Goodricke Tea

Changing Scenario of Indian Tea Industry

With Special Reference to Goodricke Tea
Goodricke Tea

2013

Abstract Tea is indigenous to India and is an area where the country assumes a lot of pride. This can be attributed to the pre eminence of the tea as a dominant foreign exchange earner and the consequent contribution to the GNP of the country. Tea occupied an important place in Indias economy for the last several decades. The market for Indian tea is changing day by day. Indian Tea was observed to lose its numero uno position in the global tea market. Domestically as well it was losing its position owing to poor quality and high price. In India the tea industry is facing tough competition from soft drinks and other beverages like horlicks, bournvita or even coffee brands in that case. Earlier the tea industry was dominated by the product oriented model of business. But now in order to meet the growing challenges and competition in the market they adapted the market oriented model. This represents the model wherein the lines of production are linked to the market behavior. Here the product is sold on the basis of gratifying the market demand. Few years back tea industry a market matching approach was followed but presently both market creation and market matching approach is needed to face the present challenges of the market.

Contents

1. Introduction 4 2. Overview: Indian Tea Scenario .. 5-6

2.1.

Decline in the tea prices .. 6

3. Problems faced by the industry ... 7 4. The Present Domestic Tea Market of India ..... 8-9 5. Goodricke Tea: Market Share & Growth Trends .... 10-11
5.1. 5.2.

Background ... 10 Peer Comparison 11

6. Conclusion . 12

1. Introduction The tea industry in India is almost 200 years old dating back to eighteenth century when it was first discovered by Robert Bruce, a British National. Tea was first discovered in the upper part of Brahmaputra valley in Assam and

adjoining areas. It was not until 1838 that Indian Tea that was grown in Assam was exported to UK for the first time for public sale. Tea in India is primarily grown in the areas of Assam, West Bengal, Tamil Nadu and Kerala. Apart from this region tea is also grown in small quantities in Karnataka, Himachal Pradesh, Uttaranchal, Manipur, Arunachal Pradesh, Sikkim and Meghalaya. Unlike most other tea exporting countries in globally, India has two dual tea bases. The country produces both CTC and orthodox tea. The tea industry in India is agro-based and follows labor intensive method for production and its operations. The industry is renowned to have provided direct employment to almost 1 million people. Through its forward and backward linkages another 10 million people derive their livelihood from tea. In the Northeast alone 900,000 persons are employed by tea industry in permanent rolls. Tea industry also stands as one of the largest employers of women amongst the organized industrial sector.

2. Overview: Indian Tea Scenario Tea cultivation started in commercial scale in India in 1839. The commercial journey of Indian Tea Industry took off from Assam and then it was extended to other parts of the country between 50s and 60s of the 19th century. However due to certain specific soil and climate requirements the tea cultivation in India was confined to only certain parts of the country. The major tea producing states in India include Assam, West Bengal, Tamil Nadu and Kerala. Assam and West Bengal together counts for 75% of the total tea produced in India. India is acclaimed to produce some of the finest tea in the world. The tea produced in different parts of India has different characteristics. Assam tea for instance, is famous for their strong, brisk and full bodied liquor; Nilgiri tea on the other hand is reno wned for their delicate flavor, strength and brightness and Darjeeling Tea is famous for its reach flavor and aroma. It is the distinct flavor and characteristics of each region set them apart from one another in different ways. When we discuss about the tea industry in India it is one of the oldest agro-based and well organized industries. The industry gives employment to millions of worker and it also gives temporary engagement to many workers as well. The labor cost incurred by the Indian tea producing industry is the largest accounting for about 60% of the total cost of tea production. Apart from employment the plantations are also responsible for providing shelter and other facilities to the workers.

2.1.

Decline in the tea prices

It was during 1999 to 2006 when the tea industry faced steep decline in their in their prices. The situation made apparent the vulnerable area of tea industry that needs to be addressed to provide safeguard against the recurrence of such situations. It was around the same time when almost 130 gardens were closed, abandoned and suspended from their operations, although the industry witnessed gradual improvement of the situation since 2008 onwards. The fluctuating nature of the tea industry in India can be attributed to its agro-based operations, long gestation period and unstable market prices.

3. Problems faced by the industry Indian Tea industry is a 200 year old industry and since then it has been contributing significantly to the countrys national income. The tea industry in India faced many problems in the past few years. The problems faced by tea industry include: Emergence of new tea manufacturers like Vietnam, Indonesia and Kenya in international markets. This resulted in the oversupply of tea. Indian tea has been losing its position in the global tea market given its high price and poor quality. Tea is mostly sold through auction but this is one sided operation and brokers have the full access to control it. This system makes proper price realization doubtful. There is the existence of higher percentage of ageing bushes in Indias tea industry. This poses a major problem to the industry. The tea industry in India faces from the problems related with higher cost of production. Almost 80% of the cost of producing tea goes behind fixed expenses such as fuel, power and labor. Lack of sufficient modern technology. Lastly the ignorance of consumers about the market structure also creates problem for the industry. Although a lot of problem was faced by the industry, the reports and observation made in recent years reveal that there has been a steady rise in position of the indust ry in international market.

4. The Present Domestic Tea Market of India The tea industry has a very prominent place in the domestic market of India. Even the poorest household in India will purchase tea for their daily consumption. Tea is not only the primary beverage worldwide but it is same for India as well. Almost 85% of the total Indian household buys tea. This makes India one of the largest tea consumers in the world. Tea industry in India to a large extent drives the economies of the region where the tea gardens are concentrated. The tea business in India is about 150 years old. The tea industry in India is an area where the country can take a lot of pride mainly because of the pre-eminence as a foreign exchange earner and its contribution to the countrys GNP. India is the second largest tea producing country in the world with almost 25% of the total world tea production after China and the fourth largest exporter of tea in the world.

The Indias share in tea export started showing improvements since 2010 onwards. Keeping in mind the global competition there is need for the country to assess their
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competitive position in the global market. The competitive position in the market can be referred to the cumulative expressions of interactive effects of the variables of tea production and processing to consumer market.

Based on the research report by the Tea Board of India in 2011 2012, India stands as worlds largest consumer and 2 nd largest producer and fourth largest exporter of tea after China. The country accounts for nearly 30% of global tea output and 25% of the tea produced worldwide are consumed in India.

5. Goodricke Tea: Market Share & Growth Trends 5.1. Background

Goodricke Group Ltd. Is a Kolkata based company engaged in the business of tea cultivation, manufacturing and sales throughout the demography of India. The premium products offered by the country include Indian Black Tea and Instant tea Powder which are soluble in water. Goodricke Group Ltd owns 17 tea gardens in India which are spread across mainly three regions namely Dooars (West Bengal), Darjeeling (West Bengal) and Assam. The company has a total area of 9,807.7 hectors under cultivation. Of this about 90% area is under cultivation of mature and young tea forming the balance 10%.

5.2.

Peer Comparison

The domestic tea market of India is complex and it comprises of numerous unorganized and regional players competing directly with the large and established national players. The local state level markets are typically dominated by these small players. In case of organized sector, the company witnesses stiff competition from the players like Tata Global tea, Hindustan Unilever, McLeod Russel and Jayashree Tea.

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The company has a good network of distribution system which allows it to derive good advantages from its share in the domestic tea market of India. Goodricke Group Ltd is one of the leading players in the tea market of India. As per the recent market reports McLeod and Goodricke Group Ltd gained substantial percent in the BSE FMCG Index. The increase they gained in the share market is driven by the improved tea prices.

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6. Conclusion The study examined various factors responsible for the present scenario of the Indian tea Industry. The different factors contributing to the declining share of Indian Tea in the Global Market have also been discussed. The study was compiled with special reference to Goodricke Tea. The peer review for Goodricke Tea presented a brief report on the major players in the Indian tea industry and the relevant market scenario. In spite of the decline of Indians position in the Global Tea Market from world no. 1 exporter and producer to no.4 and no. 2, there is still time and space for the country to re-emerge on the global footprint. India is not very far behind its competitors. The proactive measures taken by our government in the last few years upgraded the methods and practice followed by the industry registering a steady grow rate in its output.

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