INDIAN TEA INDUSTRY AN ANALYSIS USING CONCEPT OF

FORWARD ENGINEERING
Shweta Jain,
ABES-IT Group of Institutions,
Campus-2, NH-24, Vijay Nagar, Ghaziabad- 201008, U.P., India
sjainshweta@gmail.com

ABSTRACT
Tea is one of the most popular and widely consumed hot beverages worldwide. More
than 30 countries grow tea. Tea Industry has seen a lot of changes in the past few
years, the worlds largest tea producer, India, lost its position to China for the first
time, in the last 110 years. Despite its fluctuating position in the world market, India
is a key source for tea as well as the largest market. There is a need to understand the
factors which influence the demand and supply scenario in the Indian Tea Industry, in
order to facilitate, practitioners ability to modify and adapt to the changing
environment. This paper seeks to address this issue. This paper aims at studying the
Indian Tea Industry by applying the concept of Forward Engineering. This paper
examines this concept through qualitative analysis of data and information gathered
through interviews with Tea Board Officials, public documents (e.g. annual reports),
and related research literature. The study tends to reveal the strategies and action
plans for Indian Tea Industry based on mind pooling, METRIC analysis and other
forward engineering tools.
Keywords: Tea Industry, India, Forward Engineering.
INTRODUCTION:
Global Tea Scenario:
Tea is one of the most popular and widely consumed hot beverages all over the world.
Today cultivation of tea is spread over all the continents wherein more than 30
countries are into tea production. The estimated global production is 3800 million kg,
out of which 43% is exported and the world consumption being 3700 million kg
approx., the global production and consumption are finely balanced with production
little ahead of demand. Tea, being an agricultural commodity, its production is bound
to fluctuate due to vagaries of nature; the prevailing difference between production
and demand is well below any reasonable limits.
Amongst all tea producing countries, the major producers are India, China, Sri Lanka,
Kenya and Indonesia. These five countries contribute 77% of the total world

production and 80% of global exports.

In the past few decades, many new entrants have joined the tea family; notable among
them are African countries like Kenya, Malawi and Turkey etc. In the international
market, the Vietnam and China have emerged as the prominent forces to reckon with,
during the last decade.
Across various countries, the average per head consumption of tea varies widely, from
more than 2 kg in Ireland and the U.K. and around 1 kg in Sri Lanka and Pakistan to
only 800 grams in India. Still despite having one of the lowest per head consumption
in the world, the total consumption in India is the largest due to its population size.
This distinct position is in sharp contrast with other producing countries, which hardly
have any domestic demand.
In the last decade, there has been a relative decline in the production of black teas and
an increase in the production of green tea which has more than doubled 692 m.kgs
in1998 to 1490 m.kg in 2007; this is mainly due to a huge expansion in China. Over
the past ten years, the entire increase in global production is accounted by the Green
Tea since the black tea production remained static around 2300 million which could
be attributed to the scientific studies linking green tea drinking with reduced cancer
risk whilst the latest studies have proved that black teas too have the same healthy
properties as that of green tea.
Since 2001 Chinas production has grown by 464 m.kgs i.e. 8.8% cumulative annual
growth and because of this steady growth, Indias position has been pushed to 2nd
place since 2006 when Chinas production exceeded Indias for the first time in 110
years and has continued to be higher since then.
Indian Tea Scenario:
In India, tea cultivation on commercial scale was first started in Assam in 1839 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 climatic requirements its cultivation
was confined to only certain parts of the country.
Major tea producing states in the country are Assam, West Bengal, Tamil Nadu and
Kerala. 75% of the total tea produced in India is accounted by Assam and West
Bengal together. Some of the worlds finest teas are produced in India. While Assam
teas are famous for their strong, brisk and full bodied liquor; Nilgiri teas are well
known for their delicate flavor, strength and brightness; and the production of the
famous Darjeeling tea is aided by the low temperature in the hills of Darjeeling. With
their own diverse agro-climatic conditions, other areas produce medley of tea which
suits many different tastes. The distinct characteristics of each region set them apart
from one another in many different ways.

In India, tea industry is one of the oldest agro-based well organized industries. More
than a million workers get direct employment from this industry of which a sizeable
number are women. A large number of temporary workers are also engaged during the
plucking season.
The labor cost is the largest cost overhead accounting for about 60% of the total cost
of production of Indian tea because the tea plantations are not just economic
production units, but rather social institutions, which controls the lives of their
resident work force to a large extent. Apart from employment, the plantations are also
responsible for providing house, water, welfare and many other facilities that affect
the daily lives of the workers. This is because most of the employees come from
socially and economically weaker sections of the society and majority of employees
are women who work and reside in an ideal industrial community. Their livelihood is
directly linked with the prosperity of the tea industry. Therefore, the tea industry must
grow, not only to fulfill its primary function of producing a wholesome beverage for
domestic and overseas consumer, but also to fulfill its social obligations in sustaining
and improving the well being of all those who are dependent on its fortunes.
India has been a dominant player in the global tea industry. Despite its fluctuating
situation in the share of world exports, still India is a key source for tea as well as the
largest market.
The industry faced steep decline in prices during 1999 to 2006, which brought out the
vulnerable areas that need to be addressed for guarding against reoccurrence of such
eventualities and also achieve sustainable global competitiveness and sustainable
livelihood to millions of workers employed in the industry. Around 130 gardens were
closed, abandoned or suspended their operations for some time due to this recession
of which majority of tea gardens have reopened with the gradual improvement in tea
prices from 2008 onwards. The decline in the prices has mainly been due to strong
growth in supply in the face of sluggish demand.
The tea industry sees fluctuating trends due to agricultural nature of the operations,
long gestation periods and unstable prices of tea which are not likely to undergo any
changes in the future. In the past, tea prices have shown brief periods of boom
followed by longer periods of depression.
During recession, the root causes for the closure of tea gardens in several parts of the
country, as reported by the experts, are that these gardens were inherently weak and
suffered from low productivity and lack of investment on developmental activities.
Therefore, it becomes very important that suitable packages for raising the
productivity with cost effectiveness suiting to the conditions of under/less developed
sectors are devised and put into place quickly.
The problem of ageing and senile bushes is a major problem for the Indian Tea

Industry. More than 21.2 Million hectares constituting a substantial chunk of Indian
Tea gardens are in the end of economic life age category at present, because of which
the industry is running down gradually in vitality and productivity and faces a high
cost of production. This situation can endanger the prospects of keeping the
plantations in a state of maximum vigor if not countered effectively now.
Renovation of the field assets and R&D on a sound footing- financially,
organizationally and managerially would help succeed in meeting the challenges of
the future. The research institutes are expected to continuously develop appropriate
technology suiting to the demands of the industry and disseminate the same.
Therefore, research requires backing from well spread, fine tuned, efficient extension
services, covering different regions and all segments of the industry. Adequate
technical support is not available to the small and medium size producers. Thus, it
becomes necessary for the research institutes to set up a dedicated extension service
exclusive for the benefit of small and medium producers.
Over the past 10-15 years, the emergence of small sector had assumed a form of a
socio-economic movement and served as a vehicle for social transformation in the
N.E. region as well as in North Bengal and Bihar state which has also opened up
avenues for setting up of new tea factories in the small scale industry sector leading to
generation of employment in the tea industry. 26% of the total production of India is
accounted for by this tiny sector. This sector has its strength in the young and most
productive age of the plantations of the reasonably high clonal composition, low cost
of production and the youth segment of the entrepreneurs with receptiveness to a new
and improved agro-technique. In both Kenya and Sri Lanka too, most of the success
of the tea industry is linked to the growth of the small holder sector over past few
decades. The size of production from the small sector in Kenya and Sri Lanka are
interestingly at par with the volume of tea produced by the small growers in India.
Because of the scattered nature of holdings, the major problem faced by the small
growers in India is the inadequacy of the technical guidance.
2009-10 witnessed international prices bouncing back even surpassing the highs
attained in 2008 which was primarily driven by almost unprecedented drop in
production due to unfavorable weather in India, Sri Lanka and Kenya proving once
again that climate related swings are the key determinants of the global demandsupply balance. Despite economic downturn, the facts that demand for tea has
remained relatively robust have strengthened the belief that the prices will remain
firm even when production returns to normal levels. Even though the stock has
depleted in the major importing countries and consumption growth in India and
China, it is optimistically expected that the prices will not sink back to the previously
depressed levels.

Therefore, there arises a need to understand the factors which influence the demand
and supply scenario and the price fluctuations in the Indian Tea Industry so that the
practitioners can modify their strategies and adapt to the changing environment for
their own benefits as well as aim at induction of professionalism in plantation
management and improve labor productivity. This paper seeks to address this issue
and find out the ways to combat this situation. This paper aims at studying the Indian
Tea Industry by applying the concept of Forward Engineering which is based on a
new paradigm of a fusion between rationality and creativity, and it combines the
rational-analytic and the intuitive creative approaches to find unique solutions
(Sharma, 2009). This paper examines this concept through qualitative analysis of data
and information gathered through interviews with Tea Board Officials, Tea Garden
owners, Intermediaries, Auction houses, Suppliers etc. , public documents (e.g. annual
reports), and related research literature. The study using Forward engineering tries to
provide a foundational premise for the strategic gearing of Indian Tea Industry
keeping in view its existing and new capabilities with respected to current and
anticipated challenges in a competitive environment. Thus, it tends to reveal the
strategies and action plans for Indian Tea Industry based on mind pooling, METRIC
analysis and other forward engineering tools.
LITERATURE REVIEW:
Tea Industries in the developing countries of Asia are facing huge competition due to
inefficiency in the value chain management especially related to land management,
plucking efficiency and manufacturing cost (Huque, 2007). Further, Asopa (2007) had
implied that virtually, Indian tea has lost all global markets since it continues to be
traded as a commodity besides the value addition is limited or can be said, late. It is
only being sold in the markets of consumers with shallow pockets who still buy it as a
commodity, but this share is fast depleting. Thus, the industry needs to be competitive
in production, marketing, logistics and product forms. Despite being one of the largest
producers of tea, India lacks properly organized production systems where small tea
producers could manage to find a respectable place. The industry desperately needs
capital at globally competitive rates and not subsidies in any form. So, the Indian Tea
Industry needs to face the market realities, redefine its business strategies and
reposition its products to gain a competitive edge over its competitors in the global
market. For this, the first step that needs to be taken in this direction is the complete
restructuring of the tea industry, redefining the roles of various agencies like the Tea
Board and the producers organizations, and developing a healthy partnership with the
labor. Despite all these facts, major global tea companies such as Unilever and Tata
Tea are reaping large profits but are failing to take sufficient responsibility to

safeguard the rights and livelihoods of the millions of tea growers and workers who
contribute to their profits (Goddard, 2005).
Later, Nagoor (2009) examined the performance of Indias tea exports and figured out
that tea, which was a major exportable commodity in Indias agricultural exports, is
declining steadily. The export performance over the last three decades shows that the
percentage share of Indias tea export in total world tea exports has declined
drastically. During 1981-90, the share was 21.91%, which declined to 13.35% in
2001-2004. The decade of the nineties and beginning of the twenty first century has
been quite depressing for the tea industry in India.
As far as the exports are concerned, Indian Tea Industry still faces diminishing trends.
In 2009, tea exports decreased by 11.6 million kgs, that is by 5.7% as compared to
2008. In 2009, India exported 191.5 million kgs of tea whereas it exported 203.1
million kgs in the previous year. Tea exports to Iraq increased significantly in 2009
but tea export to UK, Iran, UAE and Egypt saw the same diminishing trend (Hussain
& Hazarika, 2010). Almost 20% of the tea produced in 2009, 973 million kg, was
exported. Over the years, Indian Tea Industry has experienced a shift in the proportion
of export to domestic consumption of the total tea produced in the country, with
domestic consumption far more than exports. Changing consumer tastes and
preferences in the export market has led to the drop in exports for which the main
reason is the increasing popularity of green tea as well as orthodox tea
(Ramakrishnan, 2010). Further, Ramakrishnan emphasized that there is a need to
work out suitable strategies for both domestic as well as international market
expansion and penetration.
SCP Model, structure-conduct-performance, stems the fundamental paradigm for
competitive strategy (Bain, 1956). Sharma (2000) presented a conceptual framework
of forward engineering for strategic gearing of organizations which undertakes
Rationality + Creativity paradigm to enable them to sustain and perform in the highly
competitive environment. Further, the author had mentioned that in forward
engineering exercise, analytical tools and techniques such as METRIC Analysis,
BOW Analysis, CINE Matrix, FATE Analysis, SPOT Analysis, Anti-Benchmarking,
are used. These all tools and techniques used together are a refinement to the
conventional and widely used SWOT Analysis framework of strategic management
and could be considered innovations in the entire stock of skills, techniques and
devices used in the industry. These tools combined together will help in articulating
the Indian Tea Industrys ViSA (Vision- Strategies and Action Plan) document.
By forward engineering, the author implied creative, proactive and responsive
actions in the context of dynamic competitive environment. The same approach has
been used in this paper to gear up Indian Tea Industry with some analytical tools to

bounce back in the global tea market.

METHODOLOGY:
This paper examines the concept of Forward Engineering through qualitative analysis
of data and information gathered through interviews with company executives, public
documents (e.g. annual reports), and related research literature.
Type of data: The type of data taken in the study is primary as well as secondary. The
primary data are collected through interview with 46 personnel from the Tea Board of
India, Bhupender Tea Co., Dalmia Tea Marketing (P) Ltd., JFK International,
Occidental Trading and others. And the secondary data are collected from newspaper,
reports, handouts, and journals. In addition to this, relevant materials are also
collected through the internet as well.
Tool of data collection: Schedules have been used to take in-depth interviews of the
various personnel so as to get their views on the topic in detail.
Locale: The study was conducted to gain an insight into the Indian Tea Industry, so
Kolkata and Delhi were taken as the research areas form where the various personnel
were taken.
Tools for data analysis: The various analytical tools which come under Forward
Engineering had been used for a qualitative analysis of data, namely

ViSA: Vision, Strategies and Action Plans

METRIC Analysis: Market, Economic, Technological, Resources, Institutional
Capacity

FATE Analysis: An analysis of future anticipated trends and events

BOW Analysis: An analysis of the barriers, obstacles and weaknesses
CINE Matrix: A matrix of controllable and non-controllable internal and
external factors influencing a decision situation

SO-SO Window: An analytical window to compare Indian Tea Industrys

strengths and weaknesses with that of the other tea producing countries

SPOT Analysis: Space and Pace of Opportunities and Threats

Mind Pooling: A method for pooling collective intuitional wisdom leading to
institutional visioning

DATA ANALYSIS:
Keeping in view the existing and new capabilities of Indian Tea Industry with respect
to the current and anticipated challenges in the domestic and world tea market, this
paper provides a foundational premise for the strategic gearing of the Indian Tea
Industry using the concepts of Forward Engineering. It involves creative imaging,

envisioning, anticipatory witnessing and mind pooling for creative solutions to help
the Indian Tea Industry face the new challenges of fast paced dynamic environment.
The various analytical tools progress as described below:
Backbone Analysis
BOW Analysis
METRIC Analysis
CINE Matrix
SO-SO Window
FATE Analysis
SPOT Framework
Mind-Pooling
Anti-Benchmarking
ViSA
In backbone analysis; the strengths, capabilities and competencies of the Indian tea
industry have been analyzed in the following exhibit.
Exhibit 1: Backbone Analysis:
STRENGTHS:
Production base is very strong
Strong research backed by well established research institutions
Labor welfare laws protecting workforce
Availability of modernized and upgraded manufacturing facilities
Strong domestic market
Second consistent supplier of tea after China
CAPABILITIES:
Production of wide range of teas- black, (ctc, orthodox), organic teas, green teas
High quality specialty teas- Assam, Darjeeling, high range Nilgiris, orthodox etc.
COMPETENCIES:
Competent managerial power

The strong production base and the high domestic demand are the major strengths,
production of wide range and high quality specialty teas are the capabilities and the
efficient managerial power is the key competency of the Indian Tea Industry. Despite

such robust backbone, Indian Tea is facing a challenging phase in the global scenario
because of the old age of the bushes, unskilled labor, and lack of infrastructure, poor
price realization, legal problems, outdated machinery, high fixed and labor cost,
inefficient Tea Board, and other various factors mentioned in the BOW analysis
further.
Exhibit 2: BOW Analysis
BARRIERS:
Inadequate Land
Different Climatic conditions
Unskilled labor
Lack of mechanization
Inadequate R & D
Inadequate HRD
Lack of infrastructural facilities in terms of power
Erratic supply of inputs such as fertilizers, gas etc.
No control over price realization
OBSTACLES:
Terrorism
Government Interference
Poor communication facilities
Trade Unionism
Low level of Professionalism
Export Bottlenecks
Plantation Labor Acts
Environmental degradation- floods and soil erosion
WEAKNESSES:
Antiquated Market system
Antiquated Machines
Lack of vision
Low level of motivation of staff
Inadequacy of health care
Poor health of work force
High fixed cost
Debility of soil after use of 100 years or so
Low productivity levels
High cost of production
R&D transfer too slow
Poor operations of Tea Board
Declining prices
Disregard in quality
Social fronts
Trade front issues
Inefficient auction system
Poor infrastructure for transportation
Sales and taxation
No effective cost management system
Slow increase in yield
Incompetent products

High selling price

High amount of Surplus
Unawareness about the domestic demand

Modified from Sharma, Subhash, 2009, New mantras in Corporate Corridors, New Age International Publishers

All the above mentioned factors are making Indian Tea incompetent in the global
market, since it is currently being dominated by other players like China, Sri Lanka,
Kenya and others who have better operating systems in terms of infrastructure, labor,
age of bushes, Tea Board, and most importantly very low internal demand except
China which posses a high internal demand like India. Indian Tea is declining on its
quality aspect, as it still considers tea as a commodity, whereas the other tea
producing nations are working hard towards improving the quality aspect and
converting tea into a specialty product as per the demand of the consumers. Other
factors in the market, economic, technological, resources and institutional capacity are
mentioned in the METRIC analysis below.
Exhibit 3: METRIC Analysis
MARKET:
Over supplies
Slow growth in demand
Fierce competition
Changing customer preferences
Shift towards branding
Demand for quality teas
Niche markets for good quality teas
Identify USP (Unique Strategic Positioning) of tea
ECONOMIC:
Social cost
High Cost of production
Excessive Supply
Marginally increasing demand
High price
TECHNOLOGICAL:
Introduction of e-auction
Technological up gradation
Modernization of tea factories
Information Technology
RESOURCES:
Low productivity of land
Low productivity of labor
Low productivity of capital
Knowledge levels of workforce not up to the mark
INDUSTRIAL CAPACITY:
Managerial capacity
Capacity building of small and tiny growers
HRD Initiatives
Strengthening grass root institutions
Modified from Sharma, Subhash, 2009, New mantras in Corporate Corridors, New Age International Publishers

It is evident from the above classification that the changing consumer preferences,

marginally increasing demand (Refer to appendix 2), fierce competition and the tea
surplus combined are shifting the market from production driven to consumer driven.
Social cost as per the Labor Laws and high production cost have made the Indian Tea
quite expensive in the world market as compared to other countries i.e. $2.45/kg for
India as against $1.99/kg for Kenya, $2.10/kg for China and $3.26/kg for Sri Lanka
(Refer to Appendix 5), keeping in mind that Sri Lanka mainly deals in orthodox tea
leaves and is not much into the black tea segment, it can be clearly concluded that
Indian tea is the costliest in the world market.
To overcome the communication barriers as well as to ensure proper price realization,
Tea Board of India, introduced e-auctioning of tea in the year 2009 which is expected
to bring transparency in the entire process as well as ensure good prices for the sellers
(http://www.assamtribune.com/oct3109/horizon.html). To add to the difficulties, the
resources i.e. land, labor, capital and knowledge are also very low on productivity,
which is being tried to overcome by enhancing the industrial capacity in terms of
manpower training and HRD initiatives. To help out in the decision situation, the
various factors that need to be considered have been classified on the basis of internal
and external, as controllable and non-controllable, in the CINE Matrix.
Exhibit 4: CINE Matrix

INTERNAL
Productivity
Auctions
Transportation
Tea Board Operations
Assam teas- high price
No cost management system
Fertilizer application
Labor deployment ratio
Wages
Labor health
Soil erosion
High labor ratio
High cost of production
Ineffective spraying
Cattle trespass
Labor welfare
Habitual absenteeism
Production and quality
Use of stores/ machines
Working team spirit
Proper
communication
instructions
Proper planning
Sanitation and hygiene
Land encroachment by labor

of

EXTERNAL
Weak case in countries with high
purchasing power
Wage fixation
Extremist menace
Telephone & Roads
Communication
Power crisis
Land purchase
Cattle trespass
Damage/destruction of properties
Destruction of water supply
Land encroachment
Financial stringency
Menace of wild animals
Housing finance
Forest degradation
Political interference
Alcoholism
Problem of residence of non-workers
Borrowings
Head office expenses
Input/material purchasing

Quality control
Seasonal nature of Assam teas
Taxation
Power & fuel consumption
Cattle trespass
Medical expenditure
Low productivity of labor
Absenteeism
Location of tea gardens
Transportation of green leaf/other
inputs
Geological conditions
Topographical imbalance
Trade union activities
Population increase
Semi-literacy of workers
Attitude of workers

Declining sales volume

Imports of tea in domestic market
Stagnant demand for tea
Changing preference of consumers
Power & fuel supply
Climatic changes
Blockage of drain outlets
Wild elephant menace
Bundhs/strikes- local & outside
Riots/extremist activities
Fire hazards
Social and political disturbances
Cost increase of inputs
Price fluctuations
Auctions price realizations
Natural calamities
Taxation

Modified from Sharma, Subhash, 2009, New mantras in Corporate Corridors, New Age International Publishers

Of all the adversities, low productivity, high cost of production, financial stringency,
quality control, declining sales volume and changing preference of consumers need to
be addressed and can be taken care of with the existing capabilities of the Indian Tea
industry.
Huge domestic market and wide range of teas is the area where Indian tea market has
an extra edge over its competitors, whereas, Kenya has taken over in terms of export
quantities and is the highest exporter of tea (Refer to appendix 4), Sri Lanka owes the
best quality orthodox teas and China enjoys the market leader position in terms of
production (Refer to appendix 1). Apart of all other weaknesses, Indian Tea Industry
lacks visions which has helped other players in making their mark and subsequently
lose India its position in the world trade in terms of exports as well as production.
Other strengths, weaknesses and natural strategic advantages of the major tea
producing nations are mentioned in the SO-SO Window.
Exhibit 5: SO-SO Window
STRENGTHS

INDIA

WEAKNESSES

NATURAL
STRATEGIC
ADVANTAGES
High quality products
Lack of vision
Enjoyed leadership
Global market exporter
High fixed cost
position for very
Competent
managerial Debility of soil after use long period
power
of 100 years or so
Strong production
Strong research
Low productivity levels
base
Very strong domestic High cost of production
Production of wide
market
Poor operations of Tea range of teas
Board
Declining prices
Disregard in quality

Social fronts
Trade front issues
Inefficient auction system
Poor infrastructure for
transportation
Sales and taxation
Incompetent products
High selling price
High amount of Surplus
Unawareness about the
domestic demand
KENYA
Continuous production
Low
domestic
Offset rising labor
consumption
Pakistan exports
Less exposure to global
Exports to Egypt
market
Quality tea bags
Restricted
entry
to
specific markets
Decline in domestic
consumption
SRI LANKA Global market player
Under cultivation area
Rules tea bag segment
Low market share
High production
Overall
poor
export
performance
CHINA
Expansion in domestic Large
domestic
market
consumption
Utilization of cultivation Under-cultivation area
area
Social problems
Increased production
Removal of export quota
Increased share of exports
High export growth rate
Consistent supplier
Biggest employer

Black tea production

Good quality teas

Very good quality

orthodox teas

Largest producer of
tea
Huge
domestic
market

FATE Analysis:
Future Anticipated Trends and events: Seeing the todays global tea scenario, it can be
clearly stated that tea would not be sold further as a commodity but rather as a
specialty product. And thus, anticipating the same trend, tea growing nations are now
watching the production of good quality teas and ensuring the export of such teas
only, as Sri Lanka, ensured that only good quality teas were exported to bounce back
into tea trade when once it was losing on its market share due to poor quality teas. The
share of nations and buyers who used to buy tea as a commodity is decreasing day by
day.
The tea surplus is another problem which is not allowing price realization of tea in an
appropriate manner. Disposing off 16million kg of surplus tea is a major issue (Asopa,
2007). Still, there are many nations who are in process of expanding their tea
cultivation area which would further add to the problem. So either of the two
solutions needs to be applied- cut on supply or enlarge the markets.

Also, with latest studies depicting health benefits of tea, consumption of tea
worldwide is expected to rise significantly.
Exhibit 6: SPOT Frame work:
OPPORTUNITIES
THREATS
Expansion in US and USSR markets
Major producers like China, Kenya,
Sri Lanka etc.
Brand building
Other global players
Geographical diversification
Other emerging competitors
Niche market segmentation
Declining share in global market
Re-alignment of product mix
(Refer to Appendix 3)
Home market opening

Imports of tea in domestic market

Global market
Changing demands of consumers
Kenyas market share
Declining exports to UK and Ireland
Export quality tea to Germany, Iraq,
Increasing
demand
of
other
Pakistan etc.
beverages like cold drinks etc.
Losing market share to competitors
Low demand for Indian Tea in
international market
Increasing area under tea by China
and Kenya

By analyzing the above mentioned opportunities and threats for Indian Tea, it can be
placed in the SPOT framework as follows:
OPPORTUNITIES

THREATS

SPACE

PACE

As it can be pointed out from the above framework, Slot 1 defines that the
opportunities are high but the space for the Indian Tea is very low in the current
scenario because most of the market has been captured by one or the other player in
the market. Kenya took 66% share in Pakistan imports in 2003 (Asopa, 2007).
Russian market is being taken away by Kenya and Sri Lanka. India in itself has a
huge demand in the domestic market, which if taken care of properly, would yield
high profits. Plus, with health benefits of black tea being much talked about, the
demand for black tea is expected to grow heavily in the coming years.

With so many new entrants in the Tea Industry, the second slot signifies that the
threats are very high and space is almost occupied since the industry is already facing
a huge surplus disposal problem.
The third slot depicts that the pace at which the industry is growing with the
opportunities is very low since the demand for tea has increased almost negligibly
over the past few years (Refer to appendix 2). And the last slot clearly describes that
the threats and the pace at which they are growing is very high, since many new
entrants have and are entering the market. Along with this, the perspective of Indian
producers and marketers to still trade tea as a commodity in the scenario where it is
being considered as a specialty product is quite disappointing, which makes the
situation of Indian Tea in the global scene even worse.
Mind pooling:
Indian Tea holds a strong position in terms of brand name, being the largest source
and the largest market for tea, wide range of teas, large production base as it is the
second consistent supplier of tea after China and a first mover to launch e-auctioning
of tea. After having studied all the tools in the forward engineering framework, it can
be pointed out that the major problems being faced by the Indian Tea Industry in the
present are the declining sales volume in the international market, despite being the
second largest producer of tea, India is facing imports of tea from other nations, which
is further expected to increase in the coming years; the quality of exported Indian Tea
has declined which spoiled its brand image in the global market, very high production
costs, lack of infrastructure and communication facilities. The situation is being
further depleted by the old age of bushes and unskilled labor, due to which the quality
is further declining. If proper attention is not paid to the changing market, Indian Tea
will lose its hold, not only in the international market, but in the domestic market as
well. Therefore, this issue needs to be addressed with full alacrity and Indian Tea
Industry should move in the direction that generates desirable results.
Anti-Benchmarking:
Contrary to the notion of benchmarking wherein the market leader is followed,
Forward Engineering believes in the concept of anti-benchmarking i.e. creating own
unique path for excellence, wherein after studying all the above tools, the path for
Indian Tea Industry takes it back to its domestic market and concentrate on the same.
As for the international market, it needs to be captured back with perseverance with
exporting good quality teas at competitive prices to the international consumers.

Domestic Market

Anti-benchmarking

India

China (International Market)

Benchmarking

Since, Indian Teas are very costly in the global market due to various reasons
discussed earlier and there are many other factors which make it uncompetitive in the
global scenario, Indian players should put their main focus on the domestic consumers
and try to capture that will full alacrity and leave no space for foreign players to enter.
To bounce back into the international markets, Indian Tea Industry should keep its
focus on the quality aspect and then trade it as a specialty product rather than as a
commodity as done till date.
ViSA:
Vision: To achieve sustainable domestic as well as global competitiveness.
Strategies: It is now that India needs to focus towards a competitive tea strategy,
which will help to keep a check on the quantity of tea produced and enhance the
quality of tea which is produced. Indeed, it is a highly appropriate time to elaborate
the strategy at this time because it shows exactly what type of consumer segment
should the Indian Tea Industry caters in the coming period. To become a globally
competitive tea player, the main success factor would be driven by strong focus on
quality and less attention being paid to the production levels. Therefore, a strong
commitment is required from both the government sector and private sector in order
to realize significant improvements in terms of quality, market share in tea exports
and most importantly in the domestic market. The government should restrict imports
of tea and the private players should try to explore the domestic market with further
efforts directed towards increasing the per capita consumption of tea in the domestic
market. The major strategic goals can be listed as:
1.
To improve the quality of black tea.
2.
To expand the domestic market by converting nondrinkers of tea to drinkers and increase the consumption levels of the existing
consumers.
3.
To diversify the product portfolio i.e. introduce other
varieties of tea, for example green teas and flavored teas.
4.
To add value in Packaged and Blended teas by
paying proper attention to processing and improving the quality by proper

blending and marketingfor higher price realization of their products.

Action Plan: Undoubtedly, all the objectives would require significant investments to
produce sophisticated and unique high quality tea products. Both government and the
private sector need to commit financially and operationally to achieve the goals. The
action plan required to be implemented can be divided into three main categories
namely Product Development, Marketing & promotion and Institutionalization.
Product Development
Marketing & Promotion
Institutionalization

E
I
xtensive research
nternational
edefine Tea Board
Promotional
activities

T
Campaign

raining support for

workers

N n inspection agency
ational Promotional
to check the quality

R
campaign
to
of
tea
being
oad infrastructure
stimulate
domestic
exported

T
consumption

ransportation
H ntroduction
of

P
ighlight the benefits
stringent
ower & Fuel Supply
competition laws by

A of black tea
Government
to

I
ppropriate Machinery
restrict
price
mprovement
in

R
manipulation
by
supply chain using eegulate supply and
corporate
houses
auctions
efficiently
concentrate on quality

The need for reducing the unit cost of production through productivity gains, capacity
building of small growers, streamlining marketing channels, improving infrastructure,
tailoring marketing activities to individual countrys demand, propagating health
benefits of tea and promotion of organic tea using the tea mark was suggested by the
United nations Food & Agriculture Organization (FAO,2001). And this is precisely
what the Indian Tea companies need to do for their survival. Another step that needs
to be taken is Zero duty on machine imports (Dasgupta, 2011) which would make
Indian Tea standards acceptable in the global market by good quality products and
packaging.
CONCLUSION:
This study examined the various factors responsible for low productivity, high prices
and declining share on Indian Tea in the world market. The internal and the external
factors contributing to the same have also been discussed. Comparison with other
major global players has also been done. The study also looked at the demand and
supply of tea in the global scenario along with Indias share in total world production
and exports in the previous years.
Tea Industry, where India took a lot of pride as the largest producer and exporter, has
been facing a lot of glitches since the past two decades which has brought down

Indias position in the world trade i.e. exports to #4 and in world production to #2.
The major factors identified as being responsible for Indias poor performance are
high input costs, the old age of the bushes, unskilled labor, and lack of infrastructure,
poor price realization, legal problems, outdated machinery, high fixed and labor cost,
inefficient Tea Board , inability to compete with other tea producing nations in terms
of price, quality, packaging, etc.; slow increase in world demand for tea as compared
to the subsequent increase in its supply, losing traditional international buyers and
more inclination towards domestic market in comparison to the international market.
Analyzing all the aspects in the study responsible for Indias poor performance, it is
clearly evident that Indian Tea prospects for bouncing back in the global tea market
are very weak. Therefore, as of now, it should focus on the domestic market; try to
simulate the demand in this market to ensure that it does not lose this portion to other
players once the tea imports are open in India. Subsequently, Indian practitioners
should improve their export strategy by producing good quality teas at competitive
prices. To do the same, India needs to work in three directions namely product
development, marketing & promotion and institutionalization. By improving the
quality as per the consumers taste and preference, India should also look for other tea
importing countries like Pakistan, US, USSR, Iraq, Germany, etc.
RECOMMENDATIONS:
Recommendations remain the same as mentioned in the action plan of ViSA and are
as follows:

Focus on quality improvement, proper blending and

marketing for higher price realization of tea in comparison to the quantity
produced.

Revitalization of image of India Tea in the

international market by aggressive promotional campaigns including India Tea
logos trying to make Indian Tea acceptable in the global market.

Tailor
individual countrys demand.

Propagation of health benefits of black tea to

simulate the demand in the national as well as international markets.

Keeping a check on the quality of tea exported by

appointing an inspection agency to ensure the same.

Reduction in cost of production by improving supply

chain, proper inputs, improving infrastructure, extensive research and
appropriate machinery.

Introduction of new laws to discourage the price

made

marketing

activities

specific

to

movements by big players.

Improving supply chain

utilization of e-auctioning.

Redefining Tea Board activities and duties to ensure

proper support and cooperation from Government to small plantations and
players.

management by full

BIBLIOGRAPHY:

Asopa, V.N (2007), Tea Industry of India: The cup that cheers has tears,
Indian Institute of Management, Ahmedabad, India W.P.NO.2007-07-02, July

Bain, J.S. (1956), Barriers to new competition, Cambridge, MA: Harward

University Press

Barthakur, Ranjit & Kripalini Dipak Vision 2020 Reinventing the Indian Tea
Industry to Achieve Sustainable Global Competitiveness and Sustainable
Livelihood.
Global
Managed
Service
(GMS)..
http://www.gmsworldnet.com/images/vision_2020_reinventing_indian_tea_in
dustry.pdf

Goddard, Samantha (2005), Tea Break: A crisis brewing in India,

http://www.actionaid.org/docs/tea_break.pdf accessed on 4th April, 2011

Huque, S.M.R (2007), Strategic Cost Management of Tea Industry: Adoption

of Japanese Tea Model in Developing Country Based on Value Chain
Analysis

Hussain, M.M. and Hazarika, S.D. (2010), Assam Tea Industry and its crisis,
http://www.asthabharati.org/Dia_July%20010/moon.htm accessed on 28th
February, 2011

Nagoor, B.H (2009), Performance of Indias Tea Exports: A Comparative

Study of Major Tea Countries of the World, Quantitative Approaches to
Public Policy, PP-062-21

Sharma, Subhash (2000), 'Forward Engineering for Strategic Gearing: A

Conceptual Framework', Indian Journal of Public Administration, Vol.XLVI,
No.4, pp.667-674

Tea Board of India official website http://teaboard.gov.in accessed on 10th

April, 2011

http://www.assamtribune.com/oct3109/horizon.html accessed on 28th March,

2011

http://www.bloomberg.com/news/2011-02-25/india-must-extend-zero-dutyon-machine-imports-tea-group-says.html accessed on 30th March, 2011

APPENDICES:
Appendix 1: Indias share in World Production
Country

China
India
Sri Lanka
Kenya
Turkey
Indonesia
Vietnam
Bangladesh
Malawi
Uganda
Tanzania
Others
Total

2008(P)
In
M.Kgs.
1160.00
980.82
317.70
345.82
155.00
148.31
144.00
58.75
41.64
42.75
31.61
323.38
3749.78

% of total
production
30.94
26.16
8.47
9.22
4.13
3.96
3.84
1.57
1.11
1.14
0.84
8.62
100

2007
In
M.Kgs.
1140.00
986.43
304.61
369.61
178.00
149.51
148.27
57.96
48.14
44.91
34.86
340.64
3802.94

% of total
production
29.98
25.94
8.01
9.72
4.68
3.93
3.89
1.52
1.27
1.18
0.92
8.95
100

2006
In
M.Kgs.
1028.06
981.81
310.82
310.58
142.00
140.05
142.50
53.27
45.01
36.73
31.35
350.48
3572.66

% of total
production
28.78
27.48
8.69
8.69
3.97
3.92
3.98
1.49
1.26
1.03
0.88
9.81
100

2005
In
M.Kgs.
934.86
945.97
317.20
323.50
135.00
156.27
133.35
60.60
37.98
37.73
30.36
344.77
3457.59

% of total
production
27.03
27.36
9.17
9.36
3.90
4.52
3.86
1.75
1.09
1.09
0.88
9.97
100

Source: Tea Board of India official website www.teaboard.gov.in

Note: (P) Provisional and subject to revision
Calculated from "Supplement to ITC Annual Bulletin 2008"

Appendix 2: World Demand and Supply of tea

Year
2004
2005
2006
2007
2008 (P)

World supply
3334.53
3457.59
3572.66
3802.94
3749.78

World Demand
3192.93
3348.52
3466.99
3710.84
3596.17

(+) or (-)
(+) 141.60
(+) 109.07
(+) 105.67
(+) 92.10
(+) 153.61

Source: Tea Board of India official website www.teaboard.gov.in

Appendix 3: Region wise Import of Tea for Consumption from India (in %)
Region
E.E.C.
Other West Europe
CIS
Other East Europe
North America
Latin America
WANA
Asia other than West**
Africa other than North
Oceania
Grand Total

2006
16.62
0.81
20.63
10.21
7.74
0.16
17.93
10.38
9.74
23.41
14.76

** Includes the figures of import for re-export by India and Sri Lanka.
Source: Tea Board of India official website www.teaboard.gov.in
(P) Provisional and subject to revision
Calculated from "Supplement to ITC Annual Bulletin 2008"

2007
14.45
2.84
21.4
12.24
8.34
0.12
11.99
7.37
3.55
25.86
11.99

2008 (P)
14.13
1.48
21.89
8.57
8.38
0.53
16.01
0.09
2.17
26.95
13.47

Appendix 4: Indias share in World Export

Country

Kenya
Sri Lanka
China
India
Vietnam
Indonesia
Argentina
Malawi
Uganda
Tanzania
Bangladesh
Zimbabwe
Others
Total

2008(P)
In
M.Kgs.
383.44
298.79
296.94
203.12
115.00
95.00
75.50
40.06
42.39
24.77
8.39
5.50
64.39
1653.29

% of total
exports
23.19
18.07
17.96
12.28
6.96
5.75
4.57
2.42
2.56
1.49
0.51
0.33
3.89
100

2007
In
M.Kgs.
343.70
294.25
289.43
178.75
110.93
83.66
74.23
46.59
43.64
29.13
10.56
7.60
62.52
1574.99

% of total
exports
21.82
18.68
18.38
11.35
7.04
5.31
4.71
2.96
2.77
1.85
0.67
0.48
3.97
100

2006
In
M.Kgs.
312.16
314.92
286.59
218.73
105.12
95.34
70.72
41.96
32.70
24.13
4.79
11.38
62.47
1581.01

% of total
exports
19.74
19.91
18.13
13.83
6.65
6.03
4.47
2.65
2.07
1.53
0.30
0.72
3.95
100

2005
In
M.Kgs.
348.28
298.77
286.56
199.05
87.92
102.29
66.39
42.98
33.07
22.50
9.01
8.45
64.84
1570.11

% of total
exports
22.18
19.02
18.25
12.67
5.59
6.51
4.23
2.74
2.11
1.43
0.57
0.54
4.13
100

Source: Tea Board of India official website www.teaboard.gov.in

(P) Provisional and subject to revision
Calculated from "Supplement to ITC Annual Bulletin 2008"

Appendix 5: Unit Export Prices of Tea of Major Producing Exporting Countries

(in US $ per kg.)
Country
India
Sri Lanka
Kenya
China

2004
2.06
2.41
1.61
1.56

2005
2.09
2.58
1.59
2.06

2006
2.03
2.64
2.07
1.88

2007
2.45
3.26
1.99
2.10

Source: Tea Board of India official website www.teaboard.gov.in, Annual Bulletin of Statistics-2008, ITC London.