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A challenge for Indian tea & coffee.

A spectacular price of RS. 10,001 per kg. (approximately $200 per lb. at the present rate of exchange) was fetched by a line of Darjeeling teas, produced by Puttabong Tea Estates of Jayashree Tea & industries Ltd., in the month of June at Calcutta Tea Auctions. This has easily set a new record, overtaking the previous highest price of RS. 6,000 per kg reached by Castleton Teas Estates, another Darjeeling garden. The lot was purchased by Raghunath Tea Exports (Seller - J. Thomas) for a German buyer. Germany has always been a quality conscious market and picks up good quality irrespective of price. The market is steadily developing in such lines, in which India tea is progressively increasing her share.

Decline export volume to the Soviet Union from 1,37,000 tons to only 1,10,000 tons in 1991 and further uncertainly in the current year, has forced the tea industry to find new markets. The effort has been substantially encouraging, being able to increase exports to general currency areas by 19,000 tons.

Exports in 1992 may further decline to only 75,000 tons on the basis of protocol quantity of 60,000 tons and balance through individual trade protocol with some republics including Russia. Therefore to maintain and improve tea exports in 1992, further effort to develop new markets will be necessary. It is however easier said than done to cover a wide grey area.

India's tea exports somehow revolve around a 200,000 tons ([+ or -] 5%), irrespective of a lean year or a boom, high global price or low, heavy Russian offtake or not-so-heavy.

Technical credit of $32 million earlier released by the Reserve Bank of India, covered only 15,000 tons already shipped to the former Soviet Union. Export trade is now pressing the Government for release of $90 million as further technical credit for completing shipment of balance quantity of 45,000 tons as per protocol quantity. Industry fears if this quantity cannot be shipped before December 1992 for lack of technical credit, the situation will create a serious imbalance next year due to spillover of this volume.

Due to a stalemate in the former Soviet Union's buying, prices continued to plummet, threatening economic viability of tea production units. Moreover, continued political and industrial disturbances in the tea producing areas in Northeast India, coupled with bad weather conditions in some regions, there is already a short fall of about 28,000 tons up to July 1992. Further, the former Soviet Union being mainly orthodox tea buyers, there is a possibility of glut of this variety causing serious imbalance in the internal market.

Although rains caused delay in starting harvesting in 1992, experts estimate an output of similar volume as in 1991, i.e. 740,000 tons. If the magic of 200 ([+ or -] 5%) works, there will be more than enough tea for internal market since expansion in general currency areas in the face of stiff competition will be a tough job, the Indian tea industry will have to reply more on export of packet teas, instant teas and speciality teas to cover foreign exchange earnings. While common teas suffer in export markets due to competition from Sri Lanka, Kenya, high quality teas and speciality teas have an unrestricted market.

The names--Darjeeling, Assam, Nilgiri--are already well-known in the world markets. These names go as somewhat speciality. But a time has come to dive deeper into the subject. While all Darjeeling gardens have some similar characteristics to identify them to the growth region, each garden has its special features. In fact, each plucking has differentiating values. First flush Darjeelings are different from monsoon plucking, yet they will retain some dominant similarity. A particular type and variety may be just the kind, a consumer overseas will pay a fabulous price for.

A twist of two in the rolling drum or an hour more or less in the fermenting chamber may make an ocean of difference to a connoisseur. Such is the speciality tea which looks for a connoisseur and such is the consumer who searches for his tea. The two will have to meet at the retailers initiative. There was a time when a customer would pay heavily for Leggcut variety, for manufacturing of which a special type of tobacco cutter was used. Oolong which is still a favorite to some, is made by adopting an ancient chinese method of processing from which it has taken such name.

The Indian Coffee Market

While for tea, internal absorption of surplus quantity is a manageable problem, for coffee the situation is different. In 1991/92 season, the total quantity of coffee received in the pool is only 166,000 tons which is much short of 210,000 at 120,000 tons. But there has been a shortage already due to lack of response from East European countries mainly Czechoslovakia. Moreover internal consumption has not shown any significant growth. During June and December |92 a quantity of 20,000 tons will be shipped to Russia according to trade protocol. Export realization has substantially dropped due to depressing global prices. The following table of average indicator price for |Other Milds Arabica' during January and April 1992 will give an idea of depressing global prices in the absence of a fresh agreement.

If the above trend continues, it will seriously reflect upon coffee production. Small growers play an import role in the coffee scene. More than 30% holdings in coffee bearing area are well below 2 hectare group. Continued unremunerative return is likely to drive them away from coffee to some other crop.

There is a vast internal market for coffee mainly in the northern regions, which is yet to be worked in order to supplement declining global market. Too much dependence on earstwhile Russian buying for both tea and coffee has, to some extent, blunted the sharp edges of competition, and drive for exploring new markets including internal market. Though instant coffee has gained some acceptance in the upper-upper category of the market, but constraint for instant coffee is a deterrent to its acceptance in the mass market. Nonavailability of simple brewing machines appears to be a great obstacle. Observing the popularity of coffee in hotels/ restaurants/coffee, houses one imagines the possibility of its easy passage to home kitchen. But here one stumbles for non-availability of a brewing equipment supplemented by unimaginative distribution system. India's internal market has the potential to absorb substantial quantity of coffee and reduce problem of unremunerative export, provided proper marketing and promotional activities commence before it is too late.
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Author:Bose, Bimal
Publication:Tea & Coffee Trade Journal
Date:Nov 1, 1992
Words:1094
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