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Creating new markets for Indian tea & coffee.

Production of Indian tea in 1992 closed at 703 million kg, substantially lower than 743.9 million kg in 1991. Decline is attributed to unfavorable climactic conditions. Exports too, were lower at 170 million kg against 203 million kg in 1991 however, a rise in internal consumption continued at a rate of a 3 to 4% increase.

In 1991, internal consumption was 520 million kg and in 1992 it shot up to 535 million kg. The decline in export, however, has not produced any depressing sentiment in the industry and government considering the global situation.

Direction of Indian tea exports started taking a swing from 1970. Prior to 1970, the U.K. was the principal tea export market. Since then, gradually the direction changed and the USSR became the principal export market. Export to the U.K. declined from 93.4 million kg in 1970 to a mere 21.8 million in 1990. While exports to the USSR shot up from 28 million kg in 1970 to 128.6 million kg in 1990.

During these 20 years, India passed through many economic changes, of which the implementation of a Foreign Exchange Regulations Act was an important one. The U.K. tea industry, having interest in Indian tea plantations, gradually withdrew from India and created new interest in Kenya. On the other hand, the USSR came closer politically and bound themselves in long-term trade pacts for mutual interest. These being simultaneous, the bulk of tea which used to go to the U.K. changed its direction to USSR. In this bulk export, which comprises approximately 50% of Indian tea exports, the exporters can hardly take much credit except managing the business.

The real task of creating new markets against tough competition came only after the breakdown of the Soviet Union. Now there are no compelling links either with the U.K. or with Russia and other East European states.

In this situation, with no assurance of big bulk exports to either the U.K. or CIS countries, to end up with tea exports at 170 million kg cannot be taken as a mean achievement. Indian tea exporters are going around the world to find new markets. Making private deals in free foreign exchange with Uzbekistan, Azarbijan, etc. in order to earn more foreign exchange, attention is on selling more and more value added items like packet tea, tea bags, and instant tea.

In this effort, the process of liberalization of the Indian economy has provided stimulus. Full convertibility of the rupee has gone a long way in ensuring stability of rupee exchange rate in favor of Indian exporters in the overseas markets. Recently, total abolition of excise duty on tea and coffee has improved the competitive edge. Armed with these weapons and promotional assistance from the Tea Board, Indian tea is on its way to take up the challenge in a tough global market.

In another development, the pattern of buying tea by internal consumers is rapidly changing. Traditionally, the Indian consumer used to purchase his requirement from grocers or tea retailers in loose form. The retailer uses his own expertise to blend with an eye to fix a retail price of his own choice. More often than not, in order to keep a price standard and ensure his profit margin, the product turns out to be an indifferent one.

Moreover, due to loose handling, quality suffers. The Indian Tea Packeters' Association, which was formed many years ago by the initiative of Brooke Bond, Lipton, Duncan, Gulabi, Tosh, and others, have done little to reverse the trend. It is more or less the individual packers' efforts which has been able to sell 190 million kg out of a total of 535 million kg internal consumption in 1992.

Accessibility to PPL material and the technology of multicolor printing of complicated designs has made packet tea more acceptable. Paper, aluminum foil, and board, being more expensive, are used for only expensive teas. Polypack, being less expensive and general consumers being quality conscious, is now in wide distribution. This is a good sign. If the Tea Packeters' Association takes its work seriously, the trend may change faster for improved marketing. With easier distribution, the economy may shoot up from present 40 to 60% in course of next three years, said D.K. Ghosh of Tosh & Sons, a past president of Tea Packers' Association.

Internal coffee quota

and promotion

Allowing 30% of the produce to be dealt with by the grower independently is a remarkable step taken by the Coffee Board at an appropriate time. Since 1942 when the Coffee Act was passed, rules demanded that the entire produce be delivered to the provision that internal sales quota may be granted to the growers if and when thought necessary. Coffee growers, until recently thought it beneficial to deliver his entire produce to the common pool for regulated and profitable marketing

Moreover, producers thought they could devote their full attention to production, while marketing would be looked after by the Board. Continued stalemate in the quota operation of ICO, declining prices, overstocked global market combined with slow progress in expansion of internal market, created a compelling situation for sometime requiring much more aggressive marketing techniques.

Some 30% of the produce (ISQ), which has now been privatized in a sense after 50 years, has not only met the demand continuously voiced by the plantation community for several years, it has also enhanced the maneuverability of Indian coffee in the world market. While this may not be taken as a direct fallout of the liberalization of the economic policies, it is surely a reaction of the general sentiment created by implementation of such policies.

That a quantity of 106,846 tons of coffee could be exported earning 354.4 crores of rupees in foreign exchange in the financial year 1992-93 (April-March) is a clear indication of a hopeful beginning. This will facilitate production of specialty coffee and high quality with plantation mark (brand names) for selling at a higher price in the world market to the benefit of growers, as well as the country as a whole.

It is to be observed that in this export, share from general currency areas is as large as 79,123 tons, with rupee currency area contributing a mere 27,723 tons.

Despite of a feeling shared by all concerned sectors that a substantial potential remains untapped in the internal market, the consumption is static at around 55,000 tons. In this context, the Coffee Board is thinking of stepping up promotion through establishing coffee houses in areas of tourist attraction and pilgrimages.

Up until 1955 there were more than 50 coffee houses spread all over the country. Then it was felt by the Coffee Board that promotion through coffee houses has "outlived its purpose". All coffee houses were closed down, except two or three, and promotion through modern techniques were applied.

Surely for good reason, the Coffee Board is reversing its decision, or perhaps application, of modern techniques of promotion, and will be supplemented by "Coffee House" promotion. Coffee in India, other than four South Indian states, however, has a much more competitive market to compete with today then it had in the 1950's.

Currently, India consumes 535 million kg of tea. Moreover, various cold drinks, and fizzy bottled drinks have invaded the market and are sweeping away consumers. Considering the present market and consumer habits and behavior, serious thinking, backed by adequate marketing skills, is the answer for continued growth in these segments.
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Author:Bose, Bimal
Publication:Tea & Coffee Trade Journal
Date:Jul 1, 1993
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