The Indian tea industry, which had been facing a crisis in the context of the collapse of the erstwhile Soviet Russia which was the major buyer of Indian tea, has again recovered . This paper analyses the demand for tea in the domestic as well as international market. The domestic demand is also analyzed in terms of packaged and loose tea.

Based on this analysis, strategies have been suggested for domestic manufacturing and export marketing.

ENCOURAGING PROSPECTS FOR TEA BUSINESS

India has emerged to be the world leader, mainly because it accounts for 31% of global production. It is perhaps the only industry where India has retained its leadership over the last 150 years.

The range of tea offered by India ----- from the original orthodox to crushing, tearing and curling [CTC] and green tea, from the aroma and flavour of Darjeeling Tea to the strong Assam and Nilgiri Tea ----- remains unparalleled in the world.

There exists a very high demand for Indian tea all over the world.

The total turnover of the tea industry is around Rs. 10,000 crore. Even the domestic market with billion plus population holds a huge potential for the tea business in the country. . There is substantial gap in the demand and supply of tea products in the country, includingin Central India.

There is a huge demand for tea products from the southern States such as Andhra Pradesh, Karnataka, Tamil Nadu, Kerala.

FOOD PROCESSING INCLUDING TEA POISED TO GROW

Meanwhile, the Indian economy has also recovered from the economic slowdown of the last year and is well on its way to posting one of thehighest growth rates in the world. This has given a boost to all the sectors of the economy and hence, demand for tea is poised to grow.

The food processing industry, of which tea processing is a big revenueearner, will be in the forefront of the Indian economy in the current decade.

India is among the leading producers of sugar, tea, milk, fruits and vegetables.

Agricultural production and food processing account for 30 percent of India’s GDP and employ more than 70 percent of its workforce.

The study conducted by McKinsey, the world’s best business management consultant, for the Confederation of Indian Industry [CII] suggests that, over the next 10 years, agriculture and food processing will need an investment of about Rs. 1,40,000 crore. This huge investment will be attracted by market opportunities but will materialize only with a conducive policy framework.

AGGRESSIVE MARKETING THROUGH CUSTOMIZED PACKAGING

CTC is a manufacturing process and garden fresh unadulterated CTC leaftea is packed in Rs.2 pouches, 50 gms, 100 gms, 250 gms, 1 kg and 5 kg. CTC leaf is available in poly-pouch and duplex.

In poly-pouch, CTC leaf tea is available in 50 gms, 100 gms, 250 gms, and 1 kg. While in duplex, weight variations are 40 gms, 100 gms, 250 gms, and 2.5 kg. It is also sold in the market in jute-bags of 5 kg and in pet jars of 100 gms, 250 gms and 2.5 kg.

However, CTC dust tea is available in 100 gms, 250 gms, 1 kg and 5 kg.

Green tea is made solely from the leaves of Camellia Sinensis that hasbeen minimally oxidized during processing.

Green tea is packed in jars of 100gms, and cartons of 250gms and also in tea bags.

Darjeeling tea gardens produce teas of unmatched quality. None has theability to replicate its flavor. Darjeeling Tea is packed in jars of 100 gms, and cartons of 250 gms.

TEA SEGMENT AND CONSUMER PREFERENCE

The tea segment has more than 300 brands and is characterized by severe price competition. Major players are offering different types of tea with a focus on the quality perception of the particular demography. For example, in most cases, the tea available in South India is mainly dust whereas the North India, people prefer leaf tea. On the other hand, western markets of Gujarat and Maharashtra prefer good quality packets and loose tea, while in MP and Rajasthan, CTC fanning is the choice. West Bengal and Assam prefer both packet & loose tea.

BRANDED TEA MARTKET PENETRATION

STATE NUMBER OF HOUSEHOLDS [IN MILLION]

BRANDED TEAPENETRATION[PER CENT]

Delhi 2.6 91Ahmedabad 1.0 90Bangalore 1.4 69Chennai 1.4 72Kolkata 2.9 20Mumbai 3.7 72Hyderabad 1.2 59Pune 0.9 64

TEA TRADING

Tea trading in the domestic market is done in two ways ----- auctionand private selling.

Market reports are received from the six major auction centres namely Kolkata, Guwahati, Siliguri, Cochin, Coonoor, Coimbatore and N.I. teauction.com. Bulk trading is done through the auctions held in thesecenters.

HIGHLY COMPETITIVE MARKET LEADS TO BRAND DIFFERENTIATION

Due to the highly competitive nature of the market, brand differentiation emerges as the most important factor . Value additionstrategies include: introduction of new variants in the form of special blends [ice tea, flavored tea, diet tea, herbal tea, organic tea, ready-to-drink tea in liquidand granulated form] and new packaging techniques that help preserve freshness, aroma and increase convenience.

The UK and the US have shown an increasing preference for instant ice tea and companies such as Tata Tea and Hindustan Lever Limited [HLL] have been able to access this market.

India's packaged tea market has around 300 brands, with some brands having a regional presence, and others enjoying national presence.

SOME MAJOR PLAYERS:

COMPANY NAME BRAND

Assam Company. Cheetah and Jumbo

Apeejay Tea Mantra and Maha Mantra

Duncan Industries Sargam, Double Diamond, Shakti

and Runglee

Dhunseri Tea and Industries Chote Lal

Goodricke Group Goodricke Perfect

Girnar Girnar

Harrisons Malayalam Touramulla

Hasmukhrai & Co Society Tea

Hindustan Lever Limited [HLL] Brooke Bond

Mcleod Russel India Williamson

Tata Tea Tata Tea, Tetley

Wagh Bakri Wagh Bakri

TEA PROCESSING

A small tea processing unit that will satisfy the need of the small

tea growers has a very good

market prospect. The small cottage tea industries established in the

states like Meghalaya and

Assam have been running successfully as profit earning ventures.

The quality of the product produced by these units have been found to be better and thus greatly in demand than the large unit’s produce.

Here is a case study of how a small tea processing unit has been doingbusiness exceedingly well.

Market potential:

The processed tea [CTC Black Tea] produced by the only unit at Sarupathar [Assam] under Dhansiri under Golaghat District is being sold like hot cakes in Sarupathar locality.

The cottage made CTC Tea has great demand among the users due to its special manufacturing process, which imparts its quality and aroma.

Besides cottage organic Tea [CTC and orthodox], bio tea may be produced, which will have great market potential. So a couple of cottage tea factories could be set up in concentrated tea growing areas which will have a steady market for its products.

Manufacturing process:

The manufacturing process involves 1. Withering [natural and artificial] 2. Breaking Up 3. CTC Method [Crushing, tearing and curling] 4. Fermentation and 5. Drying.

Machinery :

Plant & Machinery :

[a] CTC Machine [3CUT] 3 Pair 8” Roller [8-10-8 TPI] with 3 HP motor complete

[b] Furnace including heat exchange and chimney

[c] Drier includes Blower with 1 HP motor.

[d] Humidifier.

[e] Pivot Balance.

[f] Spring Balance.

[g] Rolling Table --- 30 kg batch [with 1 HP motor].

[h] 12.5 KVA diesel generator set and forced green leaves de-humidification chamber - Capacity 600 green leaves holding

[j] Fiber Separator.

Total estimated cost = Rs. 8.40 lakh.

Suggested capacity:

600 kg/day for 200 days working days in a year because tea leaves are grown seasonally.

Number of shifts per day is one.

Infrastructure :

The major infrastructure requirements are :

Building 2000 sq.ft.

Power 20 KW

Water 200 litres/day.

Locations:

This unit can be set up at any tea growing areas or where green leavesare available readily

Total capital requirement :

The project cost comprising fixed capital and margin money on working capital is Rs 16.82 lakh.

[A] Fixed Capital :

Land and building Rs 5.50 lakh

Plant and equipment Rs 8.40 lakh

Miscellaneous fixed assets Rs 1.20 lakh

Pre-operating.expenses Rs 0.70 lakh

Total [A] = Rs 15.80 lakh

[B] Working Capital :

Raw material for 2 months = Rs 2.27 lakh

Finished goods for. 1 week = Rs 0.56 lakh

Working expenses for 1 month = Rs 0.24 lakh

Receivables for 7 days = Rs. 1.02 lakh

Total-[B] = Rs 4.09 lakh

Note :

Working capital may be financed as:

Bank finance = Rs. 3.07 lakh

Margin money = Rs. 1.02 lakh.

Total = Rs 4.09 lakh

Means of financing :

The project cost of Rs 16.82 lakh may be financed as under:

Promoter’s contribution [35%] = Rs 5.89 lakh

Term loan [65%] = Rs 10.93 lakh

Total project cost = Rs 16.82 lakh

Operating expenses :

The annual operating expenses are estimated at Rs.16.24 lakh as under :

Raw materials required per annum 1,20,000 kg

Green leaves @ Rs 8/- per kg = Rs 9.60 lakh

Utilities = Rs 0.86 lakh

Wages and salaries = Rs 2.00 lakh

Other overheads = Rs 0.24 lakh

Selling expenses @ 5% on annual produce

Sales. = Rs 1.02 lakh

Interest = Rs 1.68 lakh

Depreciation 10% = Rs 0.84 lakh

Total operating expenses = Rs 16.24 lakh

Sales realisation :

SERIALNUMBER

PARTICULARS AMOUNT

1. Green leaves processing per year = 600 kg per day

x 200 days = 1,20,000 kg of leaves. = Total tea

produced @ 20% yield = = 24000 kg of tea produced

x @ Rs.85/kg

Rs 20.40lakh

Profitability :

Based on the sales realization and the operating expenses, the profit

at 100% capacity utilization

would be Rs 4.16 lakh per year. This is a conservative estimate and

the actual profit could be 20 to 30% more. This works out to a return

on investment of 25%. The unit would break even at about 58% of the

rated capacity.

Project highlights summarized :

The major highlights of the project are as follows:

Total capital requirement = Rs 16.82 lakh.

Promoter’s contribution = Rs 5.89 lakh

Annual sales realization = Rs 20.40 lakh

Annual operating expenses = Rs 16.24 lakh

Annual profit [Pre-tax] = Rs 4.16 lakh

Pre-tax return on sales. = 20%

Break-even Point. =: 58%

Number of persons employed. =: 10

IDEAL PROJECT LOCATION IN AP

The entrepreneur can become one of the largest manufacturers of packettea in Andhra Pradesh and can be a dominant player in the tea industry. The new company can also involve itself in wholesale trade of loose tea through its marketing network in all the districts of Andhra Pradesh and neighbouring Maharashtra and Karnataka.

Ideal installed capacity of the company can be around 6,00,000 kg per annum for manufacturing packet tea.

The company can acquire industrial land at IDA, Kottur in MahabubnagarDistrict in Andhra Pradesh. The site is located near National Highway

7 between Hyderabad and Bangalore and is about 10 km from the new International Airport at Shamshabad.

The proposed site for the tea processing plant is ideal due to following factors:

a. Proximity to raw materials.

b. Proximity to consumer hub.

c. Availability of infrastructure facilities like land, labor, power, water, communication etc.

Gradually over the years, the installed capacity can be be increased to 18,00,000 kg per annum to fulfill the ever increasing market and customer requirement.

The company can also obtain importer exporter code and can explore thepossibilities of making money in the export market.

EASIER TO SET UP UNIT UNDER SINGLE WINDOW CLEARANCE

To encourage entrepreneurs set up new units, the Government of AP made

a law to give approvals by government departments through single

window with minimum interface with Government departments.

AP was the first State in the country to have a law to process entry

of firms through one window with set time periods (given in Table-1)

and system of “deemed provisions” if time limits for approvals are not

met by the government departments concerned (given in Table-2).

It is mandatory on the part of the departments to accept the

applications for approvals/clearances through Single Window only and

not to accept any applications directly.

The important provisions of the Act are:

Self certification and check memo for enclosure of all documents according to check memo

Specific time limits to each department for issuing the approvals

Deemed provision in respect of some approvals

Nomination of one official from each of the participating departments

Additional information to be sought only once before expiry of the time limit by the offeicers

Decentralization of decision-making by creating district and state level nodal agencies

Fortnightly review by the district and state clearance committees

Review at the highest level by the Chief Secretary / Chief

Minister.

BACKGROUND OF SINGLE WINDOW CLEARANCE SCHEME

In order to promote speedy processing of the various licences and certificates, the Andhra Pradesh Government introduced the AP Industrial Single Window Clearance Act No. 17 of 2002.

To receive and process applications within a time-bound framework, thegovernment has constituted two nodal agencies, one at the district-level and the other at the state-level.

AP Government has notified and constituted nodal agencies and committees to receive process and monitor applications under Single Window Act.

All new business or industry proposals are monitored under e-Governance project of the State Government to help entrepreneurs realize the establishment of their dream factory in the quickest possible time.

All small scale industries [SSIs] need to submit theapplication to theDistrict Industries Center [DIC] of the district concerned and the large, medium and mega projects to Commissionerate of Industries [CoI].

The nodal agency receives applications and forwards them to the departments concerned and then pursues the applications.

Twenty-five departments of State and Central governments are covered by the Act and most of the approvals required to start business are brought under single window. This Act covers approvals, clearances, permissions required by an industrial undertaking till it starts commercial production.

The list of services available under Single Window is indicated below.

A. PERMISSIONS REQUIRED BEFORE ESTABLISHING A FACTORY

1 Permission from gram panchayat for site and buildings

2 Permission from municipality for site and buildings

3 Permission from urban development authority for site and buildings

4 Permission from DT&CP for site and buildings

5 Approval of plans from factories department

6 Acquisition of land other than Industrial Estate [IE]/Industrial Development Area [IDA]

7 Alienation of government land

8 Feasibility certificate for extension of power and power supply by Discom

9 a. Sanction of water supply from local bodies

b. Sanction of water supply from HMWS&SB

c. Permission from irrigation department to draw water from rivers / public tanks

10 Andhra Pradesh General Sales Tax [APGST] registration and Central Sales Tax [CST] registration

11 Allotment of land /shed in IE/IDA by APIIC

12 Sanction of term loan and equity by APIDC

13 Registration of firms

14 Consent for establishment from APPCB

15 No Objection Certificate [NoC] from Fire Services Department

B. PERMISSIONS REQUIRED FOR OPERATION OF THE INDUSTRY

1. Factories department licence

2. Licence to import and storage of petroleum/ diesel / naptha

3. Registration under Boilers Act

4. Consent for operation under Air Act from APPCB

5. Consent for operation under Water Act from APPCB

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