Tea Industry, Pakistan

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  • Topic: Tea, PG Tips, Lipton
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  • Published : May 27, 2008
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Tea Industry of Pakistan

Pakistan, a country of tee-totallers due to the Islamic ban on alcohol, is one of the highest per capita consumers of tea in South Asia. Local tea importers speculate that this is due to a limited choice of beverages. Pakistan is the third largest tea importer in the world after Russia and the UK and consumes about 155 million kg of tea every year (of which about 130 million kg is imported).On average, each Pakistani consumes about a kilo of tea a year, a total of approximately 155 million kg. for a population of around 150 million. The annual tea import bill, which this year may be more than US$200 million, highlights the importance of the country becoming self-sufficient in both growing and manufacturing tea. So far, these efforts have failed, and Pakistan continues to rely heavily on imported tea. In addition, consumers increasingly want better quality tea. The tea marketing chain typically resembles one of two models. The first one, used mainly by large trans-national companies, is vertically integrated, with one company managing all the steps, from cultivation on large estates (which is often highly mechanised) to processing of tea bags. The second model can be considered more "traditional". The tea is grown in smaller gardens, which are often owned by a co-operative of producers, and is then usually marketed by national boards, as in India, Kenya and Tanzania. The fair trade movement has had an impact on the tea trade. Tea imports from Kenya make up about 85 percent of the total import and India is in the second place. Smugglers bring in another 60 to 70 million kg. The import statistics for the month of April 2007 shows that 1.69 million kg tea is imported from India.Imports are mainly from Kenya and other African countries, while the two multinationals blenders import tea from Sri Lanka, Indonesia and Bangladesh. In addition, tea is smuggled into the country via the border areas of the NWFP and Balochistan. It is also smuggled to Afghanistan. Market share data

Unilever (lipton and supreme brands) 29% •Tapal tea 21% •Tetley ,vital and others 9-12% •Loose or unbranded 38-40%

Unilever’s lipton brand is almost fully vertically integrated while as a step towards backward integration Tapal has begun tea plantation at Shinkiari in the northern region of Pakistan.

Procurement of tea

The tea supply chain begins in a smallholder farm or a plantation, where the tea leaves are grown and plucked. The leaves are then either transported to a bought-leaf factory, in the case of small holders, or processed in the factory on-site, in the case of large plantations. The processing is done in the producing country because tea must be processed within hours of its being picked to maintain quality.

The tea is then usually taken to the local auction centre, where its price is determined on a day-to-day basis. Only about 16% of tea is sold outside the auction centers through direct contracts. For the domestic market, the tea would next be blended and packed, while for exports, the supply chain would include an exporter before blending and packing. Tea will generally reach the supermarket Shelf within 20 to 30 weeks of leaving the bush.

Tea is a very labor-intensive product and labor costs represent 55-60% of the total cost of Production, and yet the proportion of the laborer’s wage in the consumer price of tea is shockingly low. Unilever’s PG Tips is the most popular tea bag brand in the UK and costs £1.48 ($2.12) for 250 grams in Sainsbury’s supermarket. Considering that plantation workers are paid $50.76 per month in Kenya, a major exporter of tea and one of Unilever’s key suppliers, this means that less than 3% of the consumer price reflects the work of the laborer . Around 15% of the...
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