sector of the Liberation War met at Teliapara Tea estate manager's bungalow, which became a seat of the Bangladesh Forces Headquarters (BDFHQ) for quite a time.

In 1947, gardens in East Pakistan had 75,000 acres (30,364 hectares) under tea. Between 1947 and 1960, the acreage devoted to tea increased by 8,000 acres. In the following decade, thanks to the compulsory 3% extension plan undertaken by the government.

In 1947, Pakistan began with a production of 41.5 million lbs. (19.0 million kg) - approximately 7% of India's production. In 1956, this figure reached 53 million lbs. (24.1 million kg), and in 1971, a record crop of 69.18 million lbs. was harvested.

After 1971 After the war, assistance from England was readily available. At the request of the Government of Bangladesh, the British agency Overseas Development Administration (ODA) commissioned the Commonwealth Development Corporation (CDC) in 1973 to assess the requirements for a process of rehabilitation and reorganization of the tea industry, including tea growing, manufacture, research, markets and market organization, with an assessment of the financial and economic returns to such a program. In addition, in 1976 the government-sponsored Dastagir Committee, which looked into the financial constraints of a number of estates, also submitted its recommendations that proved to be very effective.

In 1977, the Bangladesh Tea Board was reconstituted with objectives common to those of the erstwhile Pakistan Tea Board formed under the Pakistan Tea Act 1950, and as the regulatory body for the tea industry of Bangladesh, the role of the Tea Board expanded to include the

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monitoring of the crop and its disposal, the issuance of export licenses to export buyers, and the authority to give permission to producers for consignment and direct sales, etc.

In 1974, the Tea Traders Association of Bangladesh replaced the Tea Traders Association of Pakistan. Eight years later, the metric weight system was adopted for the sale of tea, replacing the earlier imperial system. The area that produced tea increased from around 43,000 hectares in 1971 to the present area of about 48,000 hectares. After 1971, an improvement in yield per hectare was also evident.

Based on the findings and recommendations by the March 1973 Rab Report that aimed to maximize production, subsequent studies was carried out. By the 1973-74 season, the production of Bangladesh tea recovered to pre-1971 levels of around 30-32 million kg.

During 1975-76, in an attempt to increase yields, the Tea Board prepared two plans for intensive cultivation and replanting. Bangladesh Tea Research Institute BTRI, the scientific wing of the Tea Board, also brought out several high yielding clonal varieties of distinct character and quality.

By 1979, British consultants had developed a strategy to rehabilitate the damaged tea industry of Bangladesh. Although by this time an onward program for intensive cultivation and replanting of the tea was going on, the actual thrust started in 1983-84 and was effective from 1985/85. During the years 1971-1994, production increased from 24.2 million kg (53.2 million lbs.) in 1972 to 52.1 million kg (115 million lb) in 1994.

Although the number of estates manufacturing Orthodox teas was declining (especially after the 1980s), after independence, Orthodox teas continued to form the bulk of all teas produced. During this period, CTC teas became increasingly popular in Bangladesh with both internal and external buyers because they produced stronger and quicker brewing liquor with more cuppage. Today in Bangladesh, CTC teas account for virtually 99% of all categories of tea produced, the balance being green teas.

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The quality of Bangladesh teas competing in the world market during this period may be comparable to lower plain-grown teas from nearby Cachar, Tripura, and the Dooars, as well as with low, more plain-tasting teas from Sri Lanka and Indonesia (Source: Mr Orman Rafay Nizam, & Rasul Nizam, Members, Tea Traders Association, Bangladesh). Table: Tea History of Bangladesh Year

Location

District

Remarks

1840

Chittagong Club

Chittagong

Tea cultivation starts

1854

Malnichera

Sylhet

First Tea Garden in Bangladesh

1857

Malnichera

Sylhet

Commercial Production starts

1947

Surma Valley

Sylhet

Products were called Indian Tea

1947-1971

Post Partition duration

1950

Dhaka

Pakistan Tea Board was established

1957

Sylhet

Tea Research Institute was established as Srimangal

1959

Dhaka

Tea Ordinance Act 1959 introduced

1960

Chittagong

Tea Traders Association of Pakistan registered

1971

Throughout

Imported tea to meet local demand.

Bangladesh Liberation starts 1973

British Agency Overseas Development Administration (ODA) the

Commonwealth

commissioned Development

Corporation (CDC) 1974

Chittagong

Tea Traders Association of Pakistan replaced Tea Traders Association of Bangladesh

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1976

Government-sponsored

Dastagir

Committee formed 1977

Bangladesh Tea Board constituted

1975-76

Attempt to increase yields by Tea Board

1979

British

consultants

developed

a

strategy to rehabilitate the damaged tea

gardens

and

industry

during

liberation war 1983-84

Replanting starts

TEA SCENARIO OF THE WORLD World tea exports increased by 4.4 percent in 2004 rising to 1.47 million tons, with all major exporters registering a rise, according to the report. Tea production in India, the report said, declined by 4.3 percent with production standing at around 820,200 tonnes due to unfavourable weather conditions and for the closure of about 70 tea gardens in Assam. World net tea imports increased in 2004, by 1.5 percent, which is 1.42 million tonnes. This trend reflected the increases in traditional developed country markets of the European community (an increase of 2.4 percent), the United States (5.3 percent) and Japan (2 percent), where imports reached to 215, 000 tonnes, 99 000 tonnes and 56 000 tonnes respectively. At its Twelfth Session, the Intergovernmental Group on Tea stressed the importance of analyzing longer-term market prospects in order to determine appropriate strategies to maintain remunerative tea prices, taking into full account the impact of such factors as the macroeconomic situation, structural changes in some markets and the impact of international trade agreements. This document contains projections which were based on the most recent data available on black tea production, consumption, trade, and growth in population and income. The projections on production were based on a linear trend analysis for each country for the period 1983-85 to

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1993-95 and extrapolations to the year 2005. They were adjusted to reflect policy developments, new and replacement planting and improvements in infrastructure. Consumption was projected from past trends, estimates of population and income growth and the assumption of constant real prices. Where possible, projections for black tea were categorised by orthodox and CTC teas. Stock changes were not considered. The Group is invited to study the projections and identify fundamental issues and challenges that may be faced by the world tea economy as it enters into the next century, particularly those constraining the income of tea producers. World tea production is projected to increase from the 1993-95 average of 1.97 million tonnes to 2.7 million tonnes in 2005, an annual average growth rate of 2.8 percent. Production in India is estimated at 1.02 million tonnes in 2005, an average annual growth of 2.8 percent from the 1993-95 base. Most of the envisaged production expansion in Sri Lanka should result from recent economic reforms and the national plan for tea production expansion. Production by 2005 is projected to reach 285 000 tonnes, compared to 240 000 tonnes during 1993-95, an annual growth rate of 1.6 percent. Significant growth in production is also projected for other major tea-producing countries. China and Indonesia would increase black tea production from 180 000 tonnes and 105 100 tonnes to 220 000 tonnes and 160 000 tonnes, respectively. Output of tea in Bangladesh would grow only moderately from 49 000 tonnes in 1993-95 to 55 000 tonnes in 2005. Increases in both yields and planted area are likely to continue to support the strong growth in tea production in African countries. Output in Kenya is expected to increase at an average annual rate of 2.8 percent to 300 000 tonnes in 2005. Malawi, Tanzania and Zimbabwe are also expected to increase production significantly. Production and yield of tea produced by small growers in Africa are likely to continue to increase rapidly. Production expansion programmes initiated by major exporting countries have contributed to previous increases in output of black tea in recent years, and the impact of these programmes, particularly as bushes reach optimum production age, may continue. The area harvested of all tea has increased by almost one million hectares since 1961, from 1.4 million hectares to 2.3 million hectares in 1996. The average yield per hectare has increased by over 50 percent during the same period. However, the pressure for the cultivation of food crops continues to increase and it is questionable whether any large scale increases will ensue from now on.

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World black tea consumption is projected to increase from 1.97 million tonnes in 1993-95 to 2.67 million tonnes by 2005, an annual growth rate of 2.8 percent. Developing countries would account for the largest part of the prospective increase, with consumption rising from the 199395 average of 1.41 million tonnes to 1.95 million tonnes by 2005, an annual growth rate of 3.0 percent. Black tea consumption in India is projected to continue to rise rapidly, reaching 832 000 tonnes by 2005, an annual growth of 3.2 percent from the base period. In other major markets for black tea such as Pakistan, the Islamic Republic of Iran and Egypt, consumption is projected at 160 000 tonnes, 122 000 tonnes and 90 000 tonnes by 2005, respectively. The reduction of import tariffs and declining prices could have a more pronounced effect on consumption in these countries. The projections also suggest significant increases in black tea consumption in other developing countries, such as Turkey where consumption would grow at an annual average rate of 3.2 percent to 150 000 tonnes. In developed countries, including countries in transition, black tea consumption would increase more moderately by 2.2 percent annually, to 719 000 tonnes in 2005. Consumption in the European Community is projected to increase only slightly in the next decade since higher purchases by France, Germany, Italy and the Netherlands would be largely counterbalanced by a continuing decline in the United Kingdom. Consumption in the United States is projected to increase, though at a relatively slow rate of less than one percent. Since many developed countries impose no, or only slight, restrictions on bulk and packaged black tea imports, the effect of trade liberalisation on their consumption would be negligible. Black tea consumption in the countries of the former USSR is projected to increase from 154 000 tonnes in 1993-95 to 250 000 tonnes in 2005, equivalent to an annual growth rate of 4.5 percent over the period. Import requirements in 2005 are projected at 1.27 million tonnes, an average annual increase of 2.3 percent from average annual imports in the 1993-95 base periods. Import requirements by developing countries would increase more rapidly, by about 3.1 percent annually to reach 626000 tonnes while import demand in developed countries is projected to increase by about 1.6 percent annually to 642 000 tonnes. In volume terms, the major importers would be the countries of the former USSR (mainly the Russian Federation), Pakistan, the United Kingdom, Egypt and the United States which would account for 51 percent of total import requirements. The average annual growth rate of imports by the former USSR is projected at 2.4 percent though this may have to be revised downward if the current economic crisis continues.

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Net export availabilities are projected to reach 1.292 million tonnes in 2005, an average annual increase of 2.5 percent from the actual exports of 985 000 tonnes during the base period. China, India, Indonesia, Sri Lanka and Kenya are expected to account for 78 percent of the total projected export availabilities. Bangladesh, Malawi, Tanzania, Turkey and Zimbabwe are also expected to increase export availabilities significantly during the projection period. Most of the increase in the volume of export availabilities would originate in Asia. Exports from India, the world's largest tea producer and consumer are expected to recover from the recent disappointing performance while satisfying growing domestic demand. Projected export availabilities for Sri Lanka, currently the largest exporting country, would grow by 1.6 percent annually to 263 000 tonnes in 2005. China, Indonesia and Bangladesh are also projected to increase export availabilities. China would continue the rapid growth of tea sales from the eighties and early nineties reaching 192 000 tonnes in 2005, while Indonesia and Bangladesh would attain export availabilities of 140 000 tonnes and 32 000 tonnes, respectively. Substantial growth in export availabilities is also projected for African tea exporting countries. The region's total export availabilities are projected to amount to 401 000 tonnes in 2005, an annual increase of 2.8 percent from an average of 295 000 tonnes during 1993-95. Kenya, which currently accounts for 70 percent of African tea exports, would increase its availability from 203 000 tonnes (1993-95 average) to 276 000 tonnes in 2005, an average annual growth rate of 2.8 percent. Malawi, with average shipments of 36 000 tonnes in 1993-95, is expected to increase its exports to 44 000 tonnes in 2005. For the other African countries export availabilities would amount to 30 000 tonnes in 2005. The projections indicate that by 2005, world black tea production and consumption could almost be in balance at 2.7 million tonnes, representing a growth rate of 2.8 percent for each. Production gains would largely result from higher yields, whereas the rise in consumption would largely be due to population and income growth. Developing countries would account for most of the growth and their share in world consumption would rise by 2 percent over the projections period. However, much will depend on economic development of these countries. More importantly, the projections suggest an imbalance in the international market. The projected surplus of export availabilities over import requirements would be about 24 000 tonnes by 2005 from an almost balanced market in 1993-95. This possible imbalance implies that world

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market prices would be under downward pressure if there were no additional increases in demand and/or downward adjustments in production. There are several ways of narrowing the trade deficit and improving prices, which the Group is aware of and has attempted to address. The most obvious way is by attempting to expand consumption through promotion. Over the last few years, the major efforts of the Group have been to create awareness of the health benefits of tea drinking and to work out a generic promotion programme that would stimulate consumption of tea. The project on tea and health that has been executed for the Group by the United Kingdom Tea Council comes to an end in December 1999, and the Group will have to decide at this Session on the most effective method of keeping up the momentum. The projected gap between exports and imports could also be further reduced through trade liberalisation, particularly of "retail-packed" teas. The direct impact of the Uruguay Round Agreement on bulk tea imports is small since tariffs imposed by major importing countries are already very low or at zero. However, most of the potential growth markets have high import tariffs on "retail-packed" black tea which have restricted exports to those countries. Any reductions of these tariffs would make it possible to expand the value-added trade, and would offer new opportunities for tea exporting countries. Another obvious means of reducing the gap between export availability and import demand and thereby improving prices is through the rationalisation of production in major exporting countries to relieve the supply pressure on the world tea market. Therefore, given the prospect of downward pressure on prices, the commodity policy for tea for the next decade should largely concentrate on the exploration of possible new and marketorientated approaches (source: www.teacouncil.co.uk).

ANNEX TABLE 1 -Black Tea : Actual and Projected Production

Countries / Regions

WORLD

PRODUCTION Actual 1984* Thousand Metric Tons

Projected 1994* 2005

GROWTH RATES 1984* / 1994* 1994* / 2005 Percent per year

1858

1970

0.6

22

2681

2.8

DEVELOPING

1728

1941

2581

1.2

2.6

Africa Kenya Malawi Rwanda Tanzania Zimbabwe Other

244 128 36 9 16 13 42

335 222 36 7 24 14 33

457 300 45 15 32 20 45

3.2 5.7 0.0 -2.5 4.1 0.7 -2.4

2.9 2.8 2.0 7.2 2.6 3.3 2.9

Latin America Argentina Other

52 36 16

65 51 14

78 54 24

2.3 3.5 -1.3

1.7 0.5 5.0

Near East Iran Turkey

161 44 117

175 53 122

255 85 170

0.8 1.9 0.4

3.5 4.4 3.1

Far East Bangladesh China India Indonesia Sri Lanka Viet Nam Other

1264 41 199 618 92 200 8 106

1360 49 180 749 105 240 10 27

1777 55 220 1015 160 285 20 22

0.7 1.8 -1.0 1.9 1.3 1.8 2.3 -12.8

2.5 1.1 1.8 2.8 3.9 1.6 6.5 -1.8

Other developing

7

5

14

-3.3

Developed

130

28

100

-14.2

12.3

Former USSR Other

120 10

16 12

80 20

-18.2 1.8

15.8 4.8

* = Averages for 1983-85 and 1993-95 TABLE 2 - Black Tea : Actual and Projected Consumption CONSUMPTION Actual Projected 1984* 1994* 2005 Thousand Metric Tons

GROWTH RATES 1984* / 1994* 1994* / 2005 Percent per year

WORLD

1876

1970

2669

0.5

2.8

DEVELOPING

1235

1405

1950

1.3

3.0

Countries / Regions

23

Africa

75

82

101

0.9

1.9

Latin America

18

27

41

4.1

3.9

Near East Egypt Iran Iraq

282 70 43 41

417 62 85 1

584 90 122 54

4.0 -1.2 7.1 -31.0

3.1 3.4 3.3 43.7

Far East China India Pakistan

858 79 413 87

877 77 590 113

1194 76 832 160

0.2 -0.3 3.6 2.6

2.8 -0.1 3.2 3.2

Other developing

2

2

30

0.0

27.9

DEVELOPED

641

566

719

-1.2

2.2

North America Canada U.S.A.

98 19 79

96 13 83

105 13 92

-0.2 -3.7 0.5

0.8 0.0 0.9

Europe EC UK Other Europe

265 222 165 43

257 215 148 42

279 229 135 50

-0.3 -0.3 -1.1 -0.2

0.7 0.6 -0.8 1.6

Former USSR

218

154

250

-3.4

4.5

Oceania

28

21

28

-2.8

2.6

Other Developed

32

38

57

1.7

3.8

* = Averages for 1983-85 and 1993-95

TABLE 3 - Tea : International Trade , Actual and Projected EXPORTS

Countries Regions

/

IMPORTS GROWTH GROWTH Actual Projected RATES Actual Projected RATES 1984* / 1994* / 1984* / 1994* / 1984* 1994* 2005 1994* 2005 1984* 1994* 2005 1994* 2005 Thousand Metric Tons Thousand Metric Tons Percent per year

24

WORLD

929

985

1292

0.6

2.5

911

985

1268

0.8

2.3

DEVELOPING 929

985

1292

0.6

2.5

420

447

626

0.6

3.1

Africa Kenya Malawi Rwanda Tanzania Zimbabwe Other

295 203 36 5 20 9 23

401 276 44 9 29 13 30

4.1 6.7 -0.3 -5.7 4.4 0.0 -3.2

2.8 2.8 1.8 5.5 3.4 3.4 2.4

55

42

50

-2.7

1.6

Latin America 53 Argentina 44 Other 9

53 43 10

55 42 13

0.0 -0.2 1.1

0.3 -0.2 2.4

14

15

25

0.7

4.8

15

25

Near East Egypt Iran Iraq Turkey Other

2

17

25

23.9

3.6

1

2

0

7.2

0.0

238 71 30 41

258 62 34 1

366 100 37 54

1

16

25

32.0

4.1 162

175

Far East Bangladesh China India Indonesia Sri Lanka Pakistan Viet Nam Other

671 28 91 213 78 187

111

131

162

1.7

1.9

87

113

140

2.6

2.0

18

22

197 106 37 9 13 9 32

11 74

613 27 103 159 89 222 9 4

811 32 192 165 140 263 17 2

-0.9 -0.4 1.2 -2.9 1.3 1.7 -2.0 -25.3

2.6 1.6 5.8 0.3 4.2 1.6 6.0 -6.1

4.8 0.8 -1.3 1.3 -31.0

3.2 4.4 0.8 43.7 0.7

1.8

DEVELOPED

491

538

642

0.9

1.6

North America Canada U.S.A.

98 19 79

96 13 83

105 13 92

-0.2 -3.7 0.5

0.8 0.0 0.9

Europe EC France Germany

265 222 9 16

257 215 9 17

284 234 12 32

-0.3 -0.3 0.0 0.6

0.9 0.8 2.6 5.9

25

Italy Netherlands UK

3 10 165

5 15 148

7 16 135

5.2 4.1 -1.1

3.1 0.6 -0.8

Other Europe

43

42

50

-0.2

1.6

Former USSR

69

139

180

7.3

2.4

Oceania

27

20

28

-3.0

3.1

Other Developed

32

27

45

-1.7

4.8

* = Averages for 1983-85 and 1993-95

TEA PRODUCTION IN BANGLADESH Bangladesh is a small Tea producing country sharing 3% of the world's Tea production. Tea is an agro-based, labour intensive and export oriented sector and plays an important role in the national economy through export earnings, trade balancing and employment generation. Our Tea industry dates back to 1857 when the first Tea garden was established at Malinichera in Sylhet District. Today there are 161Tea gardens with a graned area of 1, 14,288.26 hactor of which 51225.65 ha or 44.82% is under cultivation. Though our tea industry suffered a serious set-back in 1971 but we could succeed in reversing with the help of the government, foreign assistance and hard work of our planters. We hope to increase our production to an average of over 1500 Kg per ha in a few years time. We have undertaken measures to improve our quality of tea by extending the area with new varieties of hybrid clone, modernizing factories and improving infrastructure. We now annually produce 56 million Kg of Tea and we hope to increase our production to 90 million Kg in the next 15 years. Production during 1970 was 31.6 millions kgs but just after liberation it slumped to 12 m. kgs. However, the recovery was quick and by 1974, production had again reached the pre-liberation level of over 31m kgs.

From the Year 2002 26

1. Total Tea State 2. Grant Tea 3. Total Tea Area (44.28%) a) Seedbari/Nursery b)

Immature Tea (05 years)

Young Tea (6-10 years) Mature Tea (11-40 d) years) Old Tea (41-60 e) years) Very Old Tea f) ( above 60 ) Total Area Not 4. Under Tea c)

161 114,288.26 ha 51,225.65 ha 999.91 ha 4509.55 ha

Tea Area, Production & Yield of Last 5 years Tea Area Production Year Yield/ha (kg) (ha) (mkg) 1996 48,100 53.41 1,115 1997 48,570 50.53 1,040 1998 48,571 55.82 1,149 1999 48,611 46.19 950 2000 49555 52.64 1,1 70 2001 50288 56.82 1257 2002 51225 53.62 1172

4729.70 ha 20,312.73 ha 9248.39 ha

Quantity Sold & Average Price Realized during Last 5 years Chittagong Export ( FOB ) Auction Year Qty. (mkg)

11425.37 ha

Price (Tk/kg)

Qty. (mkg)

Price (Tk/kg)

Price (US$/kg)

199616.16 46.51 2 5.39 51.64 97 1997Agriculture Use 43.65 81.07 24.45 83.12 98 1998a) Rubber 5929.22 ha 49.40 61.30 23.50 71.41 99 1999b) Planted Forest 2062.95 ha 40.72 58.44 12.61 65.48 00 c) Natural Forest 14,143.36 ha 200045.67 58.12 16.52 67.89 01 d) Herbal Plantation 2000 ha d) Bamboo 4438.40 ha Human Resources of Tea Estates e) Thatch/Sun grass 3482.76 ha Total Population 360,686 f) Paddy Land 12,933.64 ha Men 38,764 Other Economic g) 1349.58 ha Women 40,357 Crop Registered Non Agriculture Use 95,097 Labour Adolescent a) Fallow/Waste Land 5708.95 ha 11,108 63,062.61 ha

b) Stream/Pond etc. 3064.50 ha c) Infrastructure 6871.95 ha d) Other Uses 3,077.30 ha Area further Suitable 5. for Tea 11,580.52 ha Cultivation Management Information Total Manpower

5063

Casual Labour

1.17 1.89 1.47 1.18 1.26

20,641

Labour Welfare Facilities to Tea Estates Pucca Labour 17,013 Hospital 55 House

27

Manager, Asst. Manager

415

Other Staff

4648

Cutcha Labour House

Hand Tube Well Surface Well Deep Tube Well

43,332 Dispensary

146

No. of Beds Cr 裨 e

691 179

2,420

School

186

5,264

Teacher

381

87

Student

22,810

Source: Bangladesh Tea Board Tea Board Website: www.bdtboard.org

Basic Facts of Bangladesh Tea Industry a) No. of Tea Estates

161

b) No. of Tea Factories

114

c) Total Allotted Area

114288.26 ha.

d) Total Area under Tea

51225.65 ha.

e) Total Production (2002)

53.62 m. Kg.

f) Per Hectare Yield (2002)

1172.89

g) Total Export (2002-2003)

12.17 m. Kg.

h) Internal Consumption (2002-03)

39.81 m. Kg.

i) Average Auction Price per Kg. (2000-2001) 58.12 (ctg.), 67.89 (FOB) Source: Bangladesh Tea Board Web Site

Characteristics of Bangladesh Tea Our Tea grown on the lush green slopes of different Valleys are famous for following: Appearance

Clear

Color

Bright

Liquor

Pungent, i. e. strong but not better

Flavor

Same as Assam Tea

Quality

Has character of brightness with briskness

Manufacturing Process

28

After Plucking, green leaves are transported to the factory for manufacture. The process of manufacturing comprises of the following stages: •

Withering i. e. moisture removal of about 10-15% (i.e. 65-70% wither) from leaf and bringing some chemical changes for optimum quality development.

•

Fermentation i. e. oxidation process when tea etching i.e. polyphonals is degraded to desirable biochemical constituents named Theo Flavin (TF) and Thea Rubigin (TR).

•

Drying i. e. moisture removal from oxidized leaf to 2-3% at dyer mouth level.

•

Sorting i. e. grading of made Tea according to particles sizes and are given a grade name. These names are categorized, like: FP, FBOP, BOP, and GBOP, OF, FOF, PF, PD, RD, and CD (10 primary grades of CTC).

Bangladesh Tea is shipped in chests, gunny bags or paper sacks of International standard bearing an original garden mark, bulked or blended. Care is taken to ensure that each consignment, however small, reaches its destination as fresh as it was when it left the garden.

Types of Tea With the introduction of clonal Teas (BT Series) a touch of pleasant flavor is acclaimed worldwide. Bangladesh is manufacturing two types of teas as under a) Black Tea (CTC)

99%

b) GREEN TEA

1%

c) Orthodox d) Organic The processed Teas after grading as per size and make are packed in airtight as plywood chest sack on binned any bags and send to Ware-Houses in Chittagong for sale through auction.

Grades of Tea Category

Grades

BROKEN

FP (Flowery Pekoe) FBOP (Flowery Broken Orange Pekoe)

29

BOP (Broken Orange Pekoe) GBOP (Golden Broken Orange Pekoe)

FANNING

OF (Orange Fanning) FOF (Flowery Orange Fanning) PF (Pekoe Fanning)

DUST

PD (Pekoe Dust) RD (Red Dust) CD (Churamani Dust)

Bangladesh has dedicated teams of technical staff have years of experience in producing, packaging and selling tea and tea-related products. With laboratory, pilot plant and factory scale manufacturing facilities in 8 countries we offer an unrivalled breadth of resources and experience to our customers, covering the whole supply chain ……..from field to finished product! Plantations give us the unique opportunity to begin innovating at the very point the tea starts growing! Having our technical teams working alongside the production staff on location in our plantations and factories offers unique opportunities for new product and process development. We aim to deliver quality products to our customers that allow all the benefits of our knowledge and experience to be passed on to your customers. Backing up the cutting edge knowledge of the staff in our factories we use accredited laboratories and acknowledged world experts in food and beverage analysis to ensure product quality meets our stringent specifications and of those of our customers. Working closely with our customers we aim to be our outsource partner of choice for all tea-related products, new ingredient and product development, and expert knowledge. This lets us focus on the development and marketing of branded products, while leaving production to the experts. Teas are being exported to the Internatioanl market in the following forms: 1. Black leaf tea for packet and tea bags: 2. Hot Water Soluble Instant Tea: •

Spray Dried

30

•

Freeze Dried

3. Cold Water Soluble Instant Tea: 4. Liquid Tea Concentrates: 5. Ready-to-Drink Tea: 6. Decaffeinated Teas: •

Decaffeinated leaf teas

•

Decaffeinated instant teas

7. Green Teas: •

Leaf teas

•

Instant teas

8. Tea Aromas and Tea Oil: 9. Organic Teas: 10. Orthodox Teas: The seasonal nature of rainfall and temperature results in an uneven pattern of tea production. Annual rainfall is in the range of 90180 inches and falls mainly between May and October. Almost 80% of the crop is manufactured in the six months from June to November. The dry season from mid-October to mid-May is divided into a cool season (mid-October to midFebruary) and a very hot desiccating season (mid-February to mid-May) These extreme conditions tend to cause severe stress on the unshaded tea plants on southerly and westerly slopes.

Most estates are situated on valley sides. However, approximately 25% of the area runs down into swampy valleys where tea can be maintained only if the land can be drained and kept free from the water which backs up from paddy cultivation downstream. The topography rises from these ebheelsi, or low flats, through high flats or undulating slopes, representing about 45% of the tea-growing areas to steep sloping hills or ridges called tillahs.

There are two major geological formations in Bangladesh, both sedimentary in origin. The older of the two forms the hills and consists of quartzite and ferruginous gravel, sandstone, silts and clays, with outcrops of laterite, ferrocrets and occasionally lignites. The younger formation, still being deposited, forms the lowlands and consists of sands, silts, and clays brought down by the river systems draining part of the Himalayas and the hills of the Manipur and the Mize districts.

31

The older formation yields soils rich in iron which tend to be acidic, whilst the younger formation (with little intrinsic nutrient value) provides inherently fertile soils with adequate calcium levels but vunerable to waterlogging in low-lying areas.

The Bangladesh tea industry, has undergone significant changes both at a national and at a global level in the last three or four decades. There has been a shift in the method of manufacture from Orthodox teas to virtually 99% CTC manufacture, with the balance being green tea. Orthodox leaves continued to form the bulk of the produce, with a little processing of Legg-Cut and green teas. Since quality is determined by environmental conditions, particularly by elevation, the gardens in Pakistan, by virtue of locality, are naturally not in a position to produce quality teas. Instead, our Bandlesh or Pakistan teas were classified in the world market as 'clean common' and were in demand by blenders overseas who used them as fillers.

32

Last 10 Years TEA Production, Export & Export Earnings from Bangladesh Tea (Based on Calendar Year) Sl No.

Year

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Production (m. Export (m.kg) kg) 51.64 23.65 47.67 25.43 53.41 26.13 50.53 25.17 55.82 22.22 46.18 15.18 52.64 18.10 56.82 12.92 53.62 13.65 56.83 12.18

Export Earnings (m.taka) 1166.16 1291.75 1349.28 1775.39 1808.57 1008.70 1205.19 894.99 939.93 915.07

Source: a) BTB, b) PDU Annual Report 2004

Last 10 Years TEA Production, Export & Export Earnings from Bangladesh Tea (Based on Financial Year) Sl No.

Year

Production (m.kg)

1. 2. 3. 4. 5. 6.

1993-94 51.73 1994-95 47.04 1995-96 52.14 1996-97 52.67 1997-98 51.25 1998-99 50.26 19997. 49.75 2000 20008. 53.13 2001 20019. 55.20 2002 200210. 54.60 2003 Source: a) BTB, b) PDU

Export (m.kg)

Export Earnings (m.taka)

Average Price (Tk./kg)

27.42 26.72 21.43 25.39 24.45 23.50

1521.00 1241.45 1176.03 131.18 2032.29 1678.29

55.48 46.47 54.88 51.64 83.12 71.42

1.39 1.16 1.37 1.17 1.89 1.47

38.03 31.04 29.40 29.80 46.18 34.59

12.61

825.73

65.48

1.18

14.85

16.53

1122.14

67.69

1.19

19.68

13.80

947.00

68.62

1.20

16.55

12.17

870.91

71.65

1.22

14.89

Annual Report 2004

TEA MARKET PROCEDURE

33

Average Price (US$/kg)

Value (m.US$)

Bangladesh Tea Auction Center in Chittagong has good warehousing and port facilities besides excellent road, rail and air links. While our tea gaining popularity, Bangladesh Tea researchers continue their relentless efforts to innovate and improve the quality of Bangladesh Tea to meet the demands of the 21st century. While manufacturing Tea, bright liquor with sufficient strength and aroma, pungency and ISO 3720 are ensured. Tea holds a special place in the agricultural sector of Bangladesh economy. It is a major cash crop well as an important export item, It accounts for about 0.81% of the GDP and provides employment in the country. As mentioned earlier domestic consumption of tea in our country has been increasing at a much faster rate than the rate of increase of our tea production which leads to gradual shrinking of our exportable surplus. To meet this increasing internal demand and to export some tea to earn foreign exchange maintaining at least a 60:40 ratio, we will have to take effective measures to increase tea production. Rate of increasing of Production of tea in Bangladesh is very low due to various reasons arising out of technical, financial and management problems. Effective research needs to be conducted with a view to raising productivity of our tea and improving its quality. A strategic research plan has to be formulated with comprehensive programs for all round development of the tea industry. Marketing system of Bangladesh tea is defined as the process of sale of manufacture tea in bulk or packed from tea estates to the buyers at Chittagong Auction or at estates levels from where teas are sold either directly to overseas buyers or internal traders. Tea Auction is held every Tuesday at Chittagong, a major port city with sufficient warehouses and port facilities and well connected by road, railways and air link. The marketing of tea in Bangladesh can be divided into two segments. They are: a)

Internal Marketing

b)

External Marketing

34

Internal Market: Internal market deals in wholesale and retail business of tea for internal consumption in the country. In this case wholesale, retail and blending licenses are to be obtained from Bangladesh Tea Board. Here teas are sold under ex-garden sale and through auction. i)

Ex-Garden Sale: Sales by the producers directly from the estates to the internal buyers with prior approval from Bangladesh tea board.

ii)

Auction: Local traders having Biddership license from Bangladesh Tea Board, can purchase tea from Chittagong auction in internal account to sale in the internal Market.

External Market: External market deals in export business of tea. Here teas are sold under direct contract sale and through auction. i)

Direct contract sale: Tea can be exported to foreign buyers through direct negotiation between the buyer and producer with prior approval from Bangladesh Tea Board.

ii)

Auction: Traders having Biddership license from Bangladesh Tea Board can purchase tea from Chittagong Auction in external account to export tea. For export this has to obtain license from Bangladesh Tea Board.

The Supply of Tea to the Auctions The auctioning company, which is the fulcrum of the auction system, is comprised of professionals who combine multi-faceted talents as tea tasters, valuers, quality controllers, auctioneers, and independent arbitrators and consultants between buyers and producers. Auctions in Chittagong commence in early May and continue up to the third week of March of the following year, by which time the entire crop has been disposed of. Buyers operating in the Chittagong auctions are registered as export or internal buyers. At the beginning of each new season, producers nominate brokers for the disposal of their crops through the Chittagong

35

auctions. The broker charges 1% of the sale price as brokerage and also collects an additional 1% as Tea cess levied by the Bangladesh Tea Board on all producers.

The Supply of Tea to the Domestic Market The systems used for the supply of tea to the domestic market are the Chittagong Auction sale and direct sales by producers in bulk or value added form, or both. The domestic market consists of loose tea traders and blenders. Internally, more than 70% of teas are sold loose or in bulk form through a network of licensed wholesalers on whose behalf internal buyers operate. There is a small market for packet tea, mainly confined to middle and upper-middle income groups in the urban areas. Sale of teabags constitutes an even smaller percentage of all teas consumed in the domestic market. Value Added teas (i.e. packet teas and tea bags) are principally a blend of teas available in the local auctions, ex-factory sale to local traders, and garden packed teas from the estates themselves. As the bulk of teas supplied to the domestic market has always been in loose or original form, the major marketing system prevailing for the supply of such teas has been the Chittagong auctions. Direct sales by producers to the domestic market constitute less than 5% of all teas consumed and are presently one million kg. Of the estimated domestic consumption of around 27 million kg, the market share of loose tea is almost 70% at roughly 18-19 million kg per annum, whilst value added teas (including garden packed), at roughly 8 million kg per annum, is nearly 30% of total consumption. Sales of teabags are minimal and are estimated at less than 5% of the value added market. Recent figures for sales of value added teas have shown an upward trend. There has also been an increase in the number of blenders operating in the domestic market; these blenders are now in close competition for the brand name market for packet teas and tea bags, the sale of which is increasing rapidly and also includes the direct sale of garden packed teas by producers (runon). This is indeed a positive sign and an expansion in the system prevailing for the supply of tea to the domestic market. Further, with continued economic stability and prosperity comes an increase in the general purchasing power of the consumer, which will no doubt be beneficial in the marketing of tea for domestic consumption.

36

Weekly Chittagong Tea Auction Report Sale No 40 Held on Tuesday 10th February, 2004

Total Sale 68% Withdrawal 32% Av.Price. Tk. 65.27 Offering CTC LEAF CTC DUST Total

1,680,300 Kg 227, 050 Kg 1,907,350 Kg

Total Sale Up to Sale No.39= 43,625,760 KGs Average Price Up to Sale No.39 = Tk. 64.87

Quotations (In Bangladesh Taka) BROKENS FANNINGS TK US$ TK US$ 40.00Bold 0.69-0.83 73.00-75.00 1.26-1.29 48.00 53.00Medium 0.91-1.15 67.00-72.00 1.15-1.24 67.00 65.00Small 1.12-1.27 60.00-66.00 1.03-1.14 74.50 40.00Plain 0.69-0.90 44.00-56.00 0.76-0.96 52.00 Exchange Rate US$ 1= BD.TK.58.0834 BROKEN

DUST Tk

US$

43.00-75.00

0.74-1.29

45.00-75.50

0.77-1.03

38.00-82.00

0.65-1.41

50.00-119.00 0.86-2.05

: Small Broken were a stronger market. Plainer were sold at

a lower rate. The Selective liner were sold between Tk. 75.00 Tk. 85.00 FANNING

: Well made and good liquoring fanning were fully firm to a much dearer

market. The selective best lines were sold between Tk. 76.00 - Tk. 80.00 DUST

: A few good liquoring RDS\ PDS\ DS sold well and were dearer by up to

37

Tk.5.00 and some times more. Planer and poorer types were mostly neglected. ORTHODOX

: The first consignment of tea comprising 21 packages of Orthodox

organic Tea from Tetuli in Panchagarh was offered in the auction and sold from a rang of TK.75/-to TK 650/- per kg. COMMENTS

: There was a strong demand for all clean and good liquoring Tea.

Pakistan was active including the Packeteers and the local traders. Next Sale

: Next Auction sale no. 41 will be held on Feb. 17th 2004 at 8-30 AM. Total

offering will comprise of 36000 Packages Leaf and 5000 Packages Dust.

World Tea Packaging Tea bags Tea leaves are packed into a small (usually paper) tea bag. It is easy and convenient, making tea bags popular for many people nowadays. However, because fannings and dust from modern tea processing are also included in most tea bags, it is commonly held among tea aficianados that this method provides an inferior taste and experience. The paper used for the bag can also be tasted by many which can detract from the tea's flavour. Additional reasons why bag tea is considered less well-flavoured include: •

Dried tea loses its flavour quickly on exposure to air. Most bag teas (although not all) contain leaves broken into small pieces; the great surface-area-to-volume ratio of the leaves in tea bags exposes them to more air, and therefore causes them to go stale faster. Loose tea leaves are likely to be in larger pieces, or to be entirely intact.

•

Breaking up the leaves for bags extracts flavoured oils.

•

Good loose-leaf teas tend to be vacuum packed.

Loose tea The tea leaves are packaged loosely in a canister or other container. The portions must be individually measured by the consumer for use in a cup, mug or teapot. This allows greater flexibility, letting the consumer brew weaker or stronger tea as desired, but convenience is sacrificed. Strainers, "tea presses", filtered teapots and infusion bags are available commercially to avoid having to drink the floating loose leaves. A more traditional, yet perhaps more effective way around this problem is to use a three-piece

38

lidded teacup, called a gaiwan. The lid of the gaiwan can be tilted to hold back the leaves while sipping the tea. Compressed tea A lot of tea is still compressed for storage and aging convenience. Commonly Pu-Erh tea is compressed and then drunk by loosening leaves off using a small knife. Most of the time Compressed tea can be stored longer than loose leaf tea. Tea Sticks One of the more modern forms of tea consumption, an alternative to the tea bag, is tea sticks. The first known tea sticks originated in Holland in the mid 1990's, where a company by the name of Venezia Trading produced a tea stick named Ticolino. Ticolino are dubbed as single serving tea sticks which use an infusing technology to brew the tea leaves inside, releasing the flavour and aroma.

EXPORT OF TEA Tea Production, Export & Export Earning TEA PRODUCTION, EXPORT & EXPORT EARNINGS FROM BANGLADESH TEA SINCE 1973-74 TO 2002-2003 Year

Production (mkg)

Export (mkg)

Export Earning (m taka)

1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91

29.89 31.28 31.30 35.64 36.35 36.70 39.81 41.90 38.54 42.86 39.46 42.89 38.77 40.26 41.62 41.27 42.56 44.61

21.53 23.50 22.33 29.42 28.63 27.10 23.88 29.85 31.32 30.81 30.74 25.85 29.82 21.41 27.56 25.12 22.57 26.45

105.23 190.79 257.45 558.76 769.11 620.79 510.00 664.76 760.28 1096.38 1690.67 1560.68 973.10 901.32 1204.81 1263.45 1283.00 1523.61

39

1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001 2001-2002 2002-2003

46.79 49.30 51.73 47.04 52.44 52.67 51.25 50.26 50.22 53.41 55.20 54.60

23.64 33.09 27.42 26.72 21.43 25.39 24.45 23.50 12.61 16.53 13.80 12.17

1230.76 1597.59 1521.00 1241.45 1176.03 1311.18 2032.29 1678.29 825.73 1122.14 947.00 870.91

COUNTRY-WISE EXPORT OF BANGLADESH TEA SINCE 1998-2003 1998-99 Sl No. Country Qty. Value 1 Pakistan 6.19 422.84 2 Poland 6.92 461.18 3 U.K. 0.72 55.71 4 India 0.39 24.43 5 Russia 2.49 188.72 6 Germany 0.04 3.16 7 Sudan 0.35 20.81 8 Kenya 0.11 16.72 9 Iran 1.01 81.78 10 Oman 0.06 6.51 11 Jordan 0.06 3.74 12 Afghanistan 0.92 76.79 13 Egypt 0.03 2.55 14 UAE 1.05 78.35 15 China 0.24 14.76 16 Kuwait 0.01 2.25 17 Saudi Arabia 0.05 6.68 18 Japan 0.16 14.56 19 Greece 0.01 0.73 20 Kazakhstan 1.81 141.46 21 Qatar 22 Taiwan 23 Ukraine 24 Kyrgistan 0.07 5.56 25 Turkimistan 0.39 25.16 26 Turkey 0.33 19.99

1999-2000 Qty. Value 4.84 305.94 1.94 110.74 0.42 29.87 0.72 42.41 0.36 23.50 0.10 10.17 0.02 1.05 0.68 50.00 0.03 3.12 0.39 25.44 0.63 49.92 0.05 5.56 0.01 0.69 1.45 104.11 0.30 20.64 0.30 19.65 0.21 14.06 0.05 4.68

40

2000-2001 Qty. Value 7.38 489.90 0.14 7.32 1.13 94.29 0.07 4.43 0.66 42.87 0.04 2.01 0.31 17.13 0.72 47.02 0.06 6.31 4.25 275.40 0.43 34.03 0.04 4.32 0.02 1.28 1.18 92.11 0.4 2.60 -

Qty. in m kg & Value in m taka 2001-2002 2002-2003 Qty. Value Qty. Value 2.03 125.46 6.19 432.49 0.42 25.45 0.66 45.48 0.93 75.51 0.28 21.18 0.05 2.96 0.39 25.59 0.38 24.80 0.36 7.79 0.41 9.00 2.39 164.22 0.26 17.23 0.05 4.38 0.05 6.03 5.57 381.62 2.26 157.70 0.26 23.78 0.23 22.22 0.02 2.07 0.02 2.74 0.07 11.89 0.05 3.16 0.01 0.81 1.18 100.57 1.29 114.32 0.04 4.75 -0.02 1.74 -

27 28 29 30

Yemen Uzbekistan 0.01 1.69 0.06 3.70 Tazakistan 0.02 1.63 Others 0.06 0.53 0.05 0.49 0.06 1.12 0.08 2.03 0.02 Total 23.50 1678.29 12.61 825.74 16.53 1122.14 13.80 947.00 12.17 Source: BTB. Annual Report 2004

41

0.94 870.91

PRODUCTION & EXPORT OF TEA PRODUCING COUNTRIES Production in m Kg Sl Country No. 1.

Production

Export

2001

2000

1999

1998

1997

2001

2000

1999

1998

1997

Banglades 56.82 h

52.64

46.19

55.82

50.52

12.92

18.10

15.18

22.23

25.15

WORLD PRODUCTION OF TEA AND SHARE OF DIFFERENT COUNTRIES (1996-2000) 2. India 853.71 846.48 824.41 874.11 810.03 179.85 204.35 189.09 207.64 200.17 3. Sri Lanka

296.30 306.79 284.15 280.67 277.43

287.50

280.13

262.95

265.31 257.27

Production in m Kg Sl No. Name of the Production 4. China 701.70 683.32 675.87 665.03 613.37 249.67 227.66 199.61 217.43 202.46 Country 2001 2000 1999 1998 1997 5. Indonesia 161.20Produc157.37 % 161.00 166.86 153.62 99.72 105.58 97.85 67.21 Produc% Produc% Produc- % World Produc- % World66.84 tion World tion World tion World tion Share tion Share Share Share Share 6. Iran 46.00 53.00 60.00 60.00 60.00 4.00 3.50 4.00 2.50 2.50 1. Bangladesh 56.82 1.9% 52.64 1.8% 46.19 1.6% 55.82 1.9% 50.52 1.8% 7. Japan 2. India

89.81 853.71 89.31 28.3% 88.51846.4882.61 29.0% 91.21 824.41

7.60 0.70 29.2%0.83810.03 0.75 28.4% 874.11 29.6% 0.58

8. Turkey 130.67 9.8% 170.56 177.84 3. Sri Lanka 142.90 296.30 306.79 10.5%139.52 284.15 48.09 9.8% 4. China 9. Kenya

42.00 9.4%30.00 280.67 277.43 27.00 10.1% 24.90

683.32 23.4%220.72 675.87 258.11 23.3% 665.03 613.37263.40 22.4% 198.55 294.63 701.70 236.2923.2% 248.82 294.17 216.9922.2% 241.74

5. Indonesia 161.20 5.3% 157.37 5.4% 161.00 5.5% 166.86 5.6% 153.62 5.6% 10. Malawi 36.77 42.11 38.47 40.36 43.93 38.26 38.44 42.73 41.01 49.22 6. Iran 11. Others 7. Japan Total

46.00 1.5% 53.00 1.8% 60.00 341.59 324.77 304.86 292.21 260.07

2.1% 2.00

60.00 2.0% 60.00 2.2% 185.04 168.64 182.00 172.41

89.81 3.0% 89.31 3.1% 88.51 3.0% 82.61 2.8% 91.21 3.3% 3,021.43 2,922.75 2,902.84 2,989.68 2,735.89 1,391.94 1322.49 1252.62 1296.46 1200.61

8. Turkey 142.90 4.7% 130.67 4.5% 170.56 5.9% 177.84 Source: a) Monthly Statistical Bulletin of BTB b) ITC Report-2002

5.9%

139.52

5.1%

9. Kenya

294.63

9.8%

236.29

8.1%

248.82

8.6%

294.17

9.8%

220.72

8.1%

10. Malawi

36.77

1.2%

42.11

1.4%

38.47

1.3%

40.36

1.3%

43.93

1.6%

11. Others

341.59

11.3%

324.77

11.1%

304.88

10.5% 292.21

9.8%

275.54

10.1%

Total

3,021.43 100% 2,922.75

Source: ITC Report-2001

100.0% 2,902.84

42

100.0% 2,989.68 100.0% 2735.89 100.0%

WORLD EXPORT OF TEA AND SHARE OF DIFFERENT COUNTRIES

(1996-2000)

Production in m Kg Name of the Country

Production 2000

Sl No.

Export

1999

% % World World Export Share Share 1.4% 15.18 1.2%

1998

1997

1996

% % World Export Export World Export Share Share 22.23 1.7% 25.17 2.1% 26.13

% World Share

Bangladesh

18.10

India

204.35 15.4% 189.09

15.1%

207.64

16.0%

200.71 16.7% 160.00

14.2%

Sri Lanka

280.13 21.2% 262.95

21.0%

265.31

20.5%

257.27 21.4% 233.57

20.7%

China

227.66 17.2% 199.61

15.9%

217.43

61.8%

202.46 16.9% 169.67

15.1%

Indonesia

105.58

8.0%

97.85

7.8%

67.21

5.2%

66.84

5.6%

101.53

9.0%

Iran

3.50

0.3%

4.00

0.3%

2.50

0.2%

2.50

0.2%

1.70

0.2%

Japan

0.70

3.1%

0.83

0.1%

0.75

0.1%

0.58

0.0%

0.50

0.0%

Turkey

42.00

3.1%

30.00

2.4%

27.00

2.1%

24.90

2.1%

20.80

1.8%

Kenya

216.99 16.4% 241.74

19.3%

263.40

20.3%

198.55 16.5% 244.23

21.7%

Malawi

38.44

42.73

3.4%

41.01

3.1%

49.22

36.66

3.3%

Others

185.04 14.0% 168.64

13.5%

182.00

14.0%

172.41 14.4% 131.30

11.7%

1322.49 100.0% 1252.6 2 Source: ITC Report-2001

100.0%

1296.48 100.0% 1200.6 100.0% 1126.09 1

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Total

2.9%

43

4.1%

2.3%

100.0%

TEA PRODUCTION, EXPORT & EXPORT EARNINGS FROM BANGLADESH TEA SINCE 1973-74 TO 2002-2003 Production Year Export (mkg) Export Earning (m taka) (mkg) 1973-74 29.89 21.53 105.23 1974-75 31.28 23.50 190.79 1975-76 31.30 22.33 257.45 1976-77 35.64 29.42 558.76 1977-78 36.35 28.63 769.11 1978-79 36.70 27.10 620.79 1979-80 39.81 23.88 510.00 1980-81 41.90 29.85 664.76 1981-82 38.54 31.32 760.28 1982-83 42.86 30.81 1096.38 1983-84 39.46 30.74 1690.67 1984-85 42.89 25.85 1560.68 1985-86 38.77 29.82 973.10 1986-87 40.26 21.41 901.32 1987-88 41.62 27.56 1204.81 1988-89 41.27 25.12 1263.45 1989-90 42.56 22.57 1283.00 1990-91 44.61 26.45 1523.61 1991-92 46.79 23.64 1230.76 1992-93 49.30 33.09 1597.59 1993-94 51.73 27.42 1521.00 1994-95 47.04 26.72 1241.45 1995-96 52.14 21.43 1176.03 1996-97 52.67 25.39 1311.18 1997-98 51.25 24.45 2032.29 1998-99 50.26 23.50 1678.29 1999-2000 50.22 12.61 825.73 2000-2001 53.41 16.53 1122.14 2001-2002 55.20 13.80 947.00 2002-2003 54.60 12.17 870.91 Source: Bangladesh Tea Board Annual Report 2004 WORLD TEA PRODUCTION-COUNTRY WISE Name of 1997 1998 1999 2000 Country Argentina 55,000 50,000 55,000 63,000

2001

2002

59,000

58,000

2003 60,00 0

Australia

1,200

1,250

1,300

1,300

44

1,300

1,400

2004 63,00 0

1,50

1,55

Name of Country

1997

1998

1999

2000

2001

2002

50,521

55,824

46,186

52,639

56,821

53,622

2003 0

Bangladesh

0 58,30

4 Brazil

5,000

4,000

3,083

3,544

4,427

4,561

Burundi

4,189

6,669

6,859

7,118

9,011

6,605

4,80

4,731

4,485

4,004

4,200

0

4,200

613,366 665,034 675,871 683,324 701,699

4,30

745,374

9,800

15,400

15,930

14,900

15,000

768,14

14,300

2,000

1,900

1,800

1,700

1,600

14,50

1,700

3,600

4,000

4,200

4,500

4,600

1,80

4,700

810,031 874,108 825,935 846,483 853,710

4,80

826,165

153,619 166,825 161,003 162,586 166,868

857,05

162,194

70,418

65,319

68,501

44,233

59,000

49,500

Japan

91,211

82,609

88,512

89,309

90,371

83,677

169,81 58,05 0

287,102

43,930

40,360

38,469

42,114

36,770

293,67

39,185

6,200

6,300

6,246

5,642

5,413

9

5,060

1,787

1,488

1,473

1,309

612

4,04

1,382

1,600

1,600

1,800

2,500

3,000

1,43

3,000

66

61

62

64

65

3,20

70

7,000

7,000

7,200

7,500

7,700

7

7,900

7,000

5,500

6,200

6,200

6,100

8,00

6,200

2,400

2,400

2,500

2,600

6,40

2,700

13,228

14,850

12,970

14,391

17,809

14,948

2,70

8,207

10,845

10,570

10,612

10,734

11,650

15,48

277,428 280,674 284,149 306,794 296,301

45

310,604

14,19 1

10,93 2

Sri Lanka

2,75 0

4 South Africa

6,50 0

0 Rwanda

8,20 0

0 2,500

8 0

0 Papua New Guinea Peru

3,10 0

5 Napal

1,48 2

0 Myanmar

4,50 0

6 Mozambique

50,09 0

0 Mauritius

324,60

41,69 3

Malaysia

100,26 2

0 Malawi

55,00

91,93 0

220,722 294,165 248,818 236,286 294,631

164,81 7

1 Kenya

820,21 6

9 Iran

4,70 0

5 Indonesia

1,85 0

0 India

15,65 0

0 Ethiopia

835,23 1

0 Ecuador

4,50 0

0 CIS/Russia

7,50 0

0 China

4,90

7,38 0

4,189

55,99 6

0 Cameroon

2004

5,69 4

303,25

308,08

Name of Country

1997

1998

1999

2000

2001

2002

24,154

22,641

22,555

20,349

19,837

20,345

2003 4

Taiwan

9 21,00

0 Tanzania

22,475

24,333

23,490

23,897

24,745

27,511

139,523 177,838 170,563 130,671 142,900

142,000

29,48

21,075

26,422

24,730

29,282

33,255

8

33,831

52,200

56,600

65,000

70,000

80,000

36,47

88,000

2,500

2,500

2,500

2,500

2,600

93,00

2,700

95,00 0

2,80 0

Zimbabwe Total

35,70 6

0 Zaire

165,00 0

5 Vietnam

30,68

155,00 0

Uganda

21,00 0

2 Turkey

2004

3,00 0

17,098 17,755 20,411 22,489 22,382 22,544 21,973 18,734 2,742,837 2,991,001 2,908,271 2,913,740 3,035,061 3,042,730 3,152,993 3,233,585

(Source: Bangladesh Tea Board website www.btboard.gov.bd) BLACK TEA CONSUMPTION IN THE WORLD World black tea consumption is projected to increase from 1.97 million tonnes in 1993-95 to 2.67 million tonnes by 2005, an annual growth rate of 2.8 percent. Developing countries would account for the largest part of the prospective increase, with consumption rising from the 199395 average of 1.41 million tonnes to 1.95 million tonnes by 2005, an annual growth rate of 3.0 percent. Black tea consumption in India is projected to continue to rise rapidly, reaching 832 000 tonnes by 2005, an annual growth of 3.2 percent from the base period. In other major markets for black tea such as Pakistan, the Islamic Republic of Iran and Egypt, consumption is projected at 160 000 tonnes, 122 000 tonnes and 90 000 tonnes by 2005, respectively. The reduction of import tariffs and declining prices could have a more pronounced effect on consumption in these countries. The projections also suggest significant increases in black tea consumption in other developing countries, such as Turkey where consumption would grow at an annual average rate of 3.2 percent to 150 000 tonnes. In developed countries, including countries in transition, black tea consumption would increase more moderately by 2.2 percent annually, to 719 000 tonnes in 2005. Consumption in the European Community is projected to increase only slightly in the next decade since higher purchases by France, Germany, Italy and the Netherlands would be largely counterbalanced by a continuing decline in the United Kingdom. Consumption in the United States is projected to increase, though at a relatively slow rate of less than one percent. Since many developed countries impose no, or only slight, restrictions on bulk and packaged black tea imports, the

46

effect of trade liberalisation on their consumption would be negligible. Black tea consumption in the countries of the former USSR is projected to increase from 154 000 tonnes in 1993-95 to 250 000 tonnes in 2005, equivalent to an annual growth rate of 4.5 percent over the period.

47

Per Capita Consumption of Tea in Different Countries Consumption in mkg Sl. No

Country

1994-96

1995-97

1996-98

1997-99

1998-2000

1. UK

2.46

2.46

2.51

2.44

2.33

2. Ireland Republic

3.17

3.23

2.95

2.78

2.69

3. Bangladesh

0.19

0.20

0.23

0.25

0.27

4. Afganistan

1.34

1.68

1.74

1.22

1.01

5. Bahrain

1.32

1.20

1.22

1.21

1.16

6. India

0.62

0.65

0.63

0.63

0.64

7. Iran

1.25

1.43

1.52

1.55

0.58

8. Japan

1.04

1.08

1.08

1.07

1.08

9. China

0.34

0.34

0.34

0.36

0.36

10. Pakistan

0.85

0.78

0.75

0.78

0.82

11. Turkey

1.90

1.80

2.13

2.40

2.56

12. Sri Lanka

1.29

1.29

1.29

1.29

1.28

13. Saudi Arabia

0.80

0.80

0.86

0.82

0.80

14. Kenya

0.44

0.43

0.39

0.41

0.37

15. Libya

2.14

2.38

2.43

2.63

2.44

16. Egypt

1.17

1.25

1.16

1.18

0.24

17. Morocco

1.26

1.25

1.27

1.33

1.40

18. Tunisia

1.15

1.10

1.24

1.25

1.25

19. Australia

0.95

0.90

0.90

0.83

0.80

20. New Zealand

1.23

1.15

1.12

1.04

1.03

21. USA

0.34

0.32

0.33

0.33

0.34

22. Canada

0.46

0.48

0.53

0.57

0.58

23. Qatar

2.24

2.20

2.30

2.37

2.21

Source: ITC Report-2001

48

Tea Imports for Consumption Qty. in mkg Sl. Geographical Region 2000 No 1. Asia 338.54 2. Europe 431.32 3. Africa 224.69 4. North America / West Indies 107.45 5. Latin America 14.68 6. Oceania 19.72 Major Tea Producing 7. 90.20 Countries Total 1226.60 Source : a) ITC Report-2001 b) PDU, BTB.

1999

1998

1997

1996

325.32 448.00 216.53 112.48 16.81 19.18

352.76 435.94 218.71 115.08 17.24 21.78

302.51 463.42 223.23 99.71 15.03 20.48

320.41 425.43 190.12 103.93 16.77 23.23

76.98

71.37

71.32

65.11

1215.30

1233.10

1195.70

1145.00

Consumption of Tea in Different Countries Consumption in mkg Sl. Country 1994-96 No 1. UK 144.29 2. Ireland Republic 11.41 3. Bangladesh 22.53 4. Afghanistan 26.37 5. Bahrain 0.77 6. India 579.67 7. Iran 85.28 8. Japan 131.05 9. China 420.28 10. Pakistan 110.99 11. Turkey 115.07 12. Sri Lanka 23.34 13. Saudi Arabia 14.57 14. Kenya 13.54 15. Libya 11.57 16. Egypt 67.29 17. Morocco 33.35 18. Tunisia 10.32 19. Australia 17.14 20. New Zealand 4.35 21. USA 89.52 22. Canada 13.62 23. Qatar 1.23 Source: ITC Report-2001

1995-97 1996-98

1997-99 1998-2000

145.00 11.36 25.00 34.30 0.72 615.33 85.93 136.41 420.43 104.43 112.55 23.59 15.03 13.73 13.30 74.30 33.68 10.01 16.57 4.10 84.55 14.42 1.23

144.71 10.28 30.67 26.00 0.77 615.00 95.60 135.70 446.24 102.05 152.24 24.20 16.60 11.82 14.07 72.20 37.01 11.65 15.54 3.93 90.24 17.37 1.28

49

148.42 10.82 29.02 36.27 0.76 597.33 92.60 135.60 428.64 103.04 132.94 23.88 16.83 12.87 14.07 69.46 34.68 11.38 16.62 4.20 89.01 15.78 1.31

139.22 10.08 33.67 22.07 0.78 633.67 93.00 136.84 461.33 110.23 164.97 24.37 15.93 10.83 13.33 77.03 39.43 11.82 15.27 3.92 92.59 17.73 1.30

MAJOR TEA IMPORTING COUNTRIES FROM BANGLADESH Three countries in South Asia -- Bangladesh, India and Sri Lanka -- account for 52 per cent of global black tea production, 42 per cent of exports and 36 per cent of consumption. The tea industry in the region also provides year-round employment to about 1.5 million workers -mostly women -- and an equal number depend on tea-related ancillary activities for their livelihood. Yet South Asia's predominance in the tea world is on the decline, with many of the old fields in need of replanting, processing facilities requiring modernization and welfare structures calling for upgrading. At global level, the tea industry is finding it increasingly difficult to make ends meet, caught between rising costs on the one hand and stagnant or declining prices on the other. This problem is more acute in South Asia than in the relatively new tea-growing regions of East Africa. International and intra-regional efforts aimed at improving the tea market have met with little success, and a more practical option available to the industry is in the realm of cost reduction. There is no doubt that the two crucial cost elements -- labour wages and estate supplies -- are bound to rise, per se, but the thrust of this study is that these increases could, within limits, be neutralized in terms of unit costs of production through enhanced productivity. The focus here is not just on labour productivity but also on the other production factors that are involved in the growing, manufacturing and marketing of tea. As the world's second largest importer of tea, Pakistan has called for a single market in Asia for the optimal utilisation of resources and expansion of the trade in the sub-continent. Though India is the world's largest producer of tea at about 830 million kg per annum (2002), the focus has been largely on the domestic market, which consumes about 685 million kg annually. With the Indian tea sector facing multiple crises on account of higher production cost, lower prices and loss of two major exporting markets in Iraq and Russia this year, its stakeholders are desperately looking at the Pakistan market in the light of the thaw between the two neighbouring countries of late. Pakistan Tea Association chairman Saeed Ahmed Khawaja told the Indian delegates at the 110th annual conference of the United Planters Association of South India in Coonoor on Saturday that both the countries should strive towards one market for Asia or the sub-continent to take advantage of the demand-supply scenario. "For historical and political reasons, it is unfortunate that the Indian tea sector could not tap the Pakistan market during the last three decades. As developing countries, there is no reason why we cannot shed our differences and boost tea trade for mutual benefit," Khawaja stated.

50

In spite of Pakistan being a captive market with logistic and freight advantages across the western border, the share of Indian tea in its market was a mere 3.7 million kg out of a total 140 million kg last year. Total imports were valued at $250 million in 2002. Pakistan generally meets its tea requirements from Sri Lanka and Africa, especially Kenya, overlooking the prospects of sourcing it from India due to strained political and economic ties. "If Indian tea exporters have to make a dent in our market, they would have to focus on quality, variety, branding and multiple blends to match its peers from Kenya and other African countries, which have 90 per cent of the Pakistan market," Khawaja declared. In Pakistan too, tea is facing tremendous competition from other beverages. "Hence it is crucial that our trade teams join hands to market the product and increase the consumption," he added. Moreover, in the absence of a free trade agreement between the two countries, Pakistan levies high import tariff and other levies (55-60 per cent) on Indian tea, unlike on tea imports from Bangladesh, Sri Lanka and Nepal, which share the remaining 10 per cent of the Pakistan market. "Going by the current consumption trends, Pakistan is all set to overtake the United Kingdom as the leading/largest tea importer by 2005. With the exit of the Taliban regime in Afghanistan at the end of 2001, about 35 million kg of tea finds its way into the country from its western borders through grey channels. Similarly, large quantities of Indian tea (bulk and loose) are smuggled into Pakistan from across the porous border. With a per capita consumption of 1kg per annum and twice of India, tea is still the most popular and cheapest beverage in the neighboring country, where about 70 per cent of the 140-million population dwell in the hinterland. "Ironically, our government has been discouraging higher tea imports in the face of meager foreign exchange resources by asking the people to drink less tea and imposing heavy duties. None of these measures, however, have worked and tea continues to be in greater demand than before among the masses," Khawaja claimed. According to Mohsin Mansoor Saify, a member of the visiting Pakistani delegation, Pakistan importers purchase Indian teas only when prices were lower and the product was available in variety or blends. Capitalising on the improved relations between the two countries, the Indian commerce ministry is drawing up a plan of action to step up tea exports to Pakistan. Additional commerce secretary L V Saptharishi told the 9-member Pakistan delegation to convince its government for lowering the tariff barriers on tea imports from India so that the trade could be doubled every year.

51

India Tea Board chairman N K Das disclosed that normalisation of relations between the countries would enable India to double its export to Pakistan to 6 million kg by the end of the current fiscal year (2003-04) from 3.5 million kg during the last fiscal (2002-03). A Pakistani delegation has expressed their satisfaction at the quality of tea here and showed interest in importing increased amount of tea from Bangladesh. ‘After returning home, we will urge our government to increase duty-free quota for import of more tea from Bangladesh,’ the chairman of the Pakistan Tea Association, Mohammad Altaf, told New Age last week in Chittagong. Altaf led a seven-member delegation of the association that witnessed tea auction and visited tea estates in Chittagong and Sylhet during its five-day stay in Bangladesh. He said Pakistan has an annual demand for 168 million kg of tea, while its imports from Bangladesh stands only 10 million kg under duty-free quota, agreed in 2002. ‘Bangladesh tea has much more demand in Pakistan. We’re ready to buy as much tea as Bangladesh can export,’ Altaf said. During the visit, the Pakistan Tea Association inked a memorandum of understanding with the Bangladesh Tea Association aiming to further boosting tea trade between the two south Asian countries as well as removing bottlenecks in the shipment of tea. Altaf and his counterpart Wahidul Haque signed the deal on behalf of their respective sides. The Pakistani tea trade leader wants more trade with Bangladesh under a widened duty-free facility. He also observed that the country’s tea sector has attained ‘tremendous improvements –from tealeaf to liquor. The chairman of the Tea Traders Association of Bangladesh, Santanu Biswas, said that the Pakistani delegation had evinced more interest in the quality tea. ’During discussions, we have urged the delegation members to ensure right price for our quality tea,’ he informed, feeling that Bangladesh tea export to Pakistan could surge if leading tea blenders and packers of that country could be lured. By virtue of being the top tea producer in the world, India is playing the lead in the formation of a Tea Council with the seven Saarc countries as members. The council, to be named Saarc Tea Council, will conduct joint marketing, research and also look into other issues like setting minimum quality standards for exportable tea. Explaining the rationale behind the tea council, officials of Indian Tea Association (ITA) said: "The seven nation Saarc accounts for 60 percent of the world's black tea exports. India is the largest producer and consumer of tea, Sri Lanka is the world's largest exporter while Pakistan is the third largest consumer of tea. Nepal and Bangladesh are also into tea production

52

in a small way. So there is an immediate need to form a tea council to strengthen trade ties among these nations." Pakistan will play a crucial role in this council. Gautam Bhalla, executive director, Warren Tea said: "Countries (except Nepal and Bangladesh) which are exporting tea to Pakistan are required to pay a high import duty of nearly 30 percent. We would like to address this issue at the Saarc Tea Council. India should be allowed to send tea to Pakistan at a zero duty. At present, tea from Bangladesh and Nepal has zero duty status in Pakistan. The council will facilitate Indian tea trade with Bangladesh

and

Nepal."

Pakistan

consumes

nearly

140m

kg

of

tea,

annually.

The country buys mainly from Kenya. In '05, Pakistan imported 9.3m kg of tea from India. The Indian tea industry is also eager to take advantage of the South Asia Free Trade Agreement (Safta) that came into effect on January 1, '06. The pact aims at reducing tariffs for intra-regional trade among members. Pakistan and India are to complete implementation by '12, Sri Lanka by '13 and Bangladesh, Bhutan, Maldives and Nepal by '15. Senior industry officials said, "India is actively pursuing the formation of the tea council as the country wants to take advantage of the Kenyan drought." There is already a shortage of 40-50m kg of tea in Kenya following a severe drought. Indian producers have firmed up plans to make major inroads in Pakistan -- one of the largest buyers of Kenyan tea -- this year. They are trying to utilise the Saarc tea council platform for clinching better deals with the Pakistan tea trade." A 13-member Pakistan tea delegation is visiting India in April. Bangladesh tea risks losing international market, thanks to congestion at transshipment ports coupled with an increase in freight charges. Now, a shipment of 3,000 tonnes of tea worth over Tk 20 crore for Pakistan remains stranded because of congestion at Singapore and Colombo ports. The weekly tea auction in Chittagong is also witnessing a downslide both in terms of price and demand. "The shipping problem has put us into a difficult situation and we are worried about the huge stock of tea that we bought from local auctions for exporting to Pakistan, a major buyer of Bangladesh tea," said Chairman of Tea Traders Association of Bangladesh (TTAB) Feroz Ahmed. "The Karachi-bound shipment remains stranded due to congestion at transshipment ports in Singapore and Colombo," he added. "If the situation does not improve within the next 15 days, Bangladesh tea exporters will fail to meet their shipment deadline. We may even lose our export market in Pakistan," Feroz said. He said the TTAB has already started lobbying the government organisations including

53

Bangladesh Tea Board to do the needful to end the crisis. Ali Akbar, manager of a private teaexporting firm, said the increase in freight charges is also posing threat to tea export. "Freight charges rose to US$ 925 for a 20-ft container from US$ 700 and US$ 1,400 for a 40-ft container from US$ 750 only a month ago. Some tea traders now stopped buying tea from the auction as they failed to keep pace with the increased freight charges," Akbar added. Tea brokers said the weekly tea auction on Tuesday witnessed a downslide both in price and demand due to shipping problems twined with sudden flooding in Dhaka. Overall average price on Tuesday's auction stood at Tk 67.76 a kg down from Tk 68.68 recorded in the previous auction, brokers said. Besides, 20.11 percent tea in the auction remained unsold while in the previous auction 10.83 percent tea was unsold, they said. The latest Pakistani offer to enhance the duty-free quota margin in importing tea from Bangladesh would not bring any trade benefit for Dhaka. Sources in the business circle told UNB that the Pakistani decision to raise the duty-free quota margin from the existing 10,000 tons to 15,000 tons is virtually eyewash because Bangladesh is yet to achieve the target of fulfilling the existing tea quota in the Pakistani market. Pakistan in the just concluded Joint Economic Commission (JEC) meeting held in Dhaka on September 12 had positively responded to Bangladesh’s plea for raising the duty-free quota margin for tea. In the agreed minutes signed at the end the trade talks, the Pakistani side offered to enhance the duty-free quota of Bangladeshi tea to 15,000 tons per annum. ‘It could be better to seek duty free access for other Bangladeshi items to the Pakistani market… While we can’t meet the existing duty-free quota for tea in Pakistan what was the use of raising it such product,’ said a top executive of Tea Traders Association of Bangladesh (TTAB) preferring anonymity. Export Promotion Bureau (EPB) sources said Bangladesh exported 11.06 million kg tea to some 27 countries in 20042005. Of the total, the country fetched US$ 10.75 million through exporting 7.5 million-kg (7,500-ton) tea to Pakistan in 2004-2005 fiscal years. This was the highest volume of tea exported to the Pakistani market in last five years, according to Bangladesh Tea Board sources. Deputy Secretary of the Ministry of Commerce of Pakistan Waqar Ahmed Shah told UNB during his visit to Dhaka that Bangladesh need to develop more tea estates to raise its tea export to Pakistan.

54

“You have to develop more Sylhets… one Sylhet won’t be able to fulfill the demand of Pakistani buyers,” he added. Referring to Kenya’s lead in the Pakistani tea market, he said that Bangladesh provides only 8 percent of his country’s total tea demand while 60 percent came from Kenya. Tea production in the country was recorded to be 53.62 million kg in 2002, 58.30 million kg in 2003, 56.02 million kg in 2004 and 24.73 million kg in January-July of 2005, according to Bangladesh Tea Sangsad. Some 60 percent of tea produced in Bangladesh is consumed domestically while the remaining 40 is exported.

PROSPECTS OF BANGLADESHI TEA IN THE INTERNATIONAL MARKET Tea consumption in Bangladesh is increasing 3 per cent per annum but its production is increasing 1 per cent only. If tea production was not increased Bangladesh would become a teaimporting country after 2020. Bangladesh is now exporting 12,000 Metric Tons (MT) tea per annum, which earns Tk 90 crore. According to the Bangladesh Tea Board currently Bangladeshi tea gardens are producing 56,000 MT of tea per annum. Of this 12,000 MT is exported. Bangladesh’s current population growth rate is 1.6 per cent. Experts consider that in 2020 Bangladesh’s population will reach to 18.10 crore. If the tea consumption growth rate continues, in 2020 tea consumption will reach to 6.50 crore kg while its production will reach only to 5.41 crore kg. The government is considering framing of a 20-year strategic plan for development of the tea sector and to increase its production. The project will cost Tk 867. 32 crore. Of them Tk 752 crore will be spent for implementation of strategic plan, Tk 64 crore will be spent for research and other Tk 51 crore will be spent for trade and marketing strategy. The strategic plan suggests that total land for tea production has to be increased to 69,000 hectares from existing 50,000 hectares. It also suggests that tea production per hectares is 1748 kg from 1176 kg has to be increased as early as possible. It also recommends increase of quality of tea and to export 40 per cent of total tea production. Sources said that currently in Bangladesh 161 tea gardens contain 11,4,288.26 hectares of land. Of them 50,226 hectares of land were used for tea cultivation that is 44 per cent of total land of tea gardens. Out of 161 tea gardens 26 were managed by foreign companies and those produce 50.50 per cent of Bangladesh total tea production. Tea gardens that were managed by foreign companies’ are producing 1439 kg tea per hectares. On the other hand, 135 tea gardens were managed by Bangladeshi tea companies. Tea gardens that were managed by Bangladeshi companies’ produce 622 kg tea per hectares.

55

Sources said that the tea gardens owned by Bangladeshi companies failed to increase its production due to lack of plan, lack of modern technology and equipments. On the other hand 26 tea gardens owned by foreign companies produce large quantity of tea due to modern technology and equipment and proper plan. Sources said that the proposed strategic plan would be placed for approval soon. A meeting will be held soon with Planning Commission and other concerned authorities in this regard for its pre-approval. It may be mentioned here that Bangladesh exports tea to Pakistan, India, Afghanistan, Poland, United Kingdom, Russia, Kenya, Iran, Kazakstan, United Arab emirates, Oman, Saudi Arabia, Greece, Ukraine, Kirgizistan, Turkmenistan and Uzbekistan. Of them Pakistan is highest tea consuming country in the world. Special handmade Orthodox tea produced by public and private sector gardens of Bangladesh is expected to find its room permanently at the world famous UK based super chain store Harrods Limited. Bangladesh Tea Board (BTB) and tea industry sources said it will open up new avenues for Bangladesh tea if the Harrods authority finally continues to show interest for marketing of Bangladeshi tea to the clients. Sources said for the first time, the Harrods Limited which was established by British tea merchant Mr. Charles Henry Harrod, has organized an exclusive sale promotion fair for Bangladeshi tea in London held from October 25 to November 6. The Harrods authority in its brochure published on the occasion titled "The Finest Bangladesh Teas in the Finest British Store" attempted to lure its clients to Bangladeshi products by describing “Bangladesh Tea Tantalising flavours from outstanding estates". "For the last few years we have been closely following the developments in Bangladesh, a country more known for paddy fields and floods. From a very small base Bangladesh has now become the world's fifth largest producer of tea, exporting only small quantities to the United Kingdom" the brochure said. Harrods displayed tea produced by four gardens of Bangladesh with finest quality having special taste and flavour. The gardens are Dauracherra Tea Estate, Silloah Tea Estate, Kazi and Kazi Tea Estate and the tea estate owned by the Bangladesh Tea Research Institute. "Most encouraging and exciting thing was that whole chunk of the tea amounting 500 kilograms imported by the Harrods were sold out within first few days of the sale" BTB Chairman Brigadier General S A H M Tauhid told BSS. He Quoted the Harrods men as saying that the Bangladeshi tea drew a huge response among the elite customer circle. He said Harrods fetched prices three to four times high from it's

56

customers for per kilogram tea compared to their import prices and it also exported the Bangladeshi tea to Japan through their marketing chain.

"Some credit for inclusion of

Bangladesh tea at the posh business center in London must go to Mr. B. Rahman, a Bangladeshi and Senior Buyer of Harrods who played a key-role in the whole affair" the BTB Chairman said.

After getting good response from the customers about the products, the

Harrods authority is now keen to import big quantity of Bangladesh- tea. THE field and factory development project of the Bangladesh Tea Board (BTB), which is being almost entirely funded by the UNs Common Fund for Commodities (CFC), marks a serious effort by the Bangladesh Government to tone up the tea industry which is in a bad shape for a long time. The project, the implementation of which is being spread over 10 years starting 200001, takes into account the signs of increase in domestic consumption of tea due to population growth and improvement in the socio-economic condition of the people. The authorities have also kept in view the emerging opportunities for thrust on the marketing of tea, citing health benefits brought to the fore in recent years by researchers in several countries. Currently, the consumption of tea in Bangladesh is a low of 250 grams per capita. A recent FAO document, which gives details of the present state of the industry in Bangladesh, has observed that the major problem areas are low yield (1,158 kg per hectare), high cost of production, low unit realisation, inadequate availability of finance and large tracts of unutilised land. Out of the 158 estates, 37 are either sick or they fall in the least developed garden category. Although they account for 17 per cent of the area under tea, their share in production is just three per cent. Twenty-four per cent of the plantations have very old bushes and because of the large percentage of vacancy, their average yield is only 700 kg per hectare. This pulls down the overall productivity per hectare. Last year Bangladesh produced 54 million kg (mkg) of black tea (CTC), out of which the domestic consumption was estimated at 36 mkg. Its exports were placed at 18 mkg. Considering the gestation of the development project, the FAO document has placed its production in 2010 at 62 mkg. But, domestic consumption is projected to grow at 45 mkg. Availability for export will show a negative growth at 17 mkg. The development programme, therefore, aims at preventing a situation wherein Bangladesh becomes a net importer of tea. The cost of the project has been estimated at $17.4 million. CFC is to provide interest free loan of $17 million. It will attract service charge of one per cent.

57

The objectives of the development-cum-rehabilitation project are: infilling in 2,200 hectares with high yielding variety of clones; replantation in 3,000 hectares; to increase area under tea by 4,500 hectares; to procure new CTC machines and other equipment; to modernise factories having very old machinery; to improve quality to international standards, keeping in view the health benefits of drinking tea; to establish modern blending and packaging facility and; to generate employment opportunities for unemployed/temporary tea estate workers as well as dependents of tribals/ethnic minorities. BTB hopes that achievement of the targeted productivity levels will enable the industry to compete in the international market. The government has taken up a programme to cultivate tea plants in an experimental basis in the district with a view to increasing tea production in the country, reports BSS. Bangladesh Tea Research Institute has already started its sub station at Tetulia to grow tea in the area and under taken a project involving a budgetary allocation of Taka 3.3 crore for tea gardens in Panchagarh. Besides, a tea processing factory, tea development and tea expansion centre would be set up here soon. European Commission (EC) has shown keen interest to invest in setting up tea gardens in the district. EC will invest Taka 3.3 crore for three projects including set up of Tea Board office, BTRI and producing tea plant. The RAKUB will give loan of Taka 46,500 as financial support to the growers for preparing of land, purchasing of tea saplings, fertilizers, insecticides, irrigation and labourers to produce tea. Special handmade Orthodox tea produced by public and private sector gardens of Bangladesh is expected to find its room permanently at the world famous UK based super chain store Harrods Limited. Bangladesh Tea Board (BTB) and tea industry sources said it will open up new avenues for Bangladesh tea if the Harrods authorities finally continue to show interest for marketing of Bangladeshi tea to the clients. Sources said for the first time, the Harrods Limited which was established by British tea merchant Mr. Charles Henry Harrod, has organized an exclusive sale promotion fair for Bangladeshi tea in London held from October 25 to November 6. The Harrods authority in it's brochure published on the occasion titled "The Finest Bangladesh Teas In The Finest British Store" attempted to lure it's clients to Bangladeshi products by describing " Bangladesh Tea - Tantalising flavours from outstanding estates".

58

"For the last few years we have been closely following the developments in Bangladesh, a country more known for paddy fields and floods. From a very small base Bangladesh has now become the world's fifth largest producer of tea, exporting only small quantities to the United Kingdom" the brochure said. Harrods displayed tea produced by four gardens of Bangladesh with finest quality having special taste and flavour. The gardens are Dauracherra Tea Estate, Silloah Tea Estate, Kazi and Kazi Tea Estate and the tea estate owned by the Bangladesh Tea Research Institute. "Most encouraging and exciting thing was that whole chunk of the tea amounting 500 kilograms imported by the Harrods were sold out within first few days of the sale" BTB Chairman Brigadier General S A H M Tauhid told BSS. He Quoted the Harrods men as saying that the Bangladeshi tea drew a huge response among the elite customer circle. He said Harrods fetched prices three to four times high from it's customers for per kilogram tea compared to their import prices and it also exported the Bangladeshi tea to Japan through their marketing chain. "Some credit for inclusion of Bangladesh tea at the posh business center in London must go to Mr. B. Rahman, a Bangladeshi and Senior Buyer of Harrods who played a key-role in the whole affair" the BTB Chairman said. After getting good response from the customers about the products, the Harrods authority is now keen to import big quantity of Bangladesh- tea. The latest Pakistani offer to enhance the duty-free quota margin in importing tea from Bangladesh would not bring any trade benefit for Dhaka. Sources in the business circle told UNB that the Pakistani decision to raise the duty-free quota margin from the existing 10,000 tons to 15,000 tons is virtually eyewash because Bangladesh is yet to achieve the target of fulfilling the existing tea quota in the Pakistani market. Pakistan in the just concluded Joint Economic Commission (JEC) meeting held in Dhaka on September 12 had positively responded to Bangladesh’s plea for raising the duty-free quota margin for tea.In the agreed minutes signed at the end the trade talks, the Pakistani side offered to enhance the duty-free quota of Bangladeshi tea to 15,000 tons per annum. “It could be better to seek duty free access for other Bangladeshi items to the Pakistani market… While we can’t meet the existing duty-free quota for tea in Pakistan what was the use of raising it such product,” said a top executive of Tea Traders Association of Bangladesh (TTAB) preferring anonymity.

59

Export Promotion Bureau (EPB) sources said Bangladesh exported 11.06 million kg tea to some 27 countries in 2004-2005. Of the total, the country fetched US$ 10.75 million through exporting 7.5 million-kg (7,500-ton) tea to Pakistan in 2004-2005 fiscal year. This was the highest volume of tea exported to the Pakistani market in last five years, according to Bangladesh Tea Board sources. Deputy Secretary of the Ministry of Commerce of Pakistan Waqar Ahmed Shah told UNB during his visit to Dhaka that Bangladesh need to develop more tea estates to raise its tea export to Pakistan. “You have to develop more Sylhets… one Sylhet won’t be able to fulfill the demand of Pakistani buyers,” he added. Referring to Kenya’s lead in the Pakistani tea market, he said that Bangladesh provides only 8 percent of his country’s total tea demand while 60 percent came from Kenya. Tea production in the country was recorded to be 53.62 million kg in 2002, 58.30 million kg in 2003, 56.02 million kg in 2004 and 24.73 million kg in January-July of 2005, according to Bangladesh Tea Sangsad. Some 60 percent of tea produced in Bangladesh is consumed domestically while the remaining 40 is exported. Bangladesh tea witnesses a better market this year with the increase of both price and demand amid a rise in output despite a fall in its export, tea officials here said. They added that tea prices increased by Tk 11 per kilogram on an average this season compared with that of the previous season. In the first 21 auctions of the current season, 24 million kilograms of tea were sold with an average price recorded at Tk 76 per kilogram as against 21 million of tea sold with an average price of Tk 65 per kilogram during the same number of auctions in the previous season, they informed. Tea auction is held in the port city of Chittagong once in every week while tea auction season begins from April and ends in March the next year. ‘Price of tea jumped this time because of huge demand from home buyers particularly local packeteers and blenders who are in a race to capture internal market,’ said an auction official Subir Das. ‘Foreign buyers also from Pakistan and Afghanistan took part in the auctions here’ he added. According to official reports here, Bangladesh in the first eight months from January to August this year produced 33 million kilograms of tea up from 31 million kilogram produced in the previous year (2004) in 156 tea gardens. But export of Bangladesh tea in the first seven months (January to July) of this year was recorded at 4.43 million kilograms, down from 5.48 million kilograms exported during the same period of previous year, official reports said.

60

Talking to New Age, Nabi Hossain, deputy director of state-owned Bangladesh Tea Board said, ‘Our export of tea is gradually sliding as the demand for home market and the price increased so much that export buyers could not compete with local buyers’. ‘We think that in future there may not be any tea left for export from Bangladesh with more increase of home demand unless the production is raised,’ Nabi said adding that most of the tea out of over 50 million kilograms produced annually in Bangladesh are consumed in the internal market’. In 2004 Bangladesh exported 13 million kilograms of tea while 42 million kilograms were consumed in the internal market, official reports said. Feroz Ahmed, former chairman of the Tea Traders Association of Bangladesh, said, our internal consumption is increasing every year. So we don’t know, after ten years, whether we will have tea left for export if the production cannot be raised.’ Bangladesh tea which was exported to 25 countries of the world ten years ago, now finds buyers only in Pakistan, Afghanistan and CIS countries, tea sector sources said. Bangladesh joined in ‘organic tea club’ by marketing the first ever organic tea produced by the ‘Kazi and Kazi Tea Estate’, the only tea garden in the country’s northern region. The tea with the brand name ‘Meena’ was launched today (Thursday) in the market at Meena Bazar, a modern departmental store, in city’s posh Dhanmondi residential area. At a launching ceremony, Kazi Jamil Islam, Consultant of Meena Bazar, said that the tea is similar to world famous ‘Darjeeling Tea’ in taste and flavour. Moreover, being produced in the virgin land of Tetulia, the ‘Meena Tea’ is free of any harmful chemical fertilizer and chemical-free cow dung is the only natural fertilizer used for producing this tea, he said.

BANGLADESH TEA MARKET The tea market in Bangladesh has had its ups and downs. Natural disasters, the domestic market, and the state of buying countries have all been factors in Bangladesh tea’s value. Owing to an unprecedented drought prevailing well into the middle of the 1999/2000 season, quality was well below average for the country until July 2000. At that time, tea was brownish with thin liquors, but thereafter an improvement was noticeable, particularly in cup character. Puja quality was also quite fair. However, towards the end of the season, there was quite a sharp fall.

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Up until May 2000, crop figures from other producing countries showed an increase in crop from the very low figures of 1999 and only a shade lower than the massive production in 1998. These figures gave Bangladesh very little scope for optimism about prices for the current season’s teas. We have seen how, in 1999, despite very large deficits in crop, instead of moving up, prices actually went down, particularly for Bangladesh tea. We believe that this was caused by a lack of sufficient export orders owing to an abundance of plain teas. The scenario may not change for the better during the current season, and demand from export markets could be sluggish. If we examine our overseas markets, especially Pakistan, we may find that we have to compete with a host of countries such as Indonesia, Malawi, and even Vietnam, to sell our product at ever declining prices. These countries are keen sellers and offer their tea at prices that are often lower than those for teas of a similar quality from Bangladesh. We also understand that other importing countries such as Russia and CIS are well stocked with teas, so these buyers are likely to be less active during the current season than during 1999/2000. Similarly, Poland is very well stocked with cheap South Indian teas. In short, demand in our auctions may be sluggish for the best part of the current season and prices may fall to unremunerative levels. Having drawn this gloomy scenario, we feel that internal demand is likely to play a more dominant role in the market. Our domestic consumption has now grown in excess of 30 million kg and is steadily rising, mainly due to the fact that the middle class income is steadily rising while the numbers of desperately poor people are, according to government statistics, declining. During the 2000/2001 season, consumption could further increase to 32 million kg. or more, provided that consumers are supplied with a better quality tea. Fortunately, the rising popularity of branded products is having a beneficial effect on demand for good liquoring teas and more and more estates are trying to produce a good cup quality in order to cater to the requirements of blenders. Loose tea buyers are also paying more attention to cup quality than before. We therefore soundly believe that well-made grades with strong, bright liquors will attract higher demand from our internal buyers at more remunerative prices. We may well see a very sharp price differential between good and plain teas and, while the former may fetch higher prices, the latter could be mostly neglected and if sold at all realize poor prices. The key, therefore, to survival in 2000/2001, is quality!

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Demand for Bangladeshi Tea On the whole, demand was sluggish for most of 1999 as export markets were much less active than during the previous season. However, internal buyers lent good support and absorbed the bulk of the offering in the initial auctions at progressively lower rates and, as the season progressed to the end of July 1999, demand slackened quite considerably and withdrawals in the auctions were fairly heavy. This declining trend was reversed in August when strong export interest and more widespread demand from the internal buyers greatly improved the market segment and consequently the prices at the auctions. These buyers lent fairly good support during October and November and there was progressive improvement in their activities during December. Demand slackened at the beginning of 2000 with a heavy weight of teas on offer in the auctions. February began with a similar tone but soon improved and all sections of the market, especially the export market, lent some good support despite the large offerings. The last few sales of the 1999/2000 season mainly comprised end of season types but the few good invoices attracted useful support from the internal market. Export inquiries were limited. Since the new season’s sale that began in late April 2000, demand has been restricted for about six weeks to only well-made, bright-liquoring teas and, as a result, quite a lot of poorly-made teas were neglected and remained unsold. However, a better demand was seen in the following months, and most of the unsold teas of poor quality, along with an increased weight of better quality teas, were absorbed by the local buyers to satisfy internal demand. Export buyers began to appear in the market from the end of July and their activities gathered energy from August, contributing to a firm demand which lasted until the end of November 2000. The Market The first sale of the 1999/2000 season, held on May 11, 1999, was marked by a strong demand from the internal buyers at prices well over the closing rates, the average price being Tk. 80.18. However, price levels gradually declined in subsequent sales owing to lack of export enquiry. By Sale no. 10, held in the middle of July, the average price had registered a sharp drop and stood at Tk. 53.25 per kg as against Tk. 62.96 per kg for the same sale of the previous season. However, a firm market at this level prevailed up to the end of September. A much stronger demand was witnessed from the last week of September but export inquiries were sharply lower from November onwards following lack of competition. From the first week of December 1999, a much stronger market prevailed following increased buying by internal and export buyers mainly from Russia, CIS, Pakistan, and Poland. Afghanistan also re-entered the market and, for a few weeks, operated very strongly for well-made Brokens at satisfactory levels. As a result, rates

63

improved quite appreciably and by the end of December, the average price for the last sale of the century recorded an average price of Tk.62.37. The year 2000 started with an easier market and prices declining by an average of Tk.2.50/- per kg. The market improved for a short spell in February when all sections showed an active interest. In the market for the season 2000/2001, tea witnessed a fair activity until the end of June, mostly from internal buyers, but when the auction offerings increased in July, prices eased due to a lack of sufficient export demand. There was an improved demand in August and generally, prices moved upwards. This trend was maintained in September and stayed firm until the last week of the year. Buyers Internal buyers, from both the loose tea section and the packeteers, were the principal operators at the auctions and purchased a higher volume of tea than during the previous year. Poland, Pakistan and Afghanistan bought much less tea during the 1999/2000 season, but Russia bought an increased weight from this center. Kazakhstan operated in greater strength but all other export markets, notably Iran and Sudan, were much less active. Since the start of the new season, Pakistan has dominated the market and shipments until the end of September 2000 to that country amount to 6.2 million kg, as against 2.5 million in the previous season. Afghan buyers come second to Pakistan and, although they started to operate only from August, their presence has been strongly felt, especially in the market for well made Brokens and Fanning. Poland has been virtually absent while Russian buying was negligible. CIS lent less support than during the previous season. The internal loose tea buyers were quite active in the first few weeks of the new season’s auctions but only moderately so in the subsequent months. On the other hand, the internal blenders were active throughout and bought more tea than in the similar period last season.

MAJOR COMPETITORS IN TEA MARKET South Asia has a predominant stake in the global tea economy. Three countries -- Bangladesh, India and Sri Lanka -- account for 52 per cent of world black tea production and 42 per cent of the export trade. These countries, with a population of 1,200 million, account for 36 per cent of world tea consumption.

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Sri Lanka has possibly the world's highest cost of tea production at an estimated US$1.47 per kg in 1994, compared with US$1.09 per kg for India and US$1.15 per kg for Bangladesh. The cost is reportedly even lower, at US$0.96 per kg, for the estate sector in Kenya. Table 1. South Asia: Black tea production and exports, 1991-94 (million kg) Production

Exports

1991-93

1994

1991-93

1994

Average

Estimate

Average

Estimate

Bangladesh

47

53

28

24

India

727

744

182

149

Sri Lanka

217

242

196

230

South Asia

991

1 039

406

403

World

1 909

1 934

971

954

South Asia's share (per cent)

52

53

42

42

Source: FAO. (Food and Agricultural website www.fao.org) Medium-term projections clearly point to India and Sri Lanka continuing to retain their leading position in production and exports, respectively, with Pakistan emerging as the world's largest importer, surpassing both the United Kingdom and the Russian Federation. The likely position by the year 2005 could be as indicated in table 2. Table. Projected tea production, 2005 (million kg) South Asia

World

South Asia's share (per cent)

Production

1 355

2 811

48

Exports

539

1 435

38

Consumption

1 043

2 727

38

Source: FAO. (Food and Agricultural Website www.fao.org) Whether in Asia or Africa, however, the tea industry's problems are intrinsically the same -rising costs and stagnant or declining prices. The importance of these factors varies. As far as prices are concerned, global efforts, through FAO and UNCTAD, to maintain prices have met with little success. A recent initiative by Sri Lanka led to the establishment of the International Tea Producers' Forum, but efforts by the Forum to lift sagging world prices will take a long time to bear fruit. Within the region, the South Asian Association for Regional Cooperation (SAARC) has been negotiating a South Asian Preferential Trading Agreement (SAPTA) as well as a South Asian Free Trade Agreement (SAFTA). Progress has been slow in contrast to the success achieved by other trading blocs, such as the European Union, NAFTA and APEC. Meanwhile, world tea prices fell for the fourth successive year, the overall decline in US dollar terms for 1994 being about 7.7 per cent over 1993. There were, however, considerable regional

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disparities. While the average price at the Mombasa (Kenya) auction increased by 3.5 per cent, there was a substantial decline in the principal centres in South Asia -- 12.9 per cent in Calcutta (North India), 22.1 per cent in Cochin (South India), 8.5 per cent in Colombo (Sri Lanka) and 15.8 per cent in Chittagong (Bangladesh). For the first time since the Tatas took over the Tetley group, the company is on an expansion mode. Tetley is entering into three joint ventures in Russia, Pakistan and Bangladesh, three of the largest tea-drinking countries, as part of a plan to expand its global presence.The investments in these ventures will be through Tata Tea (Great Britain), the holding company of Tetley. All the three companies, which will be owned equally with local firms as partners, will blend tea locally for the respective markets. A senior Tata group official said: “Tata Tea (Great Britain) will be entering into equal partnerships with local partners. We are in the final stages of discussions and the deals will be signed soon.” Tata group officials, however, declined to reveal investment details. The expansion strategy is critical in increasing Tetley’s earnings potential because Tata Tea has leveraged the company’s future cash flows to fund Tetley’s £271-million acquisition. Since then, the Tatas have had to infuse another £30 million, for debt reduction and other recast activities, in the company to bring it back on the rails. Although Tetley is the single largest tea brand worldwide, it trails way behind the Unilever group’s tea brands. But the global tea market still remained fragmented, offering a huge opportunity, a Tata source said. Tetley will also shift its focus from black tea to higher-value added products such as flavoured teas, green teas and herbal teas. In 2001-2002, Tetley increased its market share to 25 per cent in the UK, the worlds largest tea market, against Unilevers PG Tips 23 per cent, while Premiers Typhoo had a share of 6 per cent. In Canada, Tetley had a 43 per cent marketshare in tea bags, while Unilevers Red Rose had 19 per cent, and Salada, another Unilever brand, had 9 per cent in 2001-2002. The UK and Canadian markets have been powerful contributors to the Tetley groups’ profits. Tetley has also rationalised its manufacturing facilities. Tetley currently had five production centres: one in the UK, two in the US, one in Australia and one in India. However, the group closed the Greenford factory, a small facility in the UK. By containing costs, it saved over £1 million on packaging and overheads. World tea production continued to reach new highs in 2004, when output grew by 2 percent to reach an estimated 3.2 million tonnes, according to an FAO report prepared for the

66

Intergovernmental Group on Tea meeting in Bali (20-22 July 2005) to review the current world tea market and its medium-term outlook. The expansion in production was due mainly to the increases recorded in Turkey, China, Kenya, Malawi, Sri Lanka and Indonesia. The growth in output from these countries more than offset declines in other major producing countries, including India and Bangladesh. In China, tea output for 2004 approached the 800 000 tonnes milestone as policy initiatives to promote production and trade of tea began to have an impact on the sector. In Sri Lanka, production increased slightly by 1.3 percent to 309 000 tonnes in 2004, reflecting the recovery from crop losses after devastating floods in low grown tea areas of the island in 2003. In Indonesia, where a 1.2 percent growth was recorded, output reached 170 000 tonnes in 2004. In Turkey, production was reported to have expanded dramatically in 2004 as output increased by 32 percent to reach around 205 500 tonnes, due to higher yields. Tea production in Kenya increased by more than 11 percent in 2004 to reach 328 000 tonnes, as a result of favourable weather in most of the growing regions and the expansion in processing capacity. Malawi also reported a significant increase of 19 percent in tea production with output reaching 50 000 tonnes. In India, tea production declined by 4.3 percent to reach around 820 200 tonnes due to unfavourable weather conditions and the closure of up to 70 tea gardens in Assam. World tea exports increased by 4.4 percent in 2004 to reach 1.47 million tonnes, as shipments from all major exporting countries increased during the year. Kenya was the largest exporter, once more surpassing Sri Lanka. The 8.9 percent increase in exports from Kenya brought total shipments for the year to almost 293 000 tonnes. A similar increase (8.9%) was also recorded by Indonesia. Tea exports from China expanded by more than seven percent to reach 282 000 tonnes, and were dominated by green tea, which accounted for more than 75 percent of its total exports. World net tea imports continued to increase in 2004, by 1.5 percent, reaching 1.42 million tonnes. This trend reflected the increases in traditional developed country markets of the European Community (an increase of 2.4 percent), the United States (5.3 percent) and Japan (2 percent), where imports reached 215 000 tonnes, 99 000 tonnes and 56 000 tonnes, respectively.

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Most of the growth in these markets is reportedly in response to promotional efforts on the health benefits of tea consumption. Available evidence from medical research suggests that moderate consumption of tea offers protection against heart and blood vessel disease, some cancers, and bacterial infections. In 2004, tea prices opened at US$1.56 per kg in January and closed at US$1.73 per kg in December, reflecting an improvement on the demand side, according to FAO. A recent study on the market evolution between 1993/1995 and 2001/2003 indicated that, out of 27 agricultural commodities, tea showed the second lowest variability in prices: 2% decline compared to 39% for cocoa and 38% for coffee. "Recent developments in the world tea market suggest that the major players have succeeded in bringing the market towards balance," said David Hallam, Chief, FAO Raw Materials, Tropical and Horticultural Products Service. "Demand has been stimulated in the major producing countries themselves, notably for black tea, and supply has been tailored to market opportunities," Mr. Hallam added. The meeting of the Intergovernmental Group on Tea will be preceded by the International Tea Business Conference (18 - 19 July 2005) which will take place at Bali's International Convention Centre. India produced 826 million kg of tea in 2002, representing approximately 30% of the world’s tea supply. However, the Indian tea industry faces considerable difficulties. Domestically, the retail price of tea is depressed by oversupply, as reflected in the sharp disparity in growth between volume (+28%) and value (-10%) in the retail market between 1998 and 2003. This problem was exacerbated by the government lifting quota restrictions on commodity imports in 2001, resulting in an increase in cheap, low-quality tea from neighbouring countries such as Nepal, Vietnam and Indonesia. As is frequently the case with staple products, the resultant drop in the price of tea has not equated to a rise in consumption. Furthermore in its export markets India is threatened by newcomers, such as Indonesia and Vietnam, as well as old rivals such as Sri Lanka and Kenya. The combination of these factors is squeezing margins and leading to a large accumulation of excess stock within the industry. Consequently major Indian tea manufacturers are now looking at international expansion into new markets with the aim of increasing sales and raising the profile of their brands.

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India: the largest tea consumer India consumes the largest quantity of tea in the world, accounting for nearly 14% of global retail volume sales. Geographically, tea is widely consumed in the North, East and West of India, and is popular with a wide variety of social classes and consumer age groups. However, it ranks 7th in value terms, due to relatively low unit prices. Black standard tea constitutes nearly 80% of value sales, although green tea has seen its popularity rise. Still heavily promoted to defend from alternatives Despite, and probably because, tea is the most traditional and affordable beverage in India, it is perceived as being old fashioned and less functional than some substitute products. For instance, malt-based beverages such as Horlicks (GlaxoSmithKline) and Bournvita (Cadbury Schweppes), are the favourite type of hot drink in the South, and are also the fastest growing. This drink is consumed as a substitute for milk in this milk-deficient region, and is favoured for its functional benefits. Furthermore, in the south, coffee is bigger as a proportion of total hot drinks than in the rest of the country. Local preferences are different in the south, India's main coffee-producing region. Soft drinks such as carbonates also represent a significant threat to the ongoing dominance of tea in the longer-term, with aggressive marketing campaigns from leading multinationals successfully persuading many young consumers to migrate from tea to soft drinks for various drink occasions. The industry has therefore launched a series of campaigns to promote tea as a health drink, with celebrities and scientists invited to endorse the health benefits of tea, while the Tea Board and leading players such as Unilever and Tata Tea have set up a fund of Rs 200 million to promote tea drinking. The recent pesticide controversy of carbonated drinks provided a good opportunity for tea marketers to promote the natural aspects of the drink. Unilever: the clear market leader The packaged tea market is highly consolidated in India, with Unilever and Tata Tea accounting for almost half of retail value sales. Unilever (Brooke Bond and Lipton) is the clear leader, holding over 30% of the market share, while Tata Tea (Tata) trails it with almost 20%. The remainder of the market is far more fragmented and shared between numerous small players

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Both Unilever and Tata Tea saw a fall in retail sales as a direct result of the drop in the price of tea between 2000 and 2003. These mainstream players also saw their margin squeezed in the face of increased advertising spends and competition from unpackaged tea. Tata Tea: ambitions in international markets Tata Tea is the largest vertically integrated tea firm in the world, from its plantation activity through to its packaging and marketing initiatives. Although Tata Tea is overshadowed by Unilever in its domestic market, the company has been the star performer in the global tea industry in recent years. Its high profile acquisition of the global Tetley brand in 2000 effectively consolidated its position in the international tea market. The company is now seeking to leverage the brand as a springboard to new markets. In 2003, Tata Tea started retailing its flagship brand Tata Tea in the US. The company closed a factory in Australia in the same year in order to increase the capacity of its Sri Lankan joint venture packaging company, which serves the Australian, Polish and Russian tea markets. It is currently looking into marketing Tetley in the Chinese market. Cha bars: premium tea as a lifestyle choice Retail value sales of tea in India are expected to show positive growth of 2.5% during 20032008. Euromonitor anticipates the future development of the industry is will be impacted by outof-home consumption. A new development has been the opening up of the vending machine sector. The total number of vending machines in the country was estimated at 45,000 in 2003, which included a large number of unbranded machines. Vending machines sell coffee, tea and soft drinks, however, so for the tea players it could be a double-edged sword. In addition to vending, the development of cha bars and coffee shops will encourage out-ofhome consumption. Cha bars offer a wide selection of teas at premium prices and are considered fashionable among a certain Indian demographic. Hoping to emulate the success of coffee shops witnessed in many major cities, including in emerging markets, they mainly target expatriates, the corporate entertainment market, or high income locals keen to show individual tastes. INSTITUTIONS INVOLVED IN TEA SECTOR Tea Boards Bangladesh Bangladesh Tea Board 171-172, Baizid Bostami Road Nasirabad, Chittagong India Tea Board Of India 14 Biplabi Trailokya Maharaj Sarani Calcutta

70

Indonesia Indonesian Tea Board Jakarta Kenya Tea Board of Kenya Tea Board House, Nairasha Road Post Box No.20064, Nairobi Malawi Tea Board of Malaw Limbe Sri Lanka Sri Lanka Tea Board 574, Galle Road Colombo-3

ITC Member Full Producer/Exporter members Tea Board of India 14 BTM Sarani (Brabourne Road) Kolkata 700 001 India

Sri Lanka Tea Board P O Box 1750 574 Galle Road Colombo 3 Sri Lanka

Telephone: 91 33 2235 1411 / 1412 / 1413 Fax: 91 33 2221 5715 Cables: TEEBORD E-mail: [email protected]

Telephone: 94 1 583687 / 587773 / 587814 / 582236 Fax: 94 1 589132 E-mail: [email protected] Web Site: www.pureceylontea.com

Representative: A K Sahu Representative: Ranjit Abeykoon Asosiasi Teh Indonesia Jalan Pulombangkeng No.15 Kebayoran Baru Jakarta Selatan 12110 Indonesia

The Tea Board of Kenya Tea Board House Naivasha Road / Off Ngong Road P O Box 20064 Nairobi 00200 Kenya

Telephone: 62 21 7260772 / 7393375 Fax: 62 21 7205810 / 7262912 E-mail: [email protected]

Telephone: 254 20 572421 / 572497 / 574445 - 6 Fax: 254 20 562120 / 576337 E-mail: [email protected] Web Site: www.teaboard.or.ke

Representative: Insyaf Malik

Representative: Abraham K Barno The Tea Association of Malawi Kidney Crescent P O Box 930 Blantyre Malawi

Bangladesh Tea Board 171 - 172 Baizid Bostami Road Nasirabad Chittagong Bangladesh

Telephone: 265 1671182 / 1671355 Fax: 265 1671427 E-mail: [email protected]

Telephone: 880 31 682712 /681455 / 682903 682096 / 682347 / 683527 Fax: 880 31 682863 Cables: TEABANGLA

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E-mail: [email protected] Web Site: www. bdteaboard.com Representative: M.S. Patwary China Chamber of Commerce of Import & Export of Foodstuffs, Native Produce & Animal By-Products 21 Xitangzi Hutong Wangfujing Street Beijing 100006 China Telephone: 00 86 10 65225171 Fax: 00 86 10 65139064 E-mail: [email protected] Web Site: www.agriffchina.com Representative: Ms. Yalan Zheng Full Consumer members United Kingdom Tea Association 6 Catherine Street London WC2B 5JJ United Kingdom

Irish Tea Trade Association 20 Terenure Park Dublin 6W Ireland Telephone: 00 353 1 490 3361 Fax: 00 353 1 490 3101 E-mail: [email protected]

Telephone: 44 (0)20 7836 2460 Fax: 44 (0)20 7379 5735 Representative: Katy J Tubb

Reprentative: Arthur Fitzpatrick

Tea Association of the U S A Inc 420 Lexington Avenue, Suite 825 New York NY 10170 USA

Tea Association of Canada 885 Don Mills Road Suite 301 Don Mills, Ontario M3C 1V9 Canada

Telephone: 1 212 9869415 Fax: 1 212 6978658 E-mail: [email protected]

Telephone: 1 416 510 8647 Fax: 1 416 510 8044 E-mail: [email protected]

Representative: Joseph P Simrany Alternate: Peter F Goggi

Representative: President

Coffee Roasters & Tea Packers' Association Tourniairestraat 3 Postbus 90445 1006 BK Amsterdam Netherlands

72

Telephone: 00 20 5113870 Fax: 00 5113810 E -mail: [email protected]

Associate members Zimbabwe Tea Growers' Association P O Box UA 78 Union Avenue Harare Zimbabwe

Department for Environment Food and Rural Affairs Room 247, Nobel House 17 Smith Square London SW1P 3JR

Telephone: 263 4 703469 / 703786 Fax: 263 4 705785 Representative: Sam Magombedze

Telephone: 020 7238 3185 Fax: 020 7238 3199 Representative: J O'Rourke

Office du The du Burundi 52, Boulevard de L'uprona B P 2680 Bujumbura Burundi Representative: Mr Callixte Ntamutumba

Ministry of Agriculture, Nature and Food Quality Bezuidenhoutseweg 73 P O Box 20401 2500 EK The Hague Netherlands

Tel: 00 257 224228/ 224288 Fax: 00 257 224657 / 226191 E-mail: [email protected]

Telephone: 31 70 378 4477 Fax: 31 70 378 6126 Representative: M J H van Nynatten

OCIR THE Office des Cultures Industrielles du Rwanda BP 1344 Kigali Rwanda

Japan Tea Association Room 602 Tokyo Chagyo Kaikan 8-5 Higashi-Shimbashi 2-chome Minato - ku Tokyo Japan

Telephone: 250 514797 / 514795 / 577082 Fax: 250 573943 / 514796 Representative: Gaforomo G Vianney

Telephone: 03 3431 6509 Fax: 03 3431 6711 Representative: Hiroshi Kako

Uganda Tea Association PO Box 4161 Mitchell Cotts Building - Annexe Plot 8 Burton Street Kampala Uganda Telephone: 256 41 231003 Fax: 256 41 231003 / 343121

Tea Board of Tanzania PO Box 2663 Dar es Salaam Tanzania Telephone: 255 22 2124665 / 2114400 Fax: 255 22 2114400 Representative: S H Mijinga

Representative: I G Munabi

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Vietnam Tea Association 92, Vo Thi Sau Str. Hai Ba Trung District Hanoi Vietnam

China Tea Marketing Association 45, Fuxingemennei Street Beijing 100801 China

Representative: Dr Nguyen Kim Phong

Tel: 00 86 10 6601 2403 Fax: 00 86 10 6601 8165 E-mail: [email protected] Web: www.ctma.com.cn

Tel: 00 84 4 Fax: 00 84 4 625 1801 E-mail: [email protected] Web: www.vitas.org.vn Corporate members Unilever Pakistan Limited Tea Department PO Box No 4964 32 West Wharf Road No 4 Karachi 74000 Pakistan

I.N.T. Co. Ltd Yokohama Office 101, 6-4-46 Kounan, Kounan-ku Yokohama 245-0003 Japan

Telephone: 92 21 2201223 / 2310118 / 2310112-5 Fax: 92 21 2310535

Telephone: 00 81 45 846 2313 Fax: 00 81 45 846 2316 E-mail: [email protected]

Lipton Australia Part of Unilever Australia Ltd 20-22 Cambridge Street Epping 2121 NSW Australia

Ahmed Mohamed Saleh Baeshen & Co P O Box 9822 Jeddah 21423 Saudi Arabia

Telephone: 61 (0)2 98696100 Fax: 61 (0)2 98696300

Telephone: 966 2 637 9000 Fax: 966 2 637 4656 E-Mail: [email protected]

Tapal Tea (Private) Ltd Plot 40, Sector 15 Korangi Industrial Estate Karachi 74900 Pakistan

China Tea Co Ltd 208 An Ding Men Wai Street Beijing 100011 China

Telephone: 92 21 5063891 Fax: 92 21 5063890 E-Mail: [email protected] [email protected] [email protected] Web Site: www.tapaltea.com

Telephone: 86 10 64204127 Fax: 84 10 64204101 Email: [email protected] Web Site: www.teachina.com

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Nestle SA Av. Nestle 55 1800 Vevey 1 SWITZERLAND

Cameroon Tea Estates PO Box 605 Limbe South West Province Cameroon

Telephone: 00 41 21 924 1111 Fax: 00 41 21 924 1885 Web Site: www.nestle.com

Telephone: 237 333 3177 Fax: 237 333 3176

Dubai Tea Trading Centre Jebel Ali Free Zone P O Box 48800 Dubai United Arab Emirates Telephone: 00 971 4 883 8878 Fax: 00 971 4 883 3936 E-mail: [email protected] [email protected] Web Site: www.dmcc.ae Bangladesh Tea Research Institute (BTRI): BTRI is a scientific organization of the Bangladesh Tea Board under The Ministry of Commerce. It was established in 1957 with view to provide technical support to the Tea Industry of Bangladesh. The Research Programs of the Institute are mostly adaptive and field oriented in order to meet the current needs of the Industry. Although BTRI has a research responsibility, its mandate requires that it provides advisory services to planters also. It accomplishes this through direct

scientists-to-planter

contact,

often

through

articipatory

research

on

tea

estates, through training and the distribution of publications. A large portion of BTRI's resources is devoted to this important linkage. Major Activities of BTRI * Evolving of high yielding and quality clones of tea. * Development of bi-and poly - Clonal seed stocks for seed orchards (Seed baries). * Conservation of gene resources of tea. * Raising of vegetative cuttings in the nursery using modern technique and supply of rooted and fresh cuttings of improved clonal materials to tea estates. *

Evaluation

of chemical

composition of

processed and or unprocessed

tea

quality assessment. * Standardization of quality and specification of Bangladesh tea in the international market. * Formulation of fertilizer policy for tea and ancillary crops. * Rehabilitation of soil, soil-fertilizer relationship analysis and understanding.

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for

* Adoption of appropriate methodology in improving the soil condition in existing-, proposed and rehabilitated tea areas. * Standardization of cultural practices like- planting, spacing, pruning, plucking, mulching, planting shade trees and green crops, grafting etc. * Management and control of various insect, mite and nematodes pests, diseases and weeds of tea and ancillary crops. * Pest surveillance and monitoring. * Investigation into the manufacturing problems and improvement of factory machinery. * Possibility of multiplication of tea through micro-propagation. * Introduction of suitable economic plants under crop diversification program. * Regular advisory services to the tea estates. * Economic study of tea cultivation. Such a plan must cover the following thrust areas research: *Evolving high yielding and quality clones of special feature. * Raising organic matter status of tea soils. * Utilization of biotechnology for plant improvement. * Drainage irrigation & drought management. * Physiology of tea in local environment and improvement of harvest index. * Biotechnology to improve soil fertility. * Application of IPM with different control options of pests. * IPM components with particular emphasis no bio-control agents. * Pesticide residue in tea. * VAM application in tea culture. * Vermi-culture application in tea. * Energy source utilization and efficiency. * Crop diversification. * Socio-economic study of tea industry. * Marketing and sales promotion. * GIS & tea environment study. TEA DEVELOPMENT

Tea Board is entrusted with the implementing the following developmental schemes during the 10th Five Year Plan for enhancing productivity, quality and marketability of tea in the country: •

Tea Plantation Development Scheme

•

Market Promotion Scheme

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•

Quality Upgradation and Product Diversification Scheme

•

Research & Development Schemes

•

Human Resource Development Scheme

VALUE ADDITION IN TEA PRODUCTS Kazi & Kazi Tea Estate is a pioneer of tea plantation in Bangladesh and the Darjeeling Tea Belt. We are the first substantial organic tea estate, and we use only natural resources to control agricultural pests and weeds. A new brand of high quality tea-organic tea- grown for the first time in the country by a local company is going to hit the market formally through auction centre in the port city from Tuesday. Experts said Bangladesh achieved a great success through successful plantation of tea on the plain land, which was not traditionally considered as fit for tea cultivation. Kazi and Kazi Tea Estate (KKTE) is the country''s pioneer company in the field of this kind of tea production by applying the organic method in cultivation at its garden at Tetulia in Panchagarh district. Leading brokers said the new `Meena'' brand organic tea would fetch very high price and be attractive as it is considered as very good quality tea among other brands being produced in the traditional tea garden of greater Sylhet and Chittagong districts. Experts, brokers and tea traders at a formal launching ceremony of the new brand here today highly appreciated the initiative of such tea plantation by applying new method. They, however, expressed their high optimism about Bangladesh''s ability to produce world standard tea of new variety and taste. Bangladesh Tea Research Institute has evolved a clone variety tea in the wake of growing competition in export market and high domestic demand. Officials of the BTRI said the quality of the newly evolved ‘BT-16’ species is much improved and some 3,000 to 4,000 kilograms of tea can be produced in each hectare of land from the cloned trees. According to a government estimate, some 100 million kg of tea will be required by year 2020 to meet local demand and fulfil export target. To cope with the rising demand for tea in local and international markets, the government has already begun cultivation of the improved clone tea in Chittagong Hill Tracts (CHT), Panchagarh and other district. Commerce Minister Altaf Hossain Chowdhury formally released the newly innovated BT-16 tea at a ceremony at the Bangladesh Tea Board auditorium at Srimongal in the year 2005. Addressing the function the minister said two-third of the amount of tea produced in the country is needed to cater local demand. “The government is implementing a five-year short-term

77

programme and a 20-year long-term programme to increase the production of tea “in view of the growing internal and external demand, the minister said. The minister also distributed saplings of the BT-16 species among a few tea-garden representatives. Among others, Bangladesh Tea Board Chairman Mosharraf Hossain and Bangladesh Cha Sangsad Chairman M Wahidul Haque addressed the function. Ayurvedic practitioners prescribe different types of drinks to help manage what modern-day scientists call Type II Diabetes or Non-Insulin Dependent Diabetes mellitus (NIDDM)? Vaidyas, physicians, and nutritionists all agree that the key to managing diabetes begins with diet modification. Green tea is widely consumed in Asian countries and is becoming increasingly popular in Western countries. Epidemiologically, it has been suggested that green tea consumption prevents type 2 diabetes. The present study was aimed at providing evidence of improvement in glucose metabolism in diabetic mice and healthy humans upon green tea consumption. Green tea promoted glucose metabolism in healthy human volunteers at 1.5 g/body in oral glucose tolerance tests. Green tea also lowered blood glucose levels in diabetic db+/db+ mice and streptozotocin-diabetic mice 2-6 h after administration at 300 mg/kg without affecting serum insulin level, whereas no effect was observed in control mice (+m/+m and normal ddY mice). The serum protein profiles of db+/db+ and +m/+m mice were analyzed for the first time by SELDI

(surface-enhanced

laser

desorption/ionization)-TOF

(time-of-flight)-MS

(mass

spectrometry), and then compared to investigate any effects of oral green tea administration on serum proteins. Herbs have been used for medicinal purposes, including the treatment of diabetes, for centuries. Plants containing flavonoids are used to treat diabetes in Indian medicine and the green tea flavonoid, epigallocatechin gallate (EGCG), is reported to have glucose-lowering effects in animals. Tea and Health Tea has nutritional properties, which means it is rich in vitamins, minerals, anti-oxidants and many more such healthy elements. Tea is a zero calorie drink too. Tea thus has become popular with fitness, well being and good health. It has been suggested that an intake of up to 10 cups of tea per day may be a useful dietary habit. 650 ml of tea provides over half of the total intake of dietary flavonoids; nearly 16% of the daily requirement of calcium; almost 10% of the daily requirement of zinc; over 10% of the folic acid need; around 9%, 25% and 6% of vitamins B1, B2 and B6 respectively.

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Tea also provides a dietary source of biologically active compounds that help prevent a wide variety of diseases. Extensive research has revealed that tea is one of the richest sources of antioxidants. In fact, fruits and vegetables stand below tea when it comes to the amount of antioxidants. These antioxidants are found in form of polyphenols. Scientific evidences prove that antioxidants promote heart health, prevent cancer, help combat & guard against most diseases like diabetes, BP, tumors, ulcers, inflammations, intestinal problems, tooth decay and many more common ailments. We can have a healthier heart with tea. Flavonoids present in tea prevent the oxidation of LDL cholesterol, thereby reducing the risk of heart diseases. A source of calcium too (from the milk in it), your cup of tea helps develop strong muscles too. Theaflavins, another component in tea reduces plaque formation too. Tea composition varies with climate, season, horticultural practices and variety. Polyphenols are the most important component in tea, as they constitute approximately 36 percent of the dry weight of tea. Green and black tea has similar chemical make-up. The primary difference between the two types lies in the chemical changes that take place during their production. In case of black tea, polyphenols are oxidized and this is prevented in the manufacture of green tea, thus making green tea a healthier choice. The most important groups of polyphenols are the catechins in green tea, theaflavins and thearubigens in black tea. A variety of physiological effects have been attributed to tea catechins, which are currently best known for their antioxidant activities. Black tea is virtually calorie-free (1 calorie per 100 ml) and sodium free, therefore a suitable beverage for individuals on low calorie or low sodium diet. Tea includes fluoride, traces of vitamins A, K, C, B carotene and B vitamins. Tea is a pleasant, popular, socially accepted, economical and safe drink that is enjoyed every day by hundreds of millions of people across all continents. So, enjoy cup of tea and stay assured that it is doing well to our system. (Dr. John Weisburger, Director Emeritus American Health Foundation)

CATECHINS • Lowers blood tri glyceride, blood cholesterol • Reduces incidence of cancer • Reduces oxidation by active oxygen • Strengthens blood vessel wall and regulates their permeability • Inhibits increase of blood sugar • Inhibits increase of blood pressure

• Reduces tumours • Reduces mutations • Helps in the treatment of radiation sickness • Prevents dental caries • Kills influenza virus • Beneficial in the treatment of dysentery • Prevents halitosis (bad breath)

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CAFFEINE • CNS stimulant, hence increased alertness • Gives relief from fatigue, neuralgia and headaches • Acts as diuretic

POLYSACCHARIDES • Lowers blood sugar

FLAVONOIDS • Strengthens blood vessel and blood capillary walls • Reduces oxidation by active oxygen • Acts as anti-inflammatory agent • Increases the level of catecholamines • Stimulates folic acid biosynthesis • Normalises thyroid hyperfunction

THEAFLAVIN, THEARUBIGIN • Antagonises the activity of bradykinin • Inhibits arginine and ornithine decarboxylases

METHYLXANTHINE • Acts as diuretic

THEOPHYLLINE • Modulates immune response • Helps in the treatment of asthma • Salutary effects on cardiac function

FLUORIDE • Prevents dental caries

ESSENTIAL AMINO ACIDS [LEUCINE, PHENYLALANINE, VALINE, THREONINE] • Helps in metabolism • Maintains nitrogen equilibrium

QUERCETIN • Acts as Spasmolytic • Helps in the treatment of acute diarrhoea

THEANINE • Helps in ammonia and urea metabolism • Helps in water clearance by renal tissues

VITAMINS Vitamin - B COMPLEX (RIBOFLAVIN, BIOTIN, NIACIN PANTOTHENATE, INOSITOL)

LINOLENIC ACID • Reduces platelet aggregation

• Aids carbohydrate and fat metabolism • Helps in inter and intracellular Ca++ transport • Helps in moisturisation of the skin

Tea pigments • Decreases plasma fibrinogen Seleno-cysteine • Supports normal thyroid function (helps in the conversion of T4 to physiologically effective T3.)

Vitamin- E • Acts as antioxidant and regulates aging. SALICYLATES • Acts as an analgesic and antipyretic

GABA • Lowers blood pressure

INTERNATIONAL TEA MARKET SITUATION As part of its regular activities, the Intergovernmental Group on Tea monitors market conditions and provides an update of potential market prospects for tea over the medium term. This document examines both the current situation and longer term prospects for production, consumption and trade of tea, and their likely impact on the world tea market. The tables mentioned in the document may be found in document CCP:TE 05/CRS 6. Delegates are requested to update market information pertaining to their country, and discuss possible strategies for the sustainable development of the world tea economy.

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World tea production continued to reach new highs in 2004, when output grew by 2 percent to reach an estimated 3.2 million tonnes. The expansion was due mainly to the increases recorded in Turkey, China, Kenya, Malawi, Sri Lanka and Indonesia. The growth in output from these countries more than offset declines in other major producing countries including India and Bangladesh. Production in Turkey was reported to have expanded dramatically in 2004 as output increased by 32 percent to reach 205 431 tonnes. As there were no reported new areas planted in the last five years, it is assumed that the expansion was due to higher yields. Provisional returns from China indicate that output for 2004 approached the 800 000 tonnes milestone as policy initiatives to promote production and trade of tea began to have an impact on the sector. Tea production in Sri Lanka increased slightly by 1.3 percent to 309 000 tonnes in 2004, reflecting the recovery from crop losses after devastating floods in low grown tea areas of the island in 2003. This region usually accounts for more than 50 percent of the country’s tea output. Slight relief was also evident in high grown areas after drought conditions contributed to the overall decline in output during 2003. A similar increase was recorded by Indonesia, where a 1.2 percent growth was recorded. Output in that country reached 170 000 tonnes in 2004. Tea production in Kenya increased by more than 11 percent in 2004 to reach 328 000 tonnes, as a result of favourable weather in most of the growing regions and the expansion in processing capacity. The major challenge facing the tea industry in Kenya is the rising labour cost adding to the rise in cost of production, which was slightly offset by the depreciation of the Kenyan shilling. Malawi also reported a significant increase of 19 percent in tea production in 2004 with output reaching 50 000 tonnes. Again favourable weather conditions in the whole of Eastern Africa contributed to this increase, including the output in Tanzania and Uganda where marginal increases occurred. Tea production in India declined by 4.3 percent, as output in both the Northern and Southern production regions contracted. A major factor contributing to the decline was the closure of up to 70 tea gardens in Assam due to the widespread recession in the industry. The downturn was further exacerbated by unfavourable weather both in the North (floods in the first half of 2004) and South (drought). Output in 2004 was 820 216 tonnes for the country with 634 485 produced in the North and 185 730 in the South. World tea exports increased by 4.4 percent in 2004 to reach 1.47 million tonnes, as shipments from all major exporting countries increased during the year. Kenya was the largest exporter, once more surpassing Sri Lanka. The 8.9 percent increase in exports from Kenya brought total shipments for the year to 292 704 tonnes, in line with expanded output from that country. A

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similar proportional increase of 8.9 percent was recorded by Indonesia bringing the total for that country to 98 000 tonnes. Tea exports from China expanded by more than 7 percent to reach 282 212 tonnes, and were dominated by green tea, which accounted for more than 75 percent of its total exports. Most of the increase was due to the recovery of market share in the EC and Japan following problems of non-compliance of MRL requirements in 2003. Exports to Morocco, Uzbekistan, and Ghana remained strong, while shipments to the Russian Federation and the United States showed no significant change. Exports from East Africa also recorded significant increases; 11.9 percent from Malawi, 20 percent from Tanzania and 2.9 percent from Uganda, while exports from Bangladesh and Sri Lanka remained relatively unchanged in 2004. Tea exports from Sri Lanka were 290 604 tonnes in 2004 compared to 291 472 tonnes in 2003, a marginal gain of some 0.3 percent. Attempts to expand demand for Sri Lankan tea in the Far East have led to the establishment of a tea promotion office in Tokyo to promote black tea exports to the predominantly green tea markets of China, Japan and the Republic of Korea in 2003. Tea exports from India recovered slightly by 3 percent in 2004 after a major fall of 13 percent in 2003 to the lowest level in a decade, due mainly to weaker demand from the Russian Federation, the United Arab Emirates, and the United Kingdom. World net tea imports continued to increase in 2004, by 1.5 percent, reaching 1.42 million tonnes. This trend reflected the increases in traditional developed country markets of the EC (an increase of 2.4 percent), the United States (5.3 percent), and Japan (2 percent), where imports reached 215 000 tonnes, 99 000 tonnes, and 56 000 tonnes, respectively. Most of the growth in these markets is reportedly in response to promotional efforts on the health benefits of tea consumption. Net imports into Pakistan, the largest developing country importer also continued to increase. Shipments were larger by 10 percent in 2004, from 109 000 tonnes in 2003 to 120 000 tonnes in 2004, directly influenced by lower tea prices. India could not take advantage of its recent trade agreement with Pakistan for this precise reason. Tea prices were comparatively high, resulting in a significant decline in the volume shipped to Pakistan. Imports to Syria increased by 13 percent from 26 000 tonnes in 2003, a net gain of 3500 tonnes. Imports by countries in the Near East in Africa increased by 2 percent in Morocco, where quantities reached 45 000 tonnes, while in Egypt imports declined by 11 percent.

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The FAO Composite price, as a world price indicator for tea, increased by 2 percent in 2004, reflecting the significant gains in the Calcutta and Mombasa auctions. Prices in 2004 opened at US $1.56 per kg in January and after increasing to US$1.65 per kg in April declined to US$1.56 per kg in June, before surging to US $1.77 per kg in September and closing at US $1.73 per kg in December. This volatility reflected fluctuations in tea output in major producing countries in 2004 and improvement on the demand side which eased the supply pressure on prices. The increases were quite significant in local currencies as local currencies of major tea producing countries have depreciated against the US dollar. This section of the document examines projections that were generated for the medium term (10 years from the latest complete set of data available, i.e. 2003) to 2014. It takes into account the Group’s projections to 2010, which incorporated the revisions provided by members at the 15th Session of the Intergovernmental Group on Tea in Sri Lanka. Members are requested to review the data and forecasts pertaining to their own situation and provide updates, where necessary, to allow the Secretariat to revise the projections. The projections were based on dynamic time series models. Principally, autoregressive distributed lag models were used to capture the dynamic process of market adjustment in tea markets. The forecasts are obtained from s-step a-head ADL models, where s is the forecast horizon. The FAO Tea Composite Price was included as an exogenous factor. Its values, over the forecast horizon, were obtained from its autoregressive representation. Projections were based on the assumption of normal weather conditions, and a continuation of the past trends in yields, planted areas, population and income growth. Adjustments were made to reflect current policies and future market prospects. The forecasting models captured cycles and trends in tea markets to a satisfactory level. World black tea production is projected to grow by 1.7 percent annually from 2003 to reach 2.7 million tonnes in 2014, mainly due to improvements in yields (Table 5). Among countries in Africa, a significant growth in output is expected as tea bushes reach optimum producing age and smallholder skills are maximized through intensive capacity building. Tea harvested in the largest producing country, Kenya is expected to grow by 2.4 annually to reach 379 000 tonnes in 2014, signifying a slowing in growth rates of the last decade. Other producing countries of significance include Malawi where output is projected to increas by 7 000 tonnes to reach 49 000 tonnes by 2014, while in Uganda and Tanzania output should reach 38 000 tonnes and 33 000 tonnes, respectively by 2014. In the Far East, output in India, is expected to grow by 1.6 percent annually to reach 1.01 million tonnes in 2014. Among the other major black tea producing countries in the region, a slightly

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higher growth rate of 1.9 percent is projected for Sri Lanka to reach 370 000 tonnes, while output in Indonesia will reach 150 000 tonnes, an annual growth rate of 1.5 percent. Black tea production in China is expected to decline, as the balance of production shifts to other teas with stronger market prospects. World green tea production is expected to grow at a faster rate than black tea at 2.3 percent per annum, but volumes are much smaller at a projected total of 975 000 tonnes by 2014. China would continue to account for more than 75 percent of world green tea output with an output of 740 100 tonnes, replacing some of its black tea production. However, the annual growth rate would slow from 3.8 percent over the last decade (1993-2003) to 2.2 percent over the next (2003-2014). A similar slow-down is expected in Viet Nam as the expansion in area has somewhat abated in recent years, but volumes are considerably smaller. Production in Viet Nam is projected to grow at 2.6 percent from 30 000 tonnes in 2003 to 39 600 tonnes in 2014, while production in Japan will slightly increase by 0.5 percent annually to reach 92 000 tonnes in 2014. For Indonesia, growth rates are expected to pick up again in the next decade after a slowdown since the Far East economic crisis in 1997. Output in Indonesia is expected to expand to 49 100 tonnes in 2014, from 41 000 in 2003. Most of the growth in green tea output would be due to an expansion in area planted and harvested. The growth rate in world black tea consumption is expected to be reduced from 2.2 percent over the last decade (1993-2003) to 1.2 percent over the next (2003 to 2014) to reach 2.67 million tonnes by 2014. The main reason is the slow-down in consumption in producing countries, as the production growth rate outpaces the growth in demand for exports. Global tea consumption is divided into net imports for non-tea producing countries, and domestic consumption in producing countries, measured by production less exports. World net imports of black tea, a proxy for consumption in importing countries, are projected to increase annually by 1.2 percent to reach 1.34 million tonnes in 2014 from a base of 1.17 million tonnes in 2003. Imports by the CIS (predominantly the Russian Federation) and Pakistan are expected to increase by 3.0 percent and 3.4 percent annually, respectively, in line with GDP growth expectations. Net imports by these countries are expected to reach 342 000 tonnes and 120 300 tonnes, respectively, by 2014. In the EC (15) a slight decline in imports is expected due mainly to the 1.6 percent annual contraction expected in the United Kingdom. Notable increases are expected in Germany, the Netherlands and France, but the expansion in these countries will be insufficient to offset the decline in the United Kingdom. In 2014, the quantity of black tea consumed in producing countries is expected to grow by 1.3 percent per year to reach 1.33 million tonnes. Producing countries consumed 52 percent of their

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black tea production in 1993-2003, and are projected to consume only 49 percent in 2014, adding to the demand and supply imbalance. The largest increase in domestic consumption would occur in the Far East, as tea-producing countries in Africa are expected to continue to export most of their output. Domestic consumption of black tea in India is expected to increase by 1.5 percent annually to reach 805 700 tonnes in 2014 or almost 80 percent of the tea produced in that country. Consumption in Indonesia is expected to increase at an annual rate of 1.6 percent to reach 57 000 tonnes by 2014, while in Bangladesh and Sri Lanka, tea consumption would grow at 3.0 percent and 2.5 percent to reach 48 400 tonnes and 17 500 tonnes, respectively. World black tea exports are projected to reach 1.3 million tonnes in 2014, reflecting an average annual increase of 1.4 percent per year from 1.1 million tonnes in 2003. About half of the increase would originate in Africa, where production is likely to continue to grow while domestic consumption remains small. The region's total black tea exports are projected to amount to 518 000 tonnes by 2014. Exports from Kenya would increase by 2.7 percent annually to reach 358 000 tonnes in 2014, giving Kenya a 27 percent share of the global black tea export market. Privatization of the Kenya Tea Development Authority (KTDA) and the abolition of grower permits and export licences are expected to improve Kenya’s export performance. Substantial growth in black tea exports is also projected for some other East African countries, such as Malawi (1.2 percent annually) and Uganda (2.2 percent annually). The Far East would account for the other half of the expansion in black tea exports. Sri Lanka, the second largest exporting country in the world, is expected to increase exports by 1.2 percent annually to reach 330 000 tonnes by 2014, continuing to account for 25 percent of the global total. Exports from India are projected to increase annually by 2 percent to reach 211 000 tonnes in 2014. More modest growth rates are expected for Indonesia and Bangladesh where exports contracted in the previous decade and annual increases of 0.4 percent and 0.2 percent, respectively should now be attained. World green tea exports are projected to grow by 2.8 percent annually to reach 275 000 tonnes by 2014. China is expected to continue to dominate this trade with a volume of 242 000 tonnes, followed by Viet Nam with 28 000 tonnes, and Indonesia with 5 800 tonnes. Recent developments in the world tea market suggest that the major players have adapted pretty well to the uncertainty in prices in the short term, particularly for black tea. Green tea does not have the same difficulty as it currently enjoys a premium over black tea. A recent study conducted by the Secretariat on value chains (CCP: TE 05/4) indicated that, of the 27

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agricultural commodities studied, tea showed the second lowest variability in prices (2 percent decline in tea prices compared 39 percent for cocoa and 38 percent for coffee). The major issues plaguing black tea include the erosion of market shares in the total beverages market, coupled with stagnant consumption in some markets, leading to reduced prices. The fundamental oversupply in the world market is likely to persist and prices are likely to remain depressed. New strategies particularly aimed at enhancing consumption and increasing valueaddition as well as further reduction in production and marketing costs are required. In the medium-term, the projections indicate an increasing imbalance between supply and demand of 98 000 tonnes. Part of the reason is due to the actual projections on production given by some members which appear to be higher than those generated by the model. However, if the projected imbalance is realized then further weakening in prices may be expected. In terms of profitability, a major concern is the rising cost of production, which can only be minimally reduced by increasing mechanization as the the scope is limited if quality is to be maintained. Improving yields through capacity building of growers, optimising inputs, streamlining marketing channels and improving infrastructure could also reduce production cost, but may also lead to over-supply. The preferred solution must lie in stimulating demand. Appropriate marketing strategies, including market access, could lead to improved returns to the industry. Variation in demand among countries suggests that marketing activities need to be tailored to individual markets. Value addition possibilities and quality standards need to be identified for each market and strategies devised to reap the appropriate premium. The results from extensive research demonstrating the health benefits of tea should also be more aggressively used in promoting tea consumption in an increasingly crowded beverage market. Finally, food standards, particulary MRLs, need to be complied with. Global harmonization of MRLs in tea could reduce costs of compliance on tea exporters. This is a major agenda item at this session, and the Group might wish to adopt recommendations on the way forward. The government has taken initiatives to bring more areas under tea cultivation to increase the production and meet the growing demand in the local and international markets, reports BDNews. "Based on a survey, we have sorted out 46,000 hectares of new land in Rangamati, Bandarban and Khagrachhari districts for tea cultivation," Chairman of the Bangladesh Tea Board (BTB) Mosharaf Hossain told BDNEWS. As part of the expansionary plan, six small holding gardens have already started operations in North Bengal, Hossain said.

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Bangladesh has only 162 registered largest tea plantations. Officials of the Bangladesh Tea Association (BTA) said they are facing stiff competition from countries like India, Sri Lanka and Indonesia in tea export because of their integrated efforts to boost tea industry. "We have also carried out a survey in Garo areas in Mymensingh," the BTB chairman said. Although the area is fit for tea plantation, we will not be able to do it because the area belongs to the Forest Ministry, he added. Operations of tea gardens in the new areas, especially in hill districts, are likely to start within the next four to five years, he said, adding the government has to develop infrastructure first. Another official of the Board said the government already started compensating small farmers who lost their lands for tea cultivation in the northern part of Bangladesh, particularly in Panchagarh. To acquire tea cultivable land in three hill districts, he said, the land is owned both by the government and private sector and it will take time. A tea exporter told BDNEWS that Bangladesh has the prospect to grabbing the market of the Middle East, where exports from Dhaka declined significantly in the past 10 years. Now, Bangladesh exports around 15 million kilograms of tea annually. Of which, 80 per cent is exported to Pakistan alone, BTB officials said. Recently, a Bangladesh delegation comprising representatives from the Labour Ministry, workers' union and BTA visited several tea plantations in the Dooars, in West Bengal in India to gather experience about the plantations in India. ABM Abdus Sattar, Joint Secretary, Ministry of Labour and Employment, led the team. Today, the main tea-growing areas lie to the east of the Ganga-Jumma flood plain in the hill areas bordering India's Cachar tea-growing district. Most of Bangladesh tea grows at only 80300 ft. above sea level northeast of Sylhet.

PROBLEMS RELATING TO TEA EXPORT AND TEA MARKET EXPANSION Bangladesh tea export is facing stiff competition in the global market and it stay in the competition would be tougher in he days ahead if not quantity is increased and competitive edge raised considerably, industry sources said. Bangladesh Tea Board (BTB) and industry

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sources said offensive new market search is essential raising the competitive edge of Bangladesh tea. The sources said improving quality and low production cost have become imperative to increase the competitive edge of tea to stay in the global race. Higher production in major tea producing countries for successive years, availability of better quality tea in low price than that of Bangladesh have thrown a challenge for Bangladesh tea in the global market. Low quality, higher price, rise in domestic tea consumption are shrinking the Bangladesh tea market abroad, the sources said. Sources said Pakistan remained the largest buyer of Bangladesh tea during last couple of years. Pakistan imports nearly 85 per cent of Bangladeshi tea after Islamabad granted duty-free access to Bangladesh tea to their market. “Because of rise in production of quality tea by other exporting countries and low quality and decreasing quantity of Bangladeshi tea is making the future of tea export grim,” National Brokers Ltd. - a leading tea auctioneer in the country commented in its annual report 20032004. The report also said that Pakistan, which has been a major outlet of Bangladesh tea, has lately been importing an increased quantity of tea from India, Vietnam, China and Indonesia at a very competitive rates in addition to their bulk of import from Kenya and other African countries. “Therefore Bangladesh tea is likely to face a stiffer competition from those countries in the Pakistan market” the report predicted. Exporters as well as BTB officials viewed that local tea industry, particularly the planters and marketing companies, might sustain somehow with the blessings of ever expanding domestic markets, but the presence of Bangladesh tea in international market would become scarce. They feared that Bangladesh’s traditional export item -tea would be forced to pull out from the global market due to dependence on single outlet, lack of quality and price competitiveness and poor production. Official sources said Bangladesh produced 55 million kgs tea in the fiscal 2001-2002, 54.2 million kgs in the fiscal 2002-2003, and 44.2 million kgs up to April of the just ended fiscal.The country had exported 13.8 million kgs in the fiscal 2001-2002, 12.1 million kgs in the fiscal 2002-2003 and 11.6 million kgs up to April in just ended fiscal. On the other hand, internal consumption was 40.4 million kgs in the fiscal 2001-2002 and 39.8 million kgs in the fiscal 2002- 2003, which is almost double in a decade. Domestic consumption in fiscal 1996-1997 and 1997-1998 were 27.4 million kgs and 24.4 million kgs respectively. Sources said increased domestic consumption has emerged as a threat to tea export as lesser quantity of exportable tea are left at the export basket after meeting the local demand although increased internal market came up as cushion for the growers as well as blenders.

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“Growers least bothered to improve quality of tea because they can sale all their produce whatever may be the quality in the domestic market” a BTB official told BSS on condition of anonymity. The experts quoting statistics forecast that the way annual domestic demand has been rising at the rate 3.5 per cent against the 1 per cent increase of production, Bangladesh would be turned into a tea importing country by the year 2015 to meet the domestic demand if the trend continued. Deputy Director ( Trade ) of BTB Shahe Alam Mia said there is no alternative but to improve quality and quantity of Bangladesh tea to compete in the international market with countries like India, Kenya, Vietnam, Mauritius , Malawi, Uganda, China and Indonesia, who are offering better quality tea with competitive prices. He categorically denied a report appeared recently in a section of the press that tea export faced a disaster in the last fiscal and said export was a bit higher both in volume and price in the fiscal that ended on June 30 compared to the previous years. He expressed the confidence that per hectare production of tea could easily be raised up to 2500 kilogram from the current average of 1160 kilogram and Bangladesh’s annual tea production could easily be raised up to 70 million kgs within next five years through new plantation, bringing more land under tea cultivation, improving management of locally owned gardens. BTB Chairman Brig. General S A H M Tauhid said production cost could be reduced only through increasing production, maximising use of fallow and unused lands inside existing tea gardens and bringing prospective huge cultivable lands including those in Chittagong Hill Tracts under tea plantation. He said improvement of quality of tea is also possible if the garden owners go in line with the suggestions of Bangladesh Tea Research Institute during two annual testing sessions. “Why not local planters are able to produce quality tea if sterling companies (British origin companies) can do it in Bangladesh by cultivating tea at the same soil and weather” the TBT Chairman questioned. General Tauhid told the agency that relentless efforts are going on from government side to keep country’s traditional tea industry and a very old export item in the world market. He said keeping the challenges in the mind; BTB has submitted a 20-year “strategic plan” of Taka 775 crore to the Commerce Ministry for producing 110 million kilograms of tea a year to revitalize the tea industry. “The project is under active consideration and the higher authority would meet soon to review it” he said. Although the tea export of Bangladesh decreased by more than one percent during the last fiscal year over the 2003-2004 fiscal year, the world tea production last year reached a record

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3.2 million tons, according to a report released by the United Nations Food and Agriculture Organisation on Thursday. The report said the world tea export increased by 50,000 tons which is more than the production in 2003, but production of the major exporters such as India and Bangladesh has decreased. The FAO report was prepared for the Intergovernmental Group on Tea meeting in Bali (20-22 July 2005) to review the current world tea market and its medium-term outlook. Increase in export was due mainly to record production in Turkey, China, Kenya, Malawi, Srilanka and Bangladesh. Azharul Islam, Director of Bangladesh Tea Board, yesterday told the news agency that reduction in tea export was due to a rise in domestic consumption. He said annual production of tea failed to cope with higher domestic consumption. Presently, the consumption is rising by 3.5 percent annually against 1 to 1.5 percent rise in production, he said. He, however, hoped that tea production would mark a record growth this year because of favourable weather.

Table. Tea smallholdings in South Asia Country

Units (No.)

Processing units (No.)

Bangladesh Nil Nil India North n.a. 14 South 8 000 132 Sri Lanka 230 000 260 South Asia 406 Source: Tea Boards of India and Sri Lanka.

Production (million kg)

Share in production (%)

Nil 2 38 130 170

Nil 0.4 21 54 16

It is becoming increasingly evident that tea growing lends itself ideally to smallholder cultivation. Unlike seasonal or fruit crops, tea generates year-round income to the farmer. The higher land and labour productivity ensure a production cost that is lower than in the estate sector. In social terms, the development of smallholdings offers more employment opportunities to rural women, thereby enhancing the living conditions of families. Given an efficient agricultural extension system and proper processing facilities in close proximity, increased small-grower participation in the tea industry could serve as an effective strategy for raising incomes and providing an impetus to the farming community in developing countries.

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Market break-down

There are two major types of tea, black and green. Black tea accounts for around 75% of global production and over 90% of the market in western countries. Black tea results from leaves that are fully oxidised, while green tea leaves are steamed, rolled and dried without any oxidation. Most green tea is grown in China and is gaining popularity in the West, partly for health reasons. Output of black tea is projected to grow by 1.9% annually to reach 2.7 million tonnes in 2010, mainly due to improvements in yields rather than an expansion in area. World production of green tea is expected to grow at a faster rate of 2.6% per annum to reach a projected total of 900,000 tonnes by 2010. Global production and consumption Tea is grown in 36 tropical and semi-tropical countries, 19 of them ACP countries. The six largest producing countries - India, China, Sri Lanka, Kenya, Indonesia and Turkey (in that order) - account for 80% of world output. Less than half of production is exported, as India and China, in particular, are major consumers as well as producers. Global tea production in 2003 reached 3.15 million tonnes, 75,000 tonnes more than in 2002, almost 2.4% higher, largely as a result of favourable weather conditions. All major producing countries recorded increased output, except Sri Lanka and Indonesia. India accounted for 27.4% of world output, followed by China, 24.6%, Sri Lanka, 9.75%, and Kenya 9.4%. The FAO’s provisional figure for output in 2004 is 3.197 million tonnes, which would be 1.5% higher than that in 2003. Global production has grown by around 2% a year since 1993-95, but consumption in Western countries has grown by only around 1%. In a number of developing countries, however, consumption has kept pace with, or exceeded production. India is the largest consumer of tea, accounting for over 20% of global consumption, followed by China, accounting for around 13%. The UK, the Russian Federation, the CIS countries, Pakistan and Japan are also major consumers. Main world producers and leading ACP

2004 (provisional) (tonnes)

producers India

845,000

China

821,000

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Sri Lanka

303,000

Kenya

290,000

Indonesia

158,843

Malawi

45,000

Uganda

35,000

Tanzania

25,500

Zimbabwe

22,000

Rwanda

15,484

Source: FAO (Fiid & Agricultural Organization we site www.fao.org

How the tea market works Tea is unusual among major agricultural commodities in that it is sold through auctions or in private deals, increasingly on-line. Unlike coffee or cocoa, there is no futures market for tea. Methods of sale have evolved over centuries according to conditions prevalent in the market place at any one time. Auctions began in 1679 in London and in the 19th century in Colombo and Calcutta. There are two auction centres in ACP countries, both in Africa. The major centre in Mombasa, Kenya, offers between 60,000 and 90,000 packages of tea every week, with teas mainly from Kenya, but also from Uganda, Rwanda, Tanzania and Zaire. The other auction centre, in Limbe, Malawi, sells teas from Malawi and occasionally from Mozambique, Zimbabwe and Zambia. Due to the seasonal nature of Malawi's tea production, the auction operates weekly for the six months of the season - between December and May - and fortnightly thereafter. A few firms dominate sales in each auction centre: J. Thomas & Co. Pvt. Ltd., the largest tea broker in the world, handles over 155 million kg of tea a year; Carritt Moran and Co. Ltd. is the second largest. On-line tea auctions have recently been set up alongside traditional auctions. These speed up access to information and facilitate participation. Bids can be submitted at any time and the sale process is not geographically confined. Transaction cycle times and the stages in handling are reduced. Also, teas need not be transported to warehouses as inspections can be done using samples couriered to buyers from the plantations.

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Although the auction system would seem to approximate a 'fair market' in which prices are determined solely by the interplay of supply and demand, the system does not always work well for small-scale producers. Auction prices vary considerably with both the quality and quantity of tea on offer, and the demand for tea at any given time. Price transparency, in theory one of the main advantages of an auction system, is often limited in practice. Although buyers have a fair idea of the quantity and quality of tea to be offered at any given auction, sellers have little idea of how much will be demanded. They also know little about buyers’ preferences and intentions. Thus, they have no way of accurately predicting the return on their crop. The system is also open to abuse. The concentration of buyers in most auction centres is high, and new buyers can be discriminated against for a number of reasons. First, brokers generally do not accept bids from buyers they do not know, as they feel it increases their risk; second, the new buyers are disadvantaged by the fact that the tea has to go to the processing and packaging plants, most of which are owned by the established companies competing with them in the same auction. There is evidence of collusion among brokers to influence prices. UNCTAD has pointed to the danger arising from links between selling brokers and firms operating tea estates and the small number of buying brokers in 1982. In the 1970s, a commission of inquiry into the tea auction system set up by the Sri Lankan government concluded that it appears that there is 'a high degree of collusion that prevails in buying and ….wide scope for collusion between brokers and buyers'. Such collusion, if it occurred, would tend to reduce the price at which producers could sell tea at the auctions, and would also affect prices of direct sales. More recently, investigations by the Kenyan Government found in March 2005, that tea buyers at the Mombasa auction are involved in collusive bidding, with prices being controlled by the alleged 'cartel members'. The big buyers 'manipulate the bidding process. Instead of bidding against each other and the highest bidder winning the lot, the alleged cartel members control prices and therefore split or share invoices or lots,' says its report. If prices are being restrained in this way, then clearly tea growers are being harmed. The Kenya National Chamber of Commerce and Industry has called for the elimination of tea auctions.

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International producers and traders As we have seen a small number of companies dominate the tea industry. They have a presence at almost all stages of the journey of tea from tea bush to tea bag or packet. The companies buy their tea at an early stage of production, and usually carry out the high-valueadded blending and packaging (which account for 80% of the retail price), at facilities in the EU and other Western countries. Blending means that many tea qualities have become exchangeable and are bought wherever they are cheapest. The major companies are not reliant on any one particular source and can easily freeze out a particular producing country if it does not co-operate with the needs of the company. The UK/Dutch company Unilever is the world's largest supplier of black tea. With tea estates in India and eastern Africa it has an estimated 15% share of global black tea sales. Its subsidiary Brooke Bond Kenya is the country’s largest plantation company with an 11% share of output. In July 2004 the company changed its name to Unilever Kenya Tea. Unilever’s major brands (including Lipton, PG Tips and Red Label) have an annual turnover in excess of €2.35bn and are available in more than 100 countries. Unilever's Lipton Yellow Label is the world's most popular tea brand. James Finlay Ltd produces around 55 million kg of tea each year on its plantations in Kenya, Uganda, Bangladesh and Sri Lanka. Tata Tata Ltd (India) has 18 subsidiaries worldwide and a significant presence in 35 countries. It owns more than 70 estates in India and Sri Lanka, produces over 60 million kg of black tea and in 2003 acquired Tetley, the second-largest tea bag brand worldwide. Major trends in the market: There is no single world price for tea, but rather differing prices at different auctions. The price trend is downward. World Bank figures suggest that between 1970 and 2000, tea prices fell by 44% in real terms. After rising slightly between 2000 and 2004, the price fell back in early 2005 to below the average level of 2001. Average tea prices, Mombasa auction

(US cents/kg)

2001

151.7

2002

148.2

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2003

154.4

2004

155.4

2005 (Jan/Feb avge)

149.9

Source: World Bank The prices in the table compare with a 1974 tea price of around US cents 140/kg. After taking inflation into account, the real price of tea has dropped substantially. In real terms, producers now receive less than half what they received 30 years ago. While technological innovation and the development of new teas has led to some expansion of the market, they have increased world output of tea and reduced prices without affecting global demand significantly. In the absence of supply-management strategies, production has outstripped demand. Tea prices have nonetheless fluctuated less dramatically than coffee prices, giving small-scale tea growers a little more certainty than coffee farmers. But year on year their situation has worsened, making production of the crop increasingly marginal for many. Tea is facing increasing competition from soft drinks and other beverages. Although the British are traditionally amongst the world’s largest tea drinkers, consumption has declined recently. According to the FAO’s Intergovernmental Group of Tea, world imports of black tea are projected to be in balance with exports in 2010. It expects world tea production to reach 3 million tonnes by 2010, slightly more than the record reached in 2001, while international trade would reach 1.4 million tonnes, valued at US$2.9 billion. Oxfam projects a surplus of export availabilities of about 24,000 tonnes over import requirements for 2005, a surplus of 2%. The production structure of the ACP tea sector The 19 ACP tea producers are Burundi, Cameroon, DR Congo, Ethiopia. Kenya, Lesotho, Mali, Malawi, Mauritius, Mozambique, Nigeria, Papua New Guinea, Rwanda, Seychelles, South Africa, Swaziland, Tanzania, Uganda and Zimbabwe. All but Lesotho, Mali, Nigeria and Seychelles export tea. Kenya accounts for over half of the tea output in ACP countries. Malawi, Uganda and Tanzania are the next largest producers, (in that order) with Malawi’s production about 15% of Kenya’s. Globally, most tea is grown on plantations. In the ACP countries, small-scale growers are also prominent; in Kenya, they account for about 60% of the country’s tea production. Smallholders

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often grow tea bushes alongside staple crops for their own consumption, with the tea providing cash income. Outsourcing is practiced in some countries - in Zimbabwe and Malawi, for example - with growers using their own plots to grow tea on contract for plantations. Only the smallest producers farm their land entirely with family labour, and many smallholders employ workers, often on a casual basis. On plantations, the use of child labour seems common in many of the poorer tea-producing regions, due to the economic conditions of the household and lack of schools. A recent survey by the Malawi Congress of Trade Unions found, for example, that child labour is a very serious problem in many tea (and also tobacco) plantations. After harvesting, the leaves from the tea bushes can be processed in two ways – CTC (crush, tear and curl) or orthodox. CTC is used primarily for tea bags and lower-quality leaves. Up to 97% of Kenya's tea is CTC, (compared with Sri Lanka, where about 90% is orthodox). CTC processing is done by machines which rapidly compress withered tea leaves, forcing out most of their sap; they tear the leaves and curl them tightly into balls that look something like instant coffee crystals; the leaves are then 'fired,' or dehydrated. The process does not allow for the careful treatment that high-quality leaves merit, but CTC has an important role as it allows for the rapid processing of a high volume of leaves which would otherwise go to waste. It is also good for producing a strong, robust flavour from leaves of middling quality. For many varieties of leaf CTC is the preferred processing method. The orthodox method is more complex, and is usually done mostly by hand. The process differs for black and green teas. The basic steps in the production of black tea are withering, rolling, oxidation, and firing. First, the leaves are spread out in the open (preferably in the shade) until they wither and become limp. This is so that they can be rolled without breaking. Rolling, the next step is now more often done by machine than by hand. Rolling helps mix together a variety of chemicals found naturally within the leaves, enhancing oxidation. After rolling, the clumped leaves are broken up and set to oxidise. Oxidation, which starts during rolling, is allowed to proceed for an amount of time that depends on the variety of leaf. Longer oxidation usually produces a less flavourful but more pungent tea. Finally the leaves are heated, or 'fired,' to end the oxidation process and dehydrate them so that they can be stored.

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Low prices for tea tend to be passed on to the poorest segments of a country in the form of low wages on plantations. Given that it is easier to cut costs (by reducing labour costs) than raise prices (it is impossible for a producer country to attempt this unilaterally), producing countries have to remain competitive by lowering wages – which partially accounts for the rut in which plantation wages are caught. Labour costs account for over half of the cost of production, and approximately 75% of that arises in plucking. There is downward pressure on farmers’ incomes and labourers' wages and working conditions, even though the proportion of wages in the consumer price of tea is low. Table: tea production and exports of ACP countries Production (tonnes) 2004

Exports (tonnes) 2003

(provisional) Burundi

6,600

573

Cameroon

4,000

1

DR Congo

1,389

146

Ethiopia

3,900

2,193

290,000

293,751

716

-

45,000

37,945

50

-

1,436

52

10,500

937

n/a

178

6,500

6,600

15,484

15,170

Seychelles

225

-

Swaziland

n/a

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Tanzania

25,500

20,887

Uganda

35,000

8,071

Zambia

750

-

22,000

13,355

Kenya Madagascar Malawi Mali Mauritius Mozambique Nigeria Papua New Guinea Rwanda

Zimbabwe Source: FAO

NB: F O Licht lists Kenya ’s exports at 268,801 tonnes

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The relative role of ACP tea in world trade ACP countries account for around 30% of global tea exports. According to FAO figures, Kenya is the world’s largest exporter, (293,751 tonnes) followed by Sri Lanka (291,000 tonnes); China (263,000 tonnes), India (171,000 tonnes) and Indonesia (90,000 tonnes). According to F O Licht data, Kenya is the second largest exporter. The competitiveness of ACP tea Yields of tea and the cost of producing it vary enormously from smallholder to estate, estate to estate, country to country. In Kenya the estate sector is the most efficient with yields of about 2,670 kg/ha compared to 1,167 kg/ha in Sri Lanka. This is reversed in the smallholder sector; in Kenya, yields from smallholders average only 1,651 kg/ha as against 2,217 kg/ha in Sri Lanka. The low level among Kenya smallholders is attributed to low levels of fertiliser usage, poor husbandry practices and inferior management. Paradoxically, tea smallholders in Kenya generally earn more than tea workers, many of whom would prefer to be smallholders. The Kenya Tea Development Authority pays a minimum of Ksh 7.50 (US cents 9.5) per kg to smallholders and outgrowers. Growers in Uganda receive US cents 10.4-15, those in Rwanda US cents 9.5, and those in Malawi US cents 7.5. The economic significance of tea to ACP countries Tea output is increasing in the ACP group as in other tea-producing areas. Kenya’s production increased from 203,000 tonnes in 1993-5 to 290,000 tonnes in 2004, while its exports increased even faster, from 208,154 tonnes in 2000 to 293,751 tonnes in 2003. Tea accounts for around 20% of Burundi’s total exports, 18% of Kenya’s, 12% of Rwanda’s and 7% of Malawi’s. Uganda and South Africa are vigorously developing their tea sectors, the latter partly through red tea (rooibos), worldwide export sales of which increased by 400% between 1998 and 2003. Studies carried out in South Africa have shown that rooibos is rich in antioxidants and may help protect against damage that can lead to types of cancer and heart problems. There is a danger that expansion could have a negative effect on world tea prices, especially given the near stagnant demand for tea in many Western countries.

The EU regime

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The EU has no restrictions on the import of tea, nor does it have quality standards. The EC describes tea as 'a totally liberalised market'. The most favoured nation (MFN) tariff is zero, and there is no tariff escalation if tea is processed, unlike the case for coffee and cocoa. However, on small packages only, a 5% ad valorem tax applies on imports into the EU of green tea (not fermented) in immediate packings of a content not exceeding 3 kg, and on black tea (fermented) and partly fermented tea, in immediate packings of a content not exceeding 3 kg, According to the EC, the main issue concerning the tea sector is the way its producers are not protected from 'copycats'. Around 10,000 tonnes of 'Darjeeling' tea, for example, is produced from an estate in Darjeeling, India, but 30,000 tonnes is sold under this designation around the world. The EC would like to see an international register of food-and-drink products that are made from a special recipe, or are from a specific region, that are not allowed to be copied. The March 2005 WTO ruling on Geographical Designations of Origin should help ACP countries that want to develop regionally specific teas. The EU believes that the ruling upholds its system of granting protection to products with specific geographic origin (GIs). The need for investment to improve quality and add value Investment is needed to raise the general quality of ACP teas which tend to be low. This is reflected in the comparative prices at the Mombasa auction on the one hand and the Indian and Sri Lankan auctions on the other. For instance in January/February 2005, tea fetched an average of US cents 154.4/kg in Mombasa compared with US cents 194.2/kg at the Colombo auction. More investment is needed to produce specialty teas. Teas in this category from Kenya and Rwanda and other ACP tea-producing countries are in demand and have attracted good prices. Specialty teas from India have earned a reputation for high quality and fetch very good prices. A batch of genuine Darjeeling tea, for example, fetched a record, if exceptional price, in 2003 of £223/kg., compared with less than £1/kg for ordinary teas. Tea-producing countries would profit from expanding into upstream activities, adding value in their own country, and generating additional employment, income and revenue. Efforts by producers to enter activities such as blending have been hampered by poor market information and inadequate marketing strategies, aggravated by a lack of funding. The Kenya Tea Development Agency (KTDA), which processes and markets tea on behalf of its 370,000 smallholder owners, wants to reverse this. In March 2003 it announced plans to blend KTDA tea with cheaper African teas and sell them in branded packs to foreign markets. In early 2004 the

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KTDA announced that three new tea brands are being produced in Kenya for export: green, orthodox and flavoured tea. The development of the products was inspired by a need 'to meet new customer demands'. New strategies aimed at adding value and reducing production and marketing costs are also needed, especially to meet changing tastes. The importance of the EU market globally Global tea imports in 2003 totalled 1,319,574 tonnes, of which the EU imported 291,469 tonnes, 22.1% of the total. The UK imported 156,636 tonnes, 53.74% of EU imports, and about 12% of global exports. Germany was the EU’s second largest importer. The EU share of global imports is set to rise with the entry of Poland, a major tea-consuming country, which imported 30,594 tonnes in 2003. The importance of the EU market to the ACP The overall slow growth of tea consumption in Europe means that the EU tea market is declining in importance for ACP countries producing standard teas, (although the accession of Poland may modify this). The UK has lost its historical position as the largest importer of Kenyan tea; Pakistan now buys 25% of it, followed by Egypt, the UK, Afghanistan and Sudan. However, the EU market for fair-trade and specialty tea is likely to grow in importance for ACP tea producers. Profile of the market for tea in Europe Germany is the fastest growing EU market increasing its imports from 40,583 tonnes in 2002 to 45,787 tonnes in 2002 and buying more of the higher-quality teas. The UK is buying less imports were down from 164,070 tonnes in 2002 to 156,636 tonnes in 2003 - with the market for standard teas in decline. EU countries have different requirements: continental Europe buys leafy orthodox teas, while the UK prefers the CTC teas which are normally used in tea bags. Germany buys first-flush Darjeeling at more than US$30/kg, for example, while the UK would only reluctantly pay US$2.50/kg for a top-quality Kenyan tea.

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In the 1920s, the UK was the tea supremo, absorbing 60% of world tea exports. Now it seems that a visitor to Europe is more likely to find a good cup of tea in Germany rather than in Britain. The ACP-EU trade relationship in the tea sector The EU’s historical relationship with ACP countries lays the basis for cooperation, given that EU countries do not grow tea. The entry of Turkey, the world’s sixth largest tea producer, into the EU could change this and cause considerable, but as yet unknown, repercussions for ACP countries. The EU gives financial support to tea projects in ACP countries. The Smallholder Tea Development Programme in Uganda, for example, was assisted with €20 million from the European Development Fund. The objective of the project was to develop Uganda’s smallholder tea subsector and make it profitable, and to increase farmers’ real income, employment opportunities and foreign-exchange earnings. ACP counties could gain, believes the EU, if the WTO were to extend the extra protection for GIs, currently limited to wines and spirits, to other products including commodities - Ceylon tea, for example. 'There is ample evidence that geographical indications are instrumental in fostering market differentiation leading to premium prices. The resulting consumer recognition and product reputation should therefore be safeguarded against unfair competition and imitations via WTO-wide rules', according to an EC report. Exploiting the fair-trade market An increasing number of tea growers and plantation workers are benefiting from selling their tea in the fair-trade system, with a 'Fairtrade' label. Products are certified by the UK-based Fairtrade Foundation. Fairtrade certified tea is sourced from tea estates and democratic small-farmer organisations under terms of trade which include: •

fair wages and working conditions for employees;

•

payment of a negotiated fair price to producers (estates and smallholder organisations);

•

an additional premium for investing in social, economic or environmental programmes.

CaféDirect, a UK-based fair-trade company, sources tea from east Africa and Sri Lanka for sale under its Teadirect label. With a 34% year-on-year growth by value, Teadirect is the fastest growing tea brand in the UK retail market. Farmers who grow tea for Teadirect receive a

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guaranteed minimum price of US$1.95/kg, some 40 cents a kg higher than the Mombasa auction price in early 2005. In addition, a premium of €0.50/kg or €1.00/kg, depending on the type of tea, is paid for the improvement of the socio-economic situation of the workers, their families and communities. A growing percentage of fair-trade tea, almost 40%, comes from small-scale growers. Another major UK-based company Traidcraft buys chiefly from Uganda and Tanzania. More than 70 fairtrade teas are now marketed, ranging from tea bags to loose tea, and including 'organic' and green tea. In 2002, certified sales of fair-trade tea had an estimated retail value of £7.2 million, about 1.3% of the market. The Fairtrade label is monitored by the German-based Fair-trade Labelling Organisation International (FLO), which sets standards under which tea can be sold, and is working with 51 tea-producing organisations from nine countries, including five in Tanzania, four in Uganda, and one each in Kenya and Zimbabwe. An FAO 'Tea Mark' was launched in December 2002. This is intended to be an international mark to promote tea’s health benefits. The tea boards of India, Kenya and Sri Lanka have been involved. The Kayonza tea-processing factory in Uganda is an example of involvement in the fair-trade system. The factory is collectively owned by about 3,100 smallholders, who together cultivate 1,300 hectares of tea, but most work very small plots of land (usually less than 0.2 hectares under tea). They took over the factory after it was privatised. In 1998, the farmers joined the Fairtrade scheme and by the middle of 2001 they had received nearly $50,000 in premium funds. They used this to construct a health centre with electricity and water, which services an area of 600 square km and invested in communications and email facilities, as local people previously had to walk 100 km to make a phone call. Additionally, a 4 km road has been constructed to save some farmers a five-hour walk to take their green leaf to the collection point, so that they can now spend more time on their land. The fair-trade premium has also allowed ten new primary schools to be set up in the area. Other trends There are some other favourable trends: a Teadirect report refers to some 'amazing advances in tea drinking'. It predicts that our cup of tea, what's in it and the way we drink it will have changed beyond recognition by 2010: 'Tea looks set for a massive revival over the coming years, helped along by new inventions and lifestyle trends'. Tea will also be put to new uses: 'Trendy tea - tea

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will come to reflect our life-style choices and values. Hip bars in France, the UK and the USA are already serving champagne teas and Earl Grey martinis'. In an effort to make tea more convenient to prepare, the tea industry has introduced a ‘tea tablet’. Invented in Japan, this could help to widen the market. Scientists at the world's largest tea-research facility, in Assam, India, are also reported to have developed a tea tablet. However, instant tea was a commercial failure when introduced into the UK about two decades ago. Auction trends Auction centres could become redundant with technological advances. At present almost all tea fields are located in regions where land-phone lines intermittently fail or do not exist. With the development of the internet through mobile phones, however, and given that many plantations are financed by large companies, tea estates will in the future be able to post real-time data daily onto the internet, enabling a viable futures market. The global process for bringing buyers and sellers more directly together is already taking place with catalogue sales of premium tea. ACP producers need assistance to access information to enable them to exploit on-line auctions. SUGGESTIONS If the tea industry has to choose between improving prices and controlling costs, the former is the more difficult option, particularly in a global environment where transnational corporations are exerting greater influence on the buying operations. The latter option, therefore, seems to be the more practical alternative. Although wages and input costs per se are bound to rise, they could, within limits, be balanced in terms of unit costs of production through enhanced productivity -- not just that of labour but also the other factors of production that contribute to the growing, manufacturing and marketing of tea. It is against this backdrop that this study on productivity assumes crucial significance. Cost control measures generally involve capital expenditure as, for example, in material handling equipment, heat recording systems, energy saving devices and so on. In this sense, these are also components of the productivity approach.

Conclusion The art of tea cultivation in Bangladesh began over a century and a half ago in the 1840s near the Chittagong Club. The first tea garden to be established was Malnicherra in Sylhet in 1854. Its commercial production began shortly thereafter in 1857.

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Today, tea is the second most consumeable beverage in the world after water. A total of 3,200,000 tonnes of tea were produced worldwide in 2004, (Source: FAO website www.fao.org) India, China, Sri Lanka and Kenya, in that order, are the major producers of tea leaves. Tea global market seems defined by radical change, both good and bad. The most radical disruption was the Afghan and Iraqi war, which hurt Asian wholesale producers. Remarkably, good news will likely come out of the Iraqi situation. Nations of that region consume high quantifies of tea per person, and Iraq may become again a stable base for tea consumption. Better yet, democracy may generate a larger middle-class society which has the money to buy a higher quality tea than that previously consumed. And if Iraq and Afghan becomes a regional role model as the U.S. government plans, then a future generation of newly middle-class tea drinkers may be created in many high-consumption nations, the best news for marketing bulk amounts of branded tea, especially from India and Sri Lanka. While the Iraqi war is "loud" news for tea markets, a quieter global development remains remarkably low interest rates. Some of the largest tea companies borrow heavily, reducing their ability to budget for marketing and advertising. Tea consumption in Bangladesh is increasing 3 per cent per annum but its production is increasing 1 per cent only. If tea production was not increased Bangladesh would become a teaimporting country after 2020. Bangladesh is now exporting 12,000 Metric Tons (MT) tea per annum, which earns Tk 90 crore. According to the Bangladesh Tea Board currently Bangladeshi tea gardens are producing 56,000 MT of tea per annum. Of this 12,000 MT is exported. Bangladesh’s current population growth rate is 1.6 per cent. Experts consider that in 2020 Bangladesh’s population will reach to 18.10 crore. If the tea consumption growth rate continues, in 2020 tea consumption will reach to 6.50 crore kg while its production will reach only to 5.41 crore kg. The government is considering framing of a 20-year strategic plan for development of the tea sector and to increase its production. The project will cost Tk 867. 32 crore. of them Tk 752 crore will be spent for implementation of strategic plan, Tk 64 crore will be spent for research and other Tk 51 crore will be spent for trade and marketing strategy. The strategic plan suggests that total land for tea production has to be increased to 69,000 hectares from existing 50,000 hectares. It also suggests that tea production per hectares is 1748 kg from 1176 kg has to be increased as early as possible. It also recommends increase of quality of tea and to export 40 per cent of total tea production.

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It is concluded that the tea marketing of Bangladeshi Tea to International market has both prospects because of Tea marketing systems in Bangladesh have undergone significant changes over the last three or four decades, keeping in line with changes in quantity, quality, and market structure and problems due to the world tea export increased by 50,000 tons which is more than the production in 2003, but production of the major exporters such as India and Bangladesh has decreased. The FAO report was prepared for the Intergovernmental Group on Tea meeting in Bali (20-22 July 2005) to review the current world tea market and its mediumterm outlook.

Bibliography • • • • • •

• • • • • •

Chatterjee, D.N.: Review of ILO/UNFPA/Indian Tea Association Family Welfare Education Project in Dooars, India (1982). Ceylon Labour Foundation: Health status of women plantation workers in Sri Lanka (1990). FAO: Documents for the 11th Session of the Intergovernmental Group on Tea (Rome, 1995). Government of Sri Lanka: Tea Master Plan (1980). ILO: Documents for the Tenth Session of the Committee on Work on Plantations (Geneva, 1994). International Tea Committee: Annual Bulletin of Statistics. Mackay, M.D.: Disease pattern in the tea garden workers in Bangladesh (1977). Nair, S.U.: Review of United Planters' Association of Southern India study on socio-economic affecting productivity among tea pluckers (1990). SAARC Agriculture Information Centre: Women in agriculture (1993). Sivaram, B.: A handbook on family health and welfare in plantations (ILO, Geneva, 1992). de Silva, R.L.: Statistical references: Productivity improvement of tea plantations in Sri Lanka (World Bank, 1994). Tea Board of Bangladesh, India and Sri Lanka: Tea statistics. Wesumperuma, D.; Gooneratne, W.; Fernando, N.A.: Labour absorption in the plantation crop sector of Sri Lanka (1985). Jana Arcimovičová, Pavel Valíček (1998): Vůně čaje, Start Benešov. ISBN 8-090-200591 (in Czech)

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T. Yamamoto, M Kim, L R Juneja (editors): Chemistry and Applications of Green Tea, CRC Press, ISBN 0-849-34006-3

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Lu Yu ( 陆 羽 ): Cha Jing ( 茶 经 ) (The classical book on tea). References are to Czech translation of modern-day editon (1987) by Olga Lomová (translator): Kniha o čaji. Spolek milců čaje, Praha, 2002. (in Czech)

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John C. Evans (1992): Tea in China: The History of China's National Drink, Greenwood Press. ISBN 0-313-28049-5

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Kit Chow, Ione Kramer (1990): All the Tea in China, China Books & Periodicals Inc. ISBN 0835121941 References are to Czech translation by Michal Synek (1998): Všechny čaje Číny, DharmaGaia Praha. ISBN 80-85905-48-5

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•

Stephan Reimertz (1998): Vom Genuß des Tees : Eine eine heitere Reise durch alte Landschaften, ehrwürdige Traditionen und moderne Verhältnisse, inklusive einer kleinen Teeschule (In German)

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Jane Pettigrew (2002), A Social History of Tea

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Roy Moxham (2003), Tea: Addiction, Exploitation, and Empire

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The Tea Council (UK) http://www.teacouncil.co.uk

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FAO (www.fao.org) http://www.fao.org/es/ESC/en/20953/21035/index.html

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India Infoline feature 'Indian Tea Sector: "The cup of joy"', December 9th 2004 http://trade.indiainfoline.com/Commexwebsite/olw/cup.pdf

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The EU's position on geographical indications (GIs) http://europa.eu.int/comm/trade/issues/sectoral/intell_property/argu_en.htm

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The Tea Market: A Background Study Oxfam 2002 http:/www.maketradefair.com/assets/english/TeaMarket.pdf

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EC: 'Agricultural Commodity Chains, Dependence and Poverty - A proposal for an EU Action Plan', February 12th 2004, COM(2004)89 final. http://trade-info.cec.eu.int/doclib/html/117111.htm

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Fair-trade Foundation, London: 'Producer Profile, Kayonza Growers Tea Factory, Uganda'

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http://www.fairtrade.org.uk International Tea Committee http://www.intteacomm.co.uk

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Salman Ispahani, Member, Bangladeshiya Cha Sangsad

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Orman Rafay Nizam and B. R. Nizam, Membesr, Tea Traders Association, Bangladesh.

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www.wikipedia.com/tea 7%

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Source: Bangladesh Tea Board Annual Report 2004

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Source: Bangladesh Tea Board Annual Report 2004

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Source: Bangladesh Tea Board Annual Report 2004

Source: Bangladesh Tea Board Annual Report 2004

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Source: Bangladesh Tea Board Annual Report 2004 Source: Bangladesh Tea Board Annual Report 2004

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Source: Bangladesh Tea Board Annual Report 2004

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Source: Bangladesh Tea Board Annual Report 2004

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