ExportofIndianTeatoEuropeanUnion

I.ExecutiveSummary

The Indian tea industry is an essential contributor to the nations GDP. It is in this context that
export of Indian tea becomes an important source of revenue for the country. However, India has
been losing its share of the global tea exports in the face of the threat coming from newer
competitors like China, Sri Lanka and Kenya. Thus it is essential for us to identify newer markets
which can act as growthdrivers for our exports in the coming years. Hence with this objective in
mind, this report aims to analyse the major countries in the European Union to ascertain their
attractiveness as a destination for Indian tea exports. We start with a brief discussion about the
Indian tea industry and its current trends. We next move on to analyzing the prevailing demand
conditions in each of these EU membernations which are already importing some amount of tea
fromIndia.Thusweidentifycertaincountrieswhichcanbeournewfocusmarketsandanalysethe
prosandtheconsofthesame.

Contents
1.Introduction:TeaIndustryinIndia.Pg4
2.ObjectivesandScope.Pg6
3.AnalysisofIndiasTradeinTea..Pg7
i.TrendsinExportedValuePg7
ii.IndiasPriceCompetitivenessPg10
iii.TypesofTeaexportedbyIndiaPg11
iv.IndiasTeaExportstotheEUPg12
v.TypesofTeaconsumedintheEU.Pg14
4.TeaConsumptionandImportPatternsintheEUPg15
5.ProfilingthemajordestinationsofIndianTeaintheEUPg16
i.UnitedKingdom.Pg16
ii.GermanyPg17
iii.TheNetherlands..Pg18
iv.PolandPg19
v.IrelandPg20
vi.Italy.Pg21
vii.FrancePg22
viii.Sweden.Pg22
ix.Belgium...Pg23
x.Czech....Pg24
xi.Finland....Pg25
xii.Greece....Pg26
xiii.Spain.....Pg27
xiv.Denmark..Pg27
xv.BalticStates..Pg28
xvi.Slovenia...Pg29
xvii.Hungary..Pg30
xviii.Portugal..Pg31
xix.Austria.Pg32
6.ConclusionsandRecommendationsPg33
7.References.Pg35


II.Introduction:TeaIndustryinIndia

TheteaindustryhasanimportantandspecialplaceintheIndianeconomy.TeaisIndiasprimary
beverage, with almost 85% of total households in the country consuming tea. India is the worlds
secondlargestproducer(afterChina)andsecondlargestconsumeroftea,withIndiaaccountingfor
2527%ofworldteaproduction.Indiasexpenditureonbeveragesandprocessedfoodsaccountsfor
8% of food expenditure in rural areas, and 15% in urban areas. India is also an important tea
exporter, accounting for around 1012% of world tea exports. However Indias share in world tea
exportshasdeclinedfrom21%in1990.Further,certainvarietiesoftea(forexampleDarjeeling)are
grown only in India and are in great demand across the world. All Darjeeling teas possess the
lightnessofflavourandfinecolouringthatsetthemapartfromallotherteas.

AccordingtostatisticsreleasedbytheGovernmentofIndia,IndiasteaexportswereestimatedatRs.
23,764 million during 11MFY2009 (April 2008February 2009), accounting for 0.34% of Indias
exports.Thesharehasdeclinedfrom1.1%inFY2000.StatisticsreleasedbytheTeaBoardIndia(TBI)
for2008(JanuaryDecember2008)indicateteaexportsof203mkg(millionkg)valuedatRs.23,929
million. In terms of employment, the tea industry employs around 1.26 million people at tea
plantations, and 2 million people indirectly, of which 50% are women. The last fact is particularly
important when we consider that tea industry, to a large extent, drives the economies of regions
such as Assam (average labour employment of 0.6 million), and Nilgiris (average labour
employment of 0.24 million). With estimated consumption of 802 mkg in 2008, tea is the prime
beverage consumed in India, and domestic private final consumption expenditure (PFCE) on tea,
coffeeandcocoaaggregatedRs.69.16billioninFY2008,accountingforaround0.3%ofIndiasPFCE.
Tea accounts for around 88% for Indias consumption of stimulants (tea, coffee, and cocoa beans),
followed bycoffee (10%), and cocoa beans (1.7%).In value terms, consumptionof these beverages
peakedatRs.115.43billioninFY2008,andhasdeclinedinrecentyearscausedbyhigherprices,and
ashiftinconsumerpreferencestowardscoldbeverages.

TeaProductioninIndia

*Source:TeaBoardofIndiaReport,2009

Although tea is produced in 14 States in India, Assam and West Bengal (WB) in North India; and
TamilNadu(TN),KeralaandKarnatakainSouthIndiaarethefivemostimportantStatesproducing
around98.6%ofIndiasteaproduction.Teaisalsogrownonasmallscaleinafewotherstatesviz.,
Tripura, Arunachal Pradesh, Karnataka, Himachal Pradesh (HP), Uttaranchal, Sikkim, Bihar,
Manipur, Orissa and Nagaland. In North India, tea growingareas lie between 2427degree North
latitudeand8895degreeEastlongitude.Teagrowingareascanbedividedamongseveraldistinct
regionsviz.BrahmaputraandBarakValleyinAssam,NorthBengalPlainsofDooarsandTeraias
wellasDarjeelingHills.InSouthIndia,teagrowingarealiebetween813degreeNorthlatitudeon
theslopesofWesternGhatsandadjoiningplateaus.

AlthoughNorthIndiaaccountsforaround7577%ofIndiasteaproduction,dependingontheyear
andmarketconditions,around8590%ofNorthIndianteaproductionisconsumedinthedomestic
market. The balance, much of it of high quality, is exported. Although South India accounts for
around 2325% of Indias tea production, around 3050% of its production is exported. Depending
ontheyear,SouthIndiaaccountsforaround50%ofIndiasteaexportsbyvolume.

III.ObjectivesandScope

Having determined the importance of the tea industry in the Indian industry, we also realize that
exportsareessentialforthesustenanceofthisindustry. Asweshallelaborateonlater,Indiantea
exports have been losing out to competition from Kenya, Sri Lanka, China and other newage tea
exportingnations.Itisinthiscontextthatitisextremelyimportantforustosearchoutnewmarkets
where wecan have a competitive edge. Thus in this report we try to analyse the European Union
membernationsaspotentialmarketswherewecanfindanicheforourselves.

Thescopeofthisprojectthusincludesanindepthviewoftheprevailingconditionsineachofthe
EUmembernationsthatIndiaexportsteato.Thisincludesananalysisofcurrentmarkettrendsin
consumption,consumerpreferencesandcompetitiveenvironment.Theattempthasalsobeenmade
to analyse the opportunities and threats thus afforded by each of these markets for Indian tea
exports.


IV.AnalysisofIndiasTradeinTea

*Source:ICRAReports,2009

Fromaleadershippositionininternationalmarketsupto1991,IndiahaslostmarketsharestoSri
Lanka,Kenya,andChina.AmajorlossofitsmarketshareoccurredintheformerUSSR,whereIndia
occupiedanalmostmonopolisticpositionfromthe1960sto1990.Somerecoveryinexportvolume
has occurred since the late 1990s, but generally tea exports from India have been on a declining
trendoverthelasttwodecades.Kenyaisnowtheworldslargestteaexporterwithexportsof383
millionkgduring2008,followedbySriLanka,China,andIndia.ThemajordestinationsforKenyan
exportsin2008includedEgypt,Pakistan,UK,andSudan.Chinasexportsof297millionkgin2008
were primarily to Morocco, Uzbekistan, US,andJapan. Green tea dominates Chinas exports with
estimatedexportsof230millionkgin2008.


*Source:ICRAReports,2009

Inspite of accounting for around 26% of worlds tea production, India accounts for only 12% of
worldsteaexports.Indiasinternationalcompetitivenessinteaexportshasbeenonadecline,with
its share of world exports declining from 21% in 1987. From being a preeminent supplier of the
worldstea,Indiahaslostgroundinvirtuallyeveryexportmarket.

ExportsareessentialtoearnforeignexchangeforthenationandIndianteahadtraditionallybeena
majorcontributorinthisregard.Intheearly1980s,Indianteaexportsaccountedforaround40%of
thedomesticproduction.Bytheendof1980s,thesharefellto30%.Thedeclinecontinuedtill1994
whenexportsaccountedforonly20%ofthedomesticproductionoftea.Thereafter,theproportion
ofexportsimprovedtoaround24%ofthedomesticproductionduring2003.However,exportshave
againdeclinedto19%ofproductionin2007,and21%in2008.
Overthelasttwodecades,Indiasteaexportspeakedataround213millionkgin1989butdeclined
toalowof151millionkgin1994.Exportssubsequentlyincreasedto210millionkgin1998before
decliningto174millionkgin2003.Indiasteaexportshavedeclinedata10yearCAGRof0.3%in
volumetermsduring19992008.Exportsdeclined18.3%in2007to179millionkgmainlybecauseof:

a)Lowerproduction
b)CollapseofsomemajormarketssuchasIraq
c)IncreaseinproductioninsomemajorcompetingcountriessuchasKenyaandTurkey
d)Switchoverofmajorbuyingcountriesbacktotheirpreferredsuppliercountries(UKandPakistan
fromKenya)
e)Rupeeappreciation

However,exportsincreased13.6%in2008to203millionkgbecauseof:
a)Recoveryinproduction
b)HigherexportstonontraditionalmarketssuchasEgypt,Afghanistan,andPakistan
c)Lowergrowthinexportsbycompetitorcountries
d)IncreaseinexportstotraditionalmarketssuchasKazakhstan,UK,andUAE

 2.IndiasPriceCompetitiveness

Asisevidentfromtheabovegraph,thepricesofIndianteaarenotcompetitivewhencomparedto
behemothslikeChinaandKenya,whichiswhywehavebeenlosinggroundinforeignmarkets.The
reasonsforthesameareasfollows:
a)UnfavourableageprofileofsignificantproportionofIndiasteagardens:Thishasresultedin
lowerproductivity,andhighercostofproduction.IndiasexportsaredominatedbyCTCtea,where
itisfacingincreasedcompetitionfromKenyantea.Kenyasteabusinessisgenerallycharacterized
byyoungerageprofileofbushes,higheryields,lowercostofproduction,andlowerprices.
b) Tariff and nontariff measures: These have been imposed by some tea importing countries.
Again lower off take by Russia due to change in consumer preferences, and lower productions of
orthodoxteaswhichhavealargerdemandworldwideareothercausesofthedecline.Thisresulted
intheemergenceofSriLankaandIndonesiaasmajorexporters,primarilybecauseoftheirabilityto
supplygoodqualityorthodoxtea.

c)ChangingConsumerPreferences:Traditionally,loosestandardBTwasthemostcommonformat
of consumption and import. However, since the 1990s, changing consumer preferences in major
importing countries such as UK and Russia have resulted in higher growth for tea bags visavis
loosetea.InRussia,teabagsarepreferredbytheworkingclass,andconsumptioninthisformhas
grown.ThishasfavouredSriLankanteainRussia.

d) ShiftinIndiasproduction:TheshiftinproductionfromorthodoxtoCTCteaisanothercause.
By comparison, other competing countries have continued to produce their respective traditional
typesoftea,maintainingconsistencyoftypeofsuppliestotheirexportdestinations.

e)Decline in quality: ThishasbeencausedbymushroomingBLFswhichproducecheapquality

teabybuyingandprocessinggreenleaffromsmallgrowers.Thegrowingshareofpoorqualitytea
produced by these players not only affects the domestic price levels but also damages the quality
perception of Indian tea in the export markets. Further, blending of Indian teas with cheaper
varietiesandexportofthesameasIndianteahasalsoimpairedthequalityperception.

f)Spuriousvarieties:LowerqualityofteathatareoftenpassedonasDarjeelingtea.Becauseofits
proximity, some Darjeeling tea producers are bringing in green leaf from gardens in Nepal and
sellingthemas`Darjeelingtea,therebyjeopardizingthegeographicalindicationvalueofDarjeeling
tea.

g) Lack of marketing initiatives: This has led to industrys failure to penetrate new markets and
inabilitytosecurepreferentialdutytreatmentfromcountries.Thelackofcompetitionintheearlier
days,remunerativepricesinthedomesticmarketsandbuoyantexportofftakefromCISprovided
little incentive to the Indian tea industry to develop alternative export markets. In contrast, Sri
Lankahasbeenaggressivelymarketingitsproduceandpenetratingmarketsinwhichitearlierhad
littlepresence.

3.TypesofTeaexportedbyIndia

IndiasteaexportshaveprimarilybeendominatedbylooseBTtea,whichaccountsforaround73%
of exports in volume terms and71% in value terms. However, the shareof loose BThas declined,
evenastheshareofpacketteaandGThasincreased.TheexportsoflooseBThavedeclinedlargely
because of a significant decline in exports to Russia, which till FY2004, was the largest market for
Indias tea exports. Although value added teaprimarily instant tea, tea bags, and packet
teafetcheshigherrealizations,Indiasexportsofvalueaddedteahavedeclinedsharplyinrecent
years primarily because of competitively priced and better quality offerings from Kenya and Sri
Lanka.Asaresult,looseBThascontinuedtodominateexports.

4.IndiasTeaExportstotheEuropeanUnion

Having elaborated on the issues plaguing the exporters of Indian tea, it is evident that one of the
major ways to reverse the sorry trends in Indian tea exports is to diversify into more lucrative
markets.Thisisthemajorobjectiveofthisanalysisandkeepingthisgreaterobjectiveinmindwetry
to identify the most profitable markets in the European Union which can be taken up as our new
focus areas. Since the EU nations on an average enjoy greater per capita GDPs than their Latin
American, Asian or African counterparts, we decided to concentrate on the 27 member nations of
thesameratherthanothercountries.
IndiasTeaExportstoEU(200509)*


The table above lists the major nations of the EU to which India exports tea, along with Indias
competitive position in the said market. As is evident, India not only faces major competition in
thesemarketsfromdevelopingcountrieslikeSriLanka,KenyaandChina,butalsofrommajorEU
nationslikeUK,Germany,PolandandFrance. Atfirstglance,thismightappearcounterintuitive,
sincebecauseofclimaticconditions,noproductionofcoffee,teaandcocoabeanstakesplacewithin
the EU. However, coffee and tea are processed in the EU. The processing companies buy the raw
materialfromdevelopingcountryproducersandthereforedonotcompetedirectlywithdeveloping
countries on the market. Developing countries do not play a relevant role in the EU market for
roastedcoffeeandteablends.ThisleadstoalotofintraEUtradeinprocessedtea.Infact,56%ofEU
teaimportsissourceddirectlyindevelopingcountries,whiletheremainderconsistsofreexportsby
otherEUmembercountries.


5.TypesofTeaconsumedinEU

1.Green/Blacktea:

Theteamarkethasseenadeclineinsalesofmainstreamblackteabags

In 2008, 63% of the global tea was black tea and 30% was green tea with the balance
consistingofOolong,JasmineandPurhteas,mostlyfromChina

In2007,blackteaaccountedforabout72.5%ofglobalproduction

GreenteaisincreasinglygainingpopularityintheEU,partlyduetohealthreasonsasshown
byincreasingimports

2. Flavouredtea
Flavouredteawasintroducedasaresponsetoanincreaseddemandforvariety
Itincludesfruitteasandperfumedteas(e.g.containinganiseorcinnamonflavour)
ThesearepredominatelyblendedintheEUandmainlyconcernblackandgreentea

3.Herbaltea
Herbaldrinks,particularlyherbalteasandinfusions,arebecomingincreasinglypopularin
theEU
Onlyqualitativedataisavailableonthesemarkets,whichoftenshowshowconsumptionis
shiftingfromblackteatowardsherbaltea.

4.Readytodrinkteas
IcedteawasinitiallyintroducedinBelgiumasasportsdrink
NowitisawidelyaccepteddrinkintheEU
ItisaparticularlypopularbeverageinGermanyandItaly.


IV.TeaConsumptionandImportpatternsinEU

1.TeaConsumptionintheEuropeanUnion

In 2008, the EU consumed 251 thousand tonnes of tea, of which 130 thousand tonnes was
consumedintheUnitedKingdom(InternationalTeaCommittee,2009)
OtherleadingEUmarketsforteaarePoland,Germany,France,IrelandandTheNetherlands
Intermsofpercapitaconsumption,teaismostpopularinIreland,theUnitedKingdomand
Malta
Ingeneral,teaconsumptionintheEUshowsaverysmallincrease
ConsumptioninPolandandIrelandwasdecreasingin2008
Consumption in the UK is increasing again, after substantial decreases between 1998 and
2003
Among the smaller consumption countries, Sweden, the Czech Republic, Bulgaria and
especiallyHungaryshowastrongincreaseinteaconsumption
Consumptionincountrieswhereteawastraditionallyhardlyconsumed,suchasGreeceand
Portugal,isincreasingstrongly
TheleadingEUmarketsfororganicteaaretheUnitedKingdomandGermany
FairtradeteaisconsumedmostintheUK
ThecertifiedteamarketismuchlessdevelopedthanthecertifiedcoffeemarketbutwithUtz
CertifiedandRainforestAlliancealsoenteringthismarketitisexpectedthiswillchange

2.ProfilingthemajordestinationsofIndianteaintheEU


InthissectionwetrytoanalysethedemandandsupplyconditionsinthemajorEUnationswhere
Indiaexportsbothgreenteaandblacktea.

i.UnitedKingdom

According to the International Tea Committee (ITC), the UK is the largestteaconsumer in

theEUwithamarketshareof52%in2008(ITC,2009)

Total tea consumption was somewhat erratic between 2004 and 2008, showing a slight
annualaverageincreaseof0.2%

Thetotalconsumptionamountedto130thousandtonnes

Percapitaconsumptionamountedto2.1kgin2008

TariffLines

TheUKhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

As shown by the above table, India mostly exports Black tea to the United Kingdom. However,
GreenteaconsumptionshowslargegrowthintheUKatthecostofblacktea,andthisisoneareain
whichIndianexportscansufferasourgreenteaexportstotheUKareminimal.
Overthelongterm,IndiasexportstoteatotheUKhavealsodeclined.In1951,Indiaexported125
millionkgofteatotheUK,accountingfor60%ofUKsimports.However,Indiasteaexportstothe
UK have since declined because of sharp increase in African (particularly Kenyan) tea production
and exports, stiff price competition from Kenyan CTC tea, and a shift towards consumption of
higherqualityteaintheUK.
Consumption of conventional black tea is slowly decreasing in the UK. Producers in developing
countrieswhowanttosellblackteatotheUKmarketwillhavetoshowsomedifferentalternatives
in order to compete in the market, for example organic black tea. Next to this there is a strong
demand for cheaper CTC teas. Also, as packages exceeding 3 kg are more preferred this is a clear
indication that black teais mostly not used foroverthecounter or retail purchases. The emphasis
clearlyisonreexportingthesametootherEUnations.

ii.Germany

In2008GermanywasthethirdlargestteaconsumerintheEU,withamarketshareof9.5%
in2008(ITCReports)

TotalGermanteaconsumptionincreasedby2.3%between2004and2008,amountingto24
thousandtonnesinthelatteryear(ITC,2009)

Per capita tea consumption in Germany between 2004 and 2008 was about 0.29 kg (ITC,
2009)

TariffLines

ThelevelofprotectioninGermanywhichhas4tarifflinesforIndianteaamountsto05%ofvalue
ofimports.

PotentialityAnalysis

Greenteaaccountsfor23%ofthemarket,butin2008blackteastillremainedthemostpopulartype,
accountingfor77%ofteaconsumptioninGermany.Eventhoughpreferenceforblackteafar
outweighsthepreferenceforgreenteainGermany,thegrowthrateinconsumptionofthelatterhas
beenquitelarge. ThisisagainunfavorableforIndianexportsaswearesupplyingmoreofblacktea
ratherthangreentea.ThusthereisneedtodiversifyintheEUmarkets.Also,aspackagesexceeding
3kgaremorepreferredthisisaclearindicationthatblackteaismostlynotusedfor
overthecounterorretailpurchases.TheemphasisclearlyisonreexportingthesametootherEU
nations.

iii.TheNetherlands

TheNetherlandsisasubstantialteaconsumer,accountingforanEUmarketshareof3.3%in
2008(InternationalTeaCommittee,2009)

Total tea consumption in The Netherlands is growing steadily, is now approaching the
consumptionlevelinIrelandandisconsiderablelargerthaninItaly

The annual average increase was 2.2% between 2004 and 2008, amounting to 8.4 thousand
tonnesinthelatteryear
Percapitaconsumptionofteashowsaslightincreasebetween2004and2008,amountingto
0.51kgin2008whichisthesamelevelastherespectiveEUaverage

TariffLines

TheNetherlandsalsohave4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4
differentHScodeselaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

The Netherlands also show similar trends in teaconsumption as the UK and Germany, with pure
black tea covering the largest market share in the Dutch tea market (59%) in 2008. However, the
preferenceforblackteahasshownasteadydeclineinfavourofgreenteaandotherherbalteas.In
2008,greenteaaccountedfor7%asopposedto2007whenitssharewas5%.

ThusIndianteaexportersfacesimilarissuesinthismarketaswell.

iv.Poland

In2008,PolandwasthebiggestteaconsumerintheEUwithamarketshareof12%
Between2004and2008,teaconsumptiondecreasedby0.9%,totaling31thousandtonnesin
thelatteryear
Polishpercapitaconsumptionofteawasabout800gramsin2008,whichishigherthanthe
EUaverageof500grams(ITC,2009)

TariffLines
Polandalsohas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHS
codeselaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

TheteaconsumptioninPolandactuallyshowsadecreasingtrend.Also,thegrowthintheorganic
sectorisparticularlyofinteresttoGermanplayers,sincethesectorisalreadyadevelopedmarketfor
organic products. German traders find good opportunities in the Polish market, as the Polish
distributionchannelsarestillunderdeveloped.HenceitisdifficultforIndianteaexporterstomake
significantheadwayinthismarketwithoutadequatetimeandinvestment.

v.Ireland

Irelandisthe5thlargestteaconsumerintheEU,withanEUmarketshareof4.0%in2008
(ITC,2009)
Overtheperiod20042008,Irishconsumptionofteashowedanannualaveragedecreaseof
1.3%,amountingto9.9thousandtonnesinthelatteryear.
PercapitaconsumptionofteainIrelandishigh,amountingto2.3kgin2008(ITC,2009)

TariffLines

Irelandhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

Product Productlabel IndiasexportstoIreland Irelandsimportsfromworld

code

Value Value Valuein Valuein Valuein Value Valuein

in2007 in 2009 2007 2008 in 2007
2008 2009

090240 Blacktea 153 138 868 11177 10709 9742
(fermented)&partly
fermentedteain
packagesexceeds3
kg

090230 Blacktea 101 306 185 35136 37679 36589
(fermented)&partly
fermentedteain
packagesnot
exceeds3kg

090220 Greentea(not 26 67 70 1936 3260 3096
fermented)in
packagesexceeding
3kg

090210 Greentea(not 154 207 0 8218 8613 10212
fermented)in
packagesnot
exceeding3kg

TheIrishteaconsumptionisalsoheavilyskewedtowardsblacktearatherthangreentea,whichis
favourableforIndianexports.However,theIrishteamarketshowsmarkedpreferencefor
higherendvarietyoftearatherthanthelowerendvarieties.TheUnitedKingdomwithitsbetter
packagingtechniquesandnearnesstoIrelandthushasacompetitiveedgeinthismarket.

vi.Italy

Considering its size, Italy is a small tea consumer, responsible for only 2.7% of total EU
consumption(ITC,2009)
Total Italian tea consumption shows an average annual increase of 3.5% over the period
20042008,amountingto6.9thousandtonnesin2008
ThepercapitateaconsumptioninItalyisverylowcomparedtootherEUcountries,atonly
0.1kgin2008(ITC,2009)

TariffLines

Italyhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

EventhoughteaconsumptioninItalyismuchlowerthansomeofitsothercounterpartsintheEU,
thetrendsforconsumptionofblackteaarepositive.However,atthesametimeitmustbe
mentionedthatItalyprocuresitsrequirementsofgreenteamostlyfromotherEUnations,mainly
GermanyandUK. Itisthegreenteasegmentwhichhasalsoshowngreatergrowthin
consumption,evenmorethanthatintheblackteasegment.

vii.France
FranceisthefourthbiggestteaconsumerintheEUwithamarketshareof6.0%(ITC,2009)
TotalFrenchteaconsumptionincreasedbetween2004and2008atanannualaverageof
3.7%,amountingto15thousandtonnesin2008
PercapitateaconsumptioninFrancewas0.24kgin2008,almosthalfoftherespectiveEU
average

TariffLines

Francehas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis


Franceisnotatraditionallyteadrinkingnationandhencepercapitaconsumptionismuchlesshere
thaninUK,GermanyorPoland.Theimportofblackteaactuallyshowsaheavydecreasebetween
2008and2009.Also,greenteaisgainingmuchfavourinthismarketasshownbytheabovetable.
ThisgivesIndianteaexporterslittleopportunityintheFrenchmarkets.

viii.Sweden

Swedenisamediumtosmallteaconsumer,withanEUmarketshareof1.5%in2008(ITC,
2009)
Nevertheless,theSwedishteaconsumptionshowedoneofthestrongestdevelopmentswith
anaverageannualincreaseof7.1%between2004and2008,totaling3.8thousandtonnesin
thelatteryear
Thepercapitaconsumptionamountedto0.4kgin2008

TariffLines
Swedenhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

SwedenshouldbegivenmoreattentionbyIndianteaexportersnotonlybecauseitsstronggrowth
inconsumptionoftea,butalsobecauseitisanationwhichshowsamarkedpreferenceforblacktea
overgreentea,asevidencedbythetableabove.TheonlyissuecouldbethedominanceofotherEU
nationsinthismarket,whichreexportalotofteatoSwedishmarketsafterpackagingitaccording
tolocalspecifications.However,thefutureforblackteainSwedenlooksbright.

ix.Belgium

Belgium (including Luxemburg) has a mediumsize share (0.9%) of the total EU tea
consumptionmarket(ITC,2009)

Total tea consumption in Belgium showed an increase of 2.9% between 2004 and 2008,
amountingto2.4thousandtonnesinthelatteryear

PercapitateaconsumptioninBelgiumisquitesmall(0.2kg)

TariffLines
Belgiumhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

ThereisatrendinBelgiumthatyoungpeopleareconsuminglesscoffeeinfavourofmore
fashionable(teabased)drinks,whichareseenasmorehealthy.However,increasingconsumption
ofherbalteacouldoccurattheexpenseofblackteaconsumptioninparticular.AsinmanyotherEU
memberstates,greenteaisbecomingincreasinglypopularinBelgium,tothedetrimentofblacktea
varieties.However,whilethetotalblackteamarketisshowingadecrease,premiumblackteasare
popularinBelgium.
IndiaisaverysmallexportertoBelgiumasfarasteaisconcerned,anditsexportofgreenteato
Belgiumisnegligible.

x.CzechRepublic

The Czech Republic is a mediumsized tea consumer, with an EU market share of 1.2% in
2008
TotalteaconsumptionintheCzechRepublicincreasedannuallyby6.5%between2004and
2008,amountingto3.1thousandtonnesinthelatteryear
PercapitateaconsumptionintheCzechRepublicisgraduallyincreasingandamountedto
0.3kgin2008(ITC,2009)

TariffLines

TheCzechRepublichas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4different
HScodeselaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

TheCzechRepublicisanotherinterestingmarketforIndianteaexportersbecauseofitsmarked
preferenceforblackteaovergreentea.Anincreaseinteaconsumptionisexpectedtoboostsalesin
thecomingyears.Producersindevelopingcountrieswillhaveinterestingopportunitiesinthis
market,iftheypenetratetheCzechmarketeffectively.
AlthoughtheCzech(organic)teamarketis(ingeneral)growing,achallengeisthatCzechsstillbase
mostpurchasesonprice,asCzechconsumersandfirmsareverypricesensitive.Thereforethe
qualityofteasoldontheCzechmarketisoftenquitelimited.

xi.Finland
 Finlandisasmalltomediumteaconsumer,withanEUmarketshareof0.5%in2008

TotalFinnishteaconsumptionshowedastrongannualaverageincreasebetween2004and
2008(5.3%annually),amountingto1.2thousandtonnesin2008(ITC,2008)

PercapitateaconsumptioninFinlandisratherlowcomparedtoWestEuropeancountries,
but showed a stable increase over the period 20042008, amounting to 0.23 kg in the latter
year.

TariffLines

Finlandhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

FinlandhasamarkedpreferenceforcoffeeandishenceaverysmallEUmarketfortea.

xii.Greece

The average annual increase was 8.4% between 2004 and 2008, amounting to a total tea
consumptionof1.3thousandtonnesin20087
Percapitaconsumptionin2008remainedquitelimited,comparedtootherEUcountries,at
100grams(ITC,2008)

TariffLines

Greecehas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis


AccordingtoEuromonitorreports,Greecehasaverygoodpotentialforblackteaconsumption.
Also,betterpricescanbeenjoyedbydoingthesame.IndiaisaverysmallexporterofteatoGreek
marketsandfacesmuchcompetitionfrommajorEUnationsotherthanSriLankaandChina.The
increasingdemandforgreenteaisaprobablecauseofthesame.

xiii. Spain

Spainisasmallteaconsumer,withamarketshareof0.5%in2008(ITC,2009).
Between2004and2008,totalSpanishteaconsumptionachievedanannualaverageincrease
of3.2%,totaling1.4thousandtonnesinthelatteryear

TariffLines
Spainhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

Spainisasmallconsumerofteaandthegrowthrateforgreenteaconsumptioninthismarket
exceedsthatfortheblackteaconsumption.IndiaalsoseemstoexportverylessteatoSpainwhichis
usedforretailpurposes.

xiv. Denmark

Denmark is a medium to small tea consumer in the EU, with a share of 0.6% in total EU
consumption(ITC,2009)
TotalDanishteaconsumptionshowsanaverageannualdecreaseof1.4%between2004and
2008,withconsumptionamountingto1.4thousandtonnesin2008
Percapitaconsumptionwasamountedtoapproximately0.25kgin2008

TariffLines

Denmarkhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

Greenteaconsumptionisshowingconsiderableincreaseseachyearandthisdevelopmentis
expectedtocontinue.Thisisalsopartlyduetoincreasedavailabilityofgreenteaswithadded
flavoursintheDanishmarket.Indiahasaverysmallshareofthesameandalsooftheretailblack
tearequirements.
xv.BalticStates(Estonia,Latvia,Lithuania)

TeaconsumptionintheBalticStates(Estonia,LatviaandLithuania)ismediumsized,witha
totalEUmarketshareof1.5%in2008(ITC,2009)
ThejointteaconsumptionintheBalticStatesshowsaratherstableincrease,withanannual
averageincreaseof2.9%between2004and2008,amountingto3.7thousandtonnesinthe
latteryear
Per capita consumption in the Baltic States stands at around 500 grams, with Lithuania
somewhatlower(ITC,2009)

TariffLines
TheBalticStateshave4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4different
HScodeselaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

The Baltic States are absolutely underexplored as far as Indian tea exports are concerned. This is
mainlybecausetheyprocureamajorpartoftheirrequirementsfromthenearbycountryofPoland.
Oneofthereasonsforthesamecouldbethatthetransportationandotherlogisticalcostsofreaching
theirsignificantlylowerrequirementsofteamaynotbeeconomicallyviableforIndianexporters.


xvi. Slovenia
AccordingtoFAOdata,Slovenianteaconsumptiondecreasedfrom0.2thousandtonnesin
2001downto0.15thousandtonnesin2005
Thiswouldamounttoaround70gramsofteapercapita,whichismuchlowerthantheEU
average
TariffLines
Sloveniahas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

Sloveniaisaveryunderdevelopedmarketfortea,especiallysinceteaisstillconsideredtobea
seasonaldrinkinthisnation.ThismakestheSlovenianmarketfortealimitedinsize.However,itis
ingeneralshowingafavorabledevelopment.Moreover,withdomesticplayersaccountingformost
oftheSlovenianmarket,theindustrialdemandforteashouldstillbequiteconsiderable,andshould
increaseparalleltoconsumption.SloveniahasnotbeenamajorexportdestinationforIndiantea
becauseofitslowerrequirementswhichdonotjustifythelogisticalcostsinvolved.

xvii.Hungary

Hungaryisamediumsizedteaconsumer,responsiblefor1.1%oftotalEUteaconsumption
in2008
Total Hungarian tea consumption showed a substantial increase, with an annual average
increaseof10%between2004and2008,amountingto2.9thousandtonnesin2008
PercapitaconsumptionstandsbelowtheEUaverageat280grams(ITC,2009)


TariffLines
Hungaryhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

Hungaryisonenationthatshowsasteadyincreaseinconsumptionoftea,thoughitsimportofthe
samedecreasedmarginallyintherecessionyears.Themarketfororganicandgreenteaisstill
comparativelyunderdevelopedwhichaugursfavourablyforIndianexportersofblacktea.

xviii.Portugal

PortugalisoneofthesmallestteaconsumersintheEU,withamarketshareof0.3%in2008
However, between 2004 and 2008, Portugal showed an average annual growth in
consumptionof8.3%,amountingto821tonnesinthelatteryear(ITC,2009)

TariffLines
Portugalhas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis


Portugalisanothermarketthatshowsaclearpreferenceforteaforretailpurchaseandconsumption
asevidencedbyitsgreaterimportofteainpackageslessthan3kg.Portugalsteamarketisamong
thefastestgrowingintheEU,whichcouldofferopportunitiesfordevelopingcountryteaproducers.
However,itremainsverysmall,andismostlysuppliedbyotherEUcountries.

xix.Austria

Austriaisasmallsizedconsumeroftea,takingthe13thpositionintheEU,withamarket
shareof0.9%(ITC,2009)
Between2004and2008,totalAustrianteaconsumptionmarkedasignificantannualincrease
of8.3%,amountingto2.2thousandtonnesinthelatteryear
In2008,Austrianpercapitateaconsumptionwas0.3kg

TariffLines
Austriahas4differenttarifflinesforteaoriginatinginIndia,oneeachforthe4differentHScodes
elaboratedonbelow.Thelevelofprotectionrangesbetween05%oftotalvalue.

PotentialityAnalysis

Thoughtraditionallyconsumed,teaisstillconsideredawinterdrinkbymostAustrians.Although
teadrinkingisslowlyevolvingduetothehealthandwellnesstrend,consumersarenotexpectedto
developthehabitofdrinkingblackteamoreregularlythroughouttheyearinthecomingfewyears.
GreenteaconsumptioninAustriaisincreasing.Furthermore,thedevelopmentsinthesegmentsof
herbalandfruitflavoredteasareinteresting.Austrianconsumptionofblacktearemainsmore
limited.ThisofferslimitedopportunitiestoIndianteaexporters.

V.ConclusionsandRecommendations

Basedontheaboveanalysis,wecanidentifycertainEUmembernationswhicharecurrently
importantforteaexportsandalsoonesthatcanbeamajordestinationofIndianteainthecoming
years.

From a short term perspective, we need to consolidate our position in the traditional markets of
UnitedKingdom,GermanyandIreland.NotonlyarethesesomeofthelargestmarketsintheEUfor
tea,butalsotheconsumersinthesenationsarenotaspricesensitiveasintherestoftheEU.One
issuethatcouldcausesomeconcernforIndianexportersinthemarketsofGermanyandUKisthat
theconsumersareslowlymovingawayfromblackteatowardsgreentea.However,wecanchoose
toconcentrateinextremelyprofitablenichesegmentswithourofferingsofDarjeelingtea,Assamtea
and the like, which are worldrenowned for their colour and aroma. Ireland on the other hand
shows a marked preference for black tea due to traditional associations and can prove to be a
profitablemarket.

Thusinthiscontextweneedtoconsolidateourdistributionchannelsinthesemarketsandlookat
developing more attractive retail options to appeal to the consumer. This is because the real
challenge in these markets lies in moving up the value chain as they prefer to package and then
markettheirownteaafterprocuringitfromothernations.Theprocessingcompaniesbuytheraw
materialfromdevelopingcountryproducersandthereforedonotcompetedirectlywithdeveloping
countriesonthemarket.TheIndianteaexporterscanthuslookatverticalintegrationtocapturethe
opportunitiesinthesemarkets.

As far as our long term strategy is concerned, clearly there is much benefit associated with
diversifying in nontraditional yet fast growing tea consuming nations in the EU. This is because
these markets are not saturated and the consumers will thus be willing to try out new options.
Becauseofthenascentstageofteapenetration,thesemarketsarestillhookedontoblackteaandthis
opportunity must be harnessed. The market for organic and green tea is still comparatively
underdeveloped, which augurs favourably for Indian exporters of black tea. This is because we
cannotyetcompeteeffectivelywithChinaasfarasproductionandexportofgreenteaisconcerned.
However, the major competition in these markets will not be from other developing nations like
Kenya,SriLankaorChina,butthemajorthreatwillbefromthereexportersofteawithintheEU
like UK, Germany and Poland. However, it is essential for us to move up the value chain by
packagingandmarketingtheteaaccordingtolocalspecificationsasthesewillgrantourexporters
higher margins. In order to accomplish this, stronger investment in R&D and development of
marketing channels is essential, which evidently will require considerable time and resources.
However,fromalongtermperspectiveitisabsolutelyfoolhardyforIndianexporterstoignorethese
markets.

VI.References

1.CBIReportsontea
2.ICRAReport(September2009) onIndianteaindustry
3.ICICIReportontheIndianTeaSector,2007
4.Trademaps.orgfordataregardingexportsandimports
5.WIPOReportonIndianSMEsinteasector
6.PerformanceofIndiasTeaExports:AComparativeStudyofMajorTeaExportingCountriesof
TheWorldbyB.H.Nagoor,PublishedbyIGIDR