TEA

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
May 7 - 20, 2012

Tea remains dominant and continues to lead the overall market in both the on-trade (restaurant, cafes, etc.) and off trade (retailer and wholesaler). The growth rate of tea in both value and volume terms are always influenced by sales in rural areas. Multinational and local companies have to focus on rural markets carefully to maintain their share.

Pakistan, officially a country of teetotalers with an Islamic ban on alcohol, has become one of the highest per capita consumers of tea in south Asia.

The traditional method of making a cup of tea in Pakistan is to place loose tea leaves, either directly, or in a tea infuser, into a tea pot or tea cup and pour hot water over the leaves.

It has proved that the taste of Pakistani tea comes at second number in the world and if this potential is properly tapped it would even make the country able to export tea. However, it is now duty of the private sector to invest in this field of the country.

Tea is served during breakfast, evening, and night. Mostly, tea is usually a focal point for social gatherings source of sitting and events. The events can be as small as a friends gathering or as big as marriage functions.

There are tea ceremonies which have arisen in different cultures especially in Pathan and Sindhi ones being the most well known. Karachi tea ceremony uses some traditional ways of preparing tea and serving it to the guests.

Unluckily, tea is smuggled into the country via the border areas of the Khyber Pakhtunkhwa and Balochistan. Smuggled black teas are sold cheaper as compared to teas imported from legal trade routes. This has affected legitimate sales to a large extent. The government is trying to stop the smuggling of illegal imports. Further, major steps are being taken to discourage smugglers from smuggling tea which has been a major problem for both the government of Pakistan and tea blending companies. Smuggled tea accounts for a considerable amount of the total tea available in the country.

A host of other factors is also affecting the patterns and direction of the countryŽs tea demand trends.

India's tea exports to Afghanistan and Pakistan reached an all time high in 2011. During January-May 2010, the India tea exports to Afghanistan and Pakistan increased to 12.2 million kg from 7.4 million kg a year ago.

Recently, the government has signed a memorandum with India to import 50 million kg of tea by 2015. These imports can be classified into broad categories like green and black tea.

Pakistan is also eager to import Indian packet teas and tea bags. Import duty on tea in Pakistan is 10 per cent and tea trade body has requested the government to cut it down further.

The country has looked at various opportunities on increasing tea imports from India. Pakistan is a 220 million kg market and its consumption is going up at the rate of per cent per annum.

Pakistan is looking at importing quality tea from India. The country imported a record 24 million kg in 2011 from India against 19 million kg in 2010. It buys teas mostly from South India. Only about four million kg was exported from the tea gardens in north India. Pakistan imports Indian tea at $3 per kg.

Furthermore, Pakistan imports tea from Kenya. Kenya produced less tea this year due to a drought-like situation there. During February 2012, the production was down by eight million kg and in March production declined by 3.5 million kg. Kenyan prices have also gone up due to availability shortage. Many nations depend on Kenya for meeting their tea requirements.

It was calculated that Pakistan imported as much as 127,316 metric tons of black tea costing $301 million in 2010-11 while the green tea imports during this period stood at 3,322 metric tons of $4.25 million.

Tea import in the country during the last eight month of 2011-12 recorded an increase of nearly five per cent. Tea imports declined to 89,819 tons ($186 million) in July-June 2008-09 as compared to 101,000 tons ($188 million) in the corresponding period of the last fiscal year as high prices and import duty forced packers and importers to opt for slow buying.

Average unit price in the outgoing fiscal year was $2.08 per kg as compared to $1.85 per kg in fiscal 2008-09. Out of total legal arrivals from 22 countries, imports from Kenya also plunged to 48,409 tons ($116 million) in July-June 2008-09 as compared to 61,890 tons ($129 million) in the same period of preceding fiscal year.

The average unit price of Kenyan tea was $2.39 per kg as compared to $2.09 per kg. The share of Kenyan tea in total legal imports during 2008-09 dropped to 54 from 61 per cent. The demand for tea in the world market was rising and Kenya does not have any carryover stocks of last year.

Till June there was a shortage of 90,000 tons of black tea in the world market.

More recently, Pakistan Agriculture Research Council (PARC) has developed latest technology and processing units besides identifying various areas for the production of tea to rid the country of cost it has been bearing due to tea imports. The per capita tea consumption in Pakistan has reached to one kg per annum.

CONCLUSION

The government should take major steps to control the tea smuggling. Tea packers have already passed on the impact of rising tea prices in Pakistani markets to consumers.

TEA IMPORT PAYMENTS (THOUSAND US$)

YEARS JUL-JUN MAR FEB (R) MAR (P) (JULY-MAR)
2008-09 2009-10 2010-11 2011 2012 2012 2010-11 2011-12 (p)
Tea 200,476 254,573 311,235 33,984 36,821 34,962 247,463 253,488
R=Revised
P=Provisional