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Export of Indian Tea to European Union

I. Executive Summary

The Indian tea industry is an essential contributor to the nation’s 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 growth‐drivers 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 member‐nations which are already importing some amount of tea

from India. Thus we identify certain countries which can be our new focus markets and analyse the

pros and the cons of the same.

Contents

1. Introduction: Tea Industry in India…………………………………………….……………………Pg 4

2. Objectives and Scope………………………………………………………………………………….Pg 6

3. Analysis of India’s Trade in Tea……………………………………………………………………..Pg 7

i. Trends in Exported Value…………………………………………………………Pg 7

ii. India’s Price Competitiveness……………………………………………………Pg 10

iii. Types of Tea exported by India…………………………………………………Pg 11

iv. India’s Tea Exports to the EU……………………………………………………Pg 12

v. Types of Tea consumed in the EU……………………………………………….Pg 14

4. Tea Consumption and Import Patterns in the EU…………………………………………………Pg 15

5. Profiling the major destinations of Indian Tea in the EU…………………………………………Pg 16

i. United Kingdom…………………………………………………………………….Pg 16

ii. Germany……………………………………………………………………………Pg 17

iii. The Netherlands…………………………………………………………………..Pg 18

iv. Poland………………………………………………………………………………Pg 19

v. Ireland………………………………………………………………………………Pg 20

vi. Italy………………………………………………………………………………….Pg 21

vii. France………………………………………………………………………………Pg 22

viii. Sweden…………………………………………………………………………….Pg 22

ix. Belgium………………………………………………………………………..…….Pg 23

x. Czech………………………………………………………………………..………..Pg 24

xi. Finland……………………………………………………………..………………..Pg 25

xii. Greece………………………………………………..……………………………..Pg 26

xiii. Spain……………………………………...………………………………………..Pg 27

xiv. Denmark…………………………………………………………………………..Pg 27

xv. Baltic States………………………………………………………………………..Pg 28

xvi. Slovenia…………………………………………………………………………...Pg 29

xvii. Hungary……………………………………..……………………………………Pg 30

xviii. Portugal…………………………………………………………………………..Pg 31

xix. Austria………………………………………………………………….…………Pg32

6. Conclusions and Recommendations………………………………………………………………Pg 33

7. References…………………………………………………………………………………………….Pg 35

II. Introduction: Tea Industry in India

The tea industry has an important and special place in the Indian economy. Tea is India’s primary

beverage, with almost 85% of total households in the country consuming tea. India is the world’s

second largest producer (after China) and second largest consumer of tea, with India accounting for

25‐27% of world tea production. India’s expenditure on beverages and processed foods accounts for

8% of food expenditure in rural areas, and 15% in urban areas. India is also an important tea

exporter, accounting for around 10‐12% of world tea exports. However India’s share in world tea

exports has declined from 21% in 1990. Further, certain varieties of tea (for example Darjeeling) are

grown only in India and are in great demand across the world. All Darjeeling teas possess the

lightness of flavour and fine colouring that set them apart from all other teas.

According to statistics released by the Government of India, India’s tea exports were estimated at Rs.

23,764 million during 11MFY2009 (April 2008‐February 2009), accounting for 0.34% of India’s

exports. The share has declined from 1.1% in FY2000. Statistics released by the Tea Board India (TBI)

for 2008 (January‐December 2008) indicate tea exports of 203 mkg (million kg) valued at Rs. 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,

coffee and cocoa aggregated Rs. 69.16 billion in FY2008, accounting for around 0.3% of India’s PFCE.

Tea accounts for around 88% for India’s consumption of stimulants (tea, coffee, and cocoa beans),

followed by coffee (10%), and cocoa beans (1.7%). In value terms, consumption of these beverages

peaked at Rs. 115.43 billion in FY2008, and has declined in recent years caused by higher prices, and

a shift in consumer preferences towards cold beverages.

Tea Production in India

*Source: Tea Board of India Report, 2009

Although tea is produced in 14 States in India, Assam and West Bengal (WB) in North India; and

Tamil Nadu (TN), Kerala and Karnataka in South India are the five most important States producing

around 98.6% of India’s tea production. Tea is also grown on a small scale in a few other states viz.,

Tripura, Arunachal Pradesh, Karnataka, Himachal Pradesh (HP), Uttaranchal, Sikkim, Bihar,

Manipur, Orissa and Nagaland. In North India, tea growing areas lie between 24‐27 degree North

latitude and 88‐95 degree East longitude. Tea growing areas can be divided among several distinct

regions viz. Brahmaputra and Barak Valley in Assam, North Bengal Plains of Dooars and Terai as

well as Darjeeling Hills. In South India, tea growing area lie between 8‐13 degree North latitude on

the slopes of Western Ghats and adjoining plateaus.

Although North India accounts for around 75‐77% of India’s tea production, depending on the year

and market conditions, around 85‐90% of North Indian tea production is consumed in the domestic

market. The balance, much of it of high quality, is exported. Although South India accounts for

around 23‐25% of India’s tea production, around 30‐50% of its production is exported. Depending

on the year, South India accounts for around 50% of India’s tea exports by volume.

III. Objectives and Scope

Having determined the importance of the tea industry in the Indian industry, we also realize that

exports are essential for the sustenance of this industry. As we shall elaborate on later, Indian tea

exports have been losing out to competition from Kenya, Sri Lanka, China and other new‐age tea

exporting nations. It is in this context that it is extremely important for us to search out new markets

where we can have a competitive edge. Thus in this report we try to analyse the European Union

member‐nations as potential markets where we can find a niche for ourselves.

The scope of this project thus includes an in‐depth view of the prevailing conditions in each of the

EU member‐nations that India exports tea to. This includes an analysis of current market trends in

consumption, consumer preferences and competitive environment. The attempt has also been made

to analyse the opportunities and threats thus afforded by each of these markets for Indian tea

exports.

IV. Analysis of India’s Trade in Tea

*Source: ICRA Reports, 2009

From a leadership position in international markets up to 1991, India has lost market shares to Sri

Lanka, Kenya, and China. A major loss of its market share occurred in the former USSR, where India

occupied an almost monopolistic position from the 1960s to 1990. Some recovery in export volume

has occurred since the late 1990s, but generally tea exports from India have been on a declining

trend over the last two decades. Kenya is now the world’s largest tea exporter with exports of 383

million kg during 2008, followed by Sri Lanka, China, and India. The major destinations for Kenyan

exports in 2008 included Egypt, Pakistan, UK, and Sudan. China’s exports of 297 million kg in 2008

were primarily to Morocco, Uzbekistan, US, and Japan. Green tea dominates China’s exports with

estimated exports of 230 million kg in 2008.

*Source: ICRA Reports, 2009

Inspite of accounting for around 26% of world’s tea production, India accounts for only 12% of

worldʹs tea exports. India’s international competitiveness in tea exports has been on a decline, with

its share of world exports declining from 21% in 1987. From being a pre‐eminent supplier of the

world’s tea, India has lost ground in virtually every export market.

Exports are essential to earn foreign exchange for the nation and Indian tea had traditionally been a

major contributor in this regard. In the early‐1980s, Indian tea exports accounted for around 40% of

the domestic production. By the end of 1980s, the share fell to 30%. The decline continued till 1994

when exports accounted for only 20% of the domestic production of tea. Thereafter, the proportion

of exports improved to around 24% of the domestic production during 2003. However, exports have

again declined to 19% of production in 2007, and 21% in 2008.

Over the last two decades, India’s tea exports peaked at around 213 million kg in 1989 but declined

to a low of 151 million kg in 1994. Exports subsequently increased to 210 million kg in 1998 before

declining to 174 million kg in 2003. India’s tea exports have declined at a 10‐year CAGR of 0.3% in

volume terms during 1999‐2008. Exports declined 18.3% in 2007 to 179 million kg mainly because of:

a) Lower production

b) Collapse of some major markets such as Iraq

c) Increase in production in some major competing countries such as Kenya and Turkey

d) Switchover of major buying countries back to their preferred supplier countries (UK and Pakistan

from Kenya)

e) Rupee appreciation

However, exports increased 13.6% in 2008 to 203 million kg because of:

a) Recovery in production

b) Higher exports to non‐ traditional markets such as Egypt, Afghanistan, and Pakistan

c) Lower growth in exports by competitor countries

d) Increase in exports to traditional markets such as Kazakhstan, UK, and UAE

2. India’s Price Competitiveness

As is evident from the above graph, the prices of Indian tea are not competitive when compared to

behemoths like China and Kenya, which is why we have been losing ground in foreign markets. The

reasons for the same are as follows:

a) Unfavourable age profile of significant proportion of India’s tea gardens: This has resulted in

lower productivity, and higher cost of production. India’s exports are dominated by CTC tea, where

it is facing increased competition from Kenyan tea. Kenya’s tea business is generally characterized

by younger age profile of bushes, higher yields, lower cost of production, and lower prices.

b) Tariff and non‐tariff 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

orthodox teas which have a larger demand worldwide are other causes of the decline. This resulted

in the emergence of Sri Lanka and Indonesia as major exporters, primarily because of their ability to

supply good quality orthodox tea.

c) Changing Consumer Preferences: Traditionally, loose standard BT was the most common format

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 vis‐a‐vis

loose tea. In Russia, tea bags are preferred by the working class, and consumption in this form has

grown. This has favoured Sri Lankan tea in Russia.

d) Shift in India’s production: The shift in production from orthodox to CTC tea is another cause.

By comparison, other competing countries have continued to produce their respective traditional

types of tea, maintaining consistency of type of supplies to their export destinations.

e) Decline in quality: This has been caused by mushrooming BLFs which produce cheap quality

tea by buying and processing green leaf from small growers. The growing share of poor quality tea

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

varieties and export of the same as Indian tea has also impaired the quality perception.

f) Spurious varieties: Lower quality of tea that are often passed on as Darjeeling tea. Because of its

proximity, some Darjeeling tea producers are bringing in green leaf from gardens in Nepal and

selling them as `Darjeeling tea’, thereby jeopardizing the geographical indication value of Darjeeling

tea.

g) Lack of marketing initiatives: This has led to industry’s failure to penetrate new markets and

inability to secure preferential duty treatment from countries. The lack of competition in the earlier

days, remunerative prices in the domestic markets and buoyant export off take from CIS provided

little incentive to the Indian tea industry to develop alternative export markets. In contrast, Sri

Lanka has been aggressively marketing its produce and penetrating markets in which it earlier had

little presence.

3. Types of Tea exported by India

India’s tea exports have primarily been dominated by loose BT tea, which accounts for around 73%

of exports in volume terms and 71% in value terms. However, the share of loose BT has declined,

even as the share of packet tea and GT has increased. The exports of loose BT have declined largely

because of a significant decline in exports to Russia, which till FY2004, was the largest market for

India’s tea exports. Although value added tea—primarily instant tea, tea bags, and packet

tea—fetches higher realizations, India’s exports of value added tea have declined sharply in recent

years primarily because of competitively priced and better quality offerings from Kenya and Sri

Lanka. As a result, loose BT has continued to dominate exports.

4. India’s Tea Exports to the European Union

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. This is the major objective of this analysis and keeping this greater objective in mind we try

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

the same rather than other countries.

India’s Tea Exports to EU (2005‐09)*

The table above lists the major nations of the EU to which India exports tea, along with India’s

competitive position in the said market. As is evident, India not only faces major competition in

these markets from developing countries like Sri Lanka, Kenya and China, but also from major EU

nations like UK, Germany, Poland and France. At first glance, this might appear counter‐intuitive,

since because of climatic conditions, no production of coffee, tea and cocoa beans takes place within

the EU. However, coffee and tea are processed in the EU. The processing companies buy the raw

material from developing country producers and therefore do not compete directly with developing

countries on the market. Developing countries do not play a relevant role in the EU market for

roasted coffee and tea blends. This leads to a lot of intra‐EU trade in processed tea. In fact, 56% of EU

tea imports is sourced directly in developing countries, while the remainder consists of re‐exports by

other EU member countries.

5. Types of Tea consumed in EU

1. Green/Black tea:

The tea market has seen a decline in sales of mainstream black tea bags

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

consisting of Oolong, Jasmine and Puérh teas, mostly from China

In 2007, black tea accounted for about 72.5% of global production

Green tea is increasingly gaining popularity in the EU, partly due to health reasons as shown

by increasing imports

2. Flavoured tea

Flavoured tea was introduced as a response to an increased demand for variety

It includes fruit teas and perfumed teas (e.g. containing anise or cinnamon flavour)

These are predominately blended in the EU and mainly concern black and green tea

3. Herbal tea

Herbal drinks, particularly herbal teas and infusions, are becoming increasingly popular in

the EU

Only qualitative data is available on these markets, which often shows how consumption is

shifting from black tea towards herbal tea.

4. Ready‐to‐drink teas

Iced tea was initially introduced in Belgium as a sports drink

Now it is a widely accepted drink in the EU

It is a particularly popular beverage in Germany and Italy.

IV. Tea Consumption and Import patterns in EU

1. Tea Consumption in the European Union

In 2008, the EU consumed 251 thousand tonnes of tea, of which 130 thousand tonnes was

consumed in the United Kingdom (International Tea Committee, 2009)

Other leading EU markets for tea are Poland, Germany, France, Ireland and The Netherlands

In terms of per capita consumption, tea is most popular in Ireland, the United Kingdom and

Malta

In general, tea consumption in the EU shows a very small increase

Consumption in Poland and Ireland was decreasing in 2008

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

especially Hungary show a strong increase in tea consumption

Consumption in countries where tea was traditionally hardly consumed, such as Greece and

Portugal, is increasing strongly

The leading EU markets for organic tea are the United Kingdom and Germany

Fairtrade tea is consumed most in the UK

The certified tea market is much less developed than the certified coffee market but with Utz

Certified and Rainforest Alliance also entering this market it is expected this will change

2. Profiling the major destinations of Indian tea in the EU

In this section we try to analyse the demand and supply conditions in the major EU nations where

India exports both green tea and black tea.

i. United Kingdom

According to the International Tea Committee (ITC), the UK is the largest tea consumer in

the EU with a market share of 52% in 2008 (ITC, 2009)

Total tea consumption was somewhat erratic between 2004 and 2008, showing a slight

annual average increase of 0.2%

The total consumption amounted to 130 thousand tonnes

Per capita consumption amounted to 2.1 kg in 2008

Tariff Lines

The UK has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes

elaborated on below. The level of protection ranges between 0‐5 % of total value.

As shown by the above table, India mostly exports Black tea to the United Kingdom. However,

Green tea consumption shows large growth in the UK at the cost of black tea, and this is one area in

which Indian exports can suffer as our green tea exports to the UK are minimal.

Over the long term, India’s exports to tea to the UK have also declined. In 1951, India exported 125

million kg of tea to the UK, accounting for 60% of UK’s imports. However, India’s tea exports to the

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

higher quality tea in the UK.

Consumption of conventional black tea is slowly decreasing in the UK. Producers in developing

countries who want to sell black tea to the UK market will have to show some different alternatives

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 tea is mostly not used for over‐the‐counter or retail purchases. The emphasis

clearly is on re‐exporting the same to other EU nations.

ii. Germany

In 2008 Germany was the third largest tea consumer in the EU, with a market share of 9.5%

in 2008 (ITC Reports)

Total German tea consumption increased by 2.3% between 2004 and 2008, amounting to 24

thousand tonnes in the latter year (ITC, 2009)

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

2009)

Tariff Lines

The level of protection in Germany which has 4 tariff lines for Indian tea amounts to 0‐5 % of value

of imports.

Potentiality Analysis

Green tea accounts for 23% of the market, but in 2008 black tea still remained the most popular type,

accounting for 77% of tea consumption in Germany. Even though preference for black tea far

outweighs the preference for green tea in Germany, the growth rate in consumption of the latter has

been quite large. This is again unfavorable for Indian exports as we are supplying more of black tea

rather than green tea. Thus there is need to diversify in the EU markets. Also, as packages exceeding

3 kg are more preferred this is a clear indication that black tea is mostly not used for

over‐the‐counter or retail purchases. The emphasis clearly is on re‐exporting the same to other EU

nations.

iii. The Netherlands

The Netherlands is a substantial tea consumer, accounting for an EU market share of 3.3% in

2008 (International Tea Committee, 2009)

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

consumption level in Ireland and is considerable larger than in Italy

The annual average increase was 2.2% between 2004 and 2008, amounting to 8.4 thousand

tonnes in the latter year

Per capita consumption of tea shows a slight increase between 2004 and 2008, amounting to

0.51 kg in 2008 which is the same level as the respective EU average

Tariff Lines

The Netherlands also have 4 different tariff lines for tea originating in India, one each for the 4

different HS codes elaborated on below. The level of protection ranges between 0‐5 % of total value.


The Netherlands also show similar trends in tea consumption as the UK and Germany, with pure

black tea covering the largest market share in the Dutch tea market (59%) in 2008. However, the

preference for black tea has shown a steady decline in favour of green tea and other herbal teas. In

2008, green tea accounted for 7% as opposed to 2007 when its share was 5%.

Thus Indian tea exporters face similar issues in this market as well.

iv. Poland

In 2008, Poland was the biggest tea consumer in the EU with a market share of 12%

Between 2004 and 2008, tea consumption decreased by 0.9%, totaling 31 thousand tonnes in

the latter year

Polish per capita consumption of tea was about 800 grams in 2008, which is higher than the

EU average of 500 grams (ITC, 2009)

Tariff Lines

Poland also has 4 different tariff lines for tea originating in India, one each for the 4 different HS

codes elaborated on below. The level of protection ranges between 0‐5 % of total value.


The tea consumption in Poland actually shows a decreasing trend. Also, the growth in the organic

sector is particularly of interest to German players, since the sector is already a developed market for

organic products. German traders find good opportunities in the Polish market, as the Polish

distribution channels are still underdeveloped. Hence it is difficult for Indian tea exporters to make

significant headway in this market without adequate time and investment.

v. Ireland

Ireland is the 5th largest tea consumer in the EU, with an EU market share of 4.0% in 2008

(ITC, 2009)

Over the period 2004‐2008, Irish consumption of tea showed an annual average decrease of

1.3%, amounting to 9.9 thousand tonnes in the latter year.

Per capita consumption of tea in Ireland is high, amounting to 2.3 kg in 2008 (ITC, 2009)

Tariff Lines

Ireland has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Product

code

Product label Indiaʹs exports to Ireland Irelandʹs imports from world

Value

in 2007

Value

in

2008

Value in

2009

Value in

2007

Value in

2008

Value

in

2009

Value in

2007

ʹ090240

Black tea

(fermented) & partly

fermented tea in

packages exceeds 3

kg

153

138

868

11177

10709

9742

ʹ090230

Black tea

(fermented)&partly

fermented tea in

packages not

exceeds 3 kg

101

306

185

35136

37679

36589

ʹ090220

Green tea (not

fermented) in

packages exceeding

3 kg

26

67

70

1936

3260

3096

ʹ090210

Green tea (not

fermented) in

packages not

exceeding 3 kg

154

207

0

8218

8613

10212

The Irish tea consumption is also heavily skewed towards black tea rather than green tea, which is

favourable for Indian exports. However, the Irish tea market shows marked preference for

higher‐end variety of tea rather than the lower‐end varieties. The United Kingdom with its better

packaging techniques and nearness to Ireland thus has a competitive edge in this market.

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

2004‐2008, amounting to 6.9 thousand tonnes in 2008

The per capita tea consumption in Italy is very low compared to other EU countries, at only

0.1 kg in 2008 (ITC, 2009)

Tariff Lines

Italy has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Even though tea consumption in Italy is much lower than some of its other counterparts in the EU,

the trends for consumption of black tea are positive. However, at the same time it must be

mentioned that Italy procures its requirements of green tea mostly from other EU nations, mainly

Germany and UK. It is the green tea segment which has also shown greater growth in

consumption, even more than that in the black tea segment.

vii. France

France is the fourth biggest tea consumer in the EU with a market share of 6.0% (ITC, 2009)

Total French tea consumption increased between 2004 and 2008 at an annual average of

3.7%, amounting to 15 thousand tonnes in 2008

Per‐capita tea consumption in France was 0.24 kg in 2008, almost half of the respective EU

average

Tariff Lines

France has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



France is not a traditionally tea‐drinking nation and hence per capita consumption is much less here

than in UK, Germany or Poland. The import of black tea actually shows a heavy decrease between

2008 and 2009. Also, green tea is gaining much favour in this market as shown by the above table.

This gives Indian tea exporters little opportunity in the French markets.

viii. Sweden

Sweden is a medium‐to‐small tea consumer, with an EU market share of 1.5% in 2008 (ITC,

2009)

Nevertheless, the Swedish tea consumption showed one of the strongest developments with

an average annual increase of 7.1% between 2004 and 2008, totaling 3.8 thousand tonnes in

the latter year

The per capita consumption amounted to 0.4 kg in 2008

Tariff Lines

Sweden has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Sweden should be given more attention by Indian tea exporters not only because its strong growth

in consumption of tea, but also because it is a nation which shows a marked preference for black tea

over green tea, as evidenced by the table above. The only issue could be the dominance of other EU

nations in this market, which re‐export a lot of tea to Swedish markets after packaging it according

to local specifications. However, the future for black tea in Sweden looks bright.

ix. Belgium

Belgium (including Luxemburg) has a medium‐size share (0.9%) of the total EU tea

consumption market (ITC, 2009)

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

amounting to 2.4 thousand tonnes in the latter year

Per capita tea consumption in Belgium is quite small (0.2 kg)

Tariff Lines

Belgium has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



There is a trend in Belgium that young people are consuming less coffee in favour of more

fashionable (tea based‐) drinks, which are seen as more healthy. However, increasing consumption

of herbal tea could occur at the expense of black tea consumption in particular. As in many other EU

member states, green tea is becoming increasingly popular in Belgium, to the detriment of black tea

varieties. However, while the total black tea market is showing a decrease, premium black teas are

popular in Belgium.

India is a very small exporter to Belgium as far as tea is concerned, and its export of green tea to

Belgium is negligible.

x. Czech Republic

The Czech Republic is a medium‐sized tea consumer, with an EU market share of 1.2% in

2008

Total tea consumption in the Czech Republic increased annually by 6.5% between 2004 and

2008, amounting to 3.1 thousand tonnes in the latter year

Per capita tea consumption in the Czech Republic is gradually increasing and amounted to

0.3 kg in 2008 (ITC, 2009)

Tariff Lines

The Czech Republic has 4 different tariff lines for tea originating in India, one each for the 4 different

HS codes elaborated on below. The level of protection ranges between 0‐5 % of total value.


The Czech Republic is another interesting market for Indian tea exporters because of its marked

preference for black tea over green tea. An increase in tea consumption is expected to boost sales in

the coming years. Producers in developing countries will have interesting opportunities in this

market, if they penetrate the Czech market effectively.

Although the Czech (organic) tea market is(in general) growing, a challenge is that Czechs still base

most purchases on price, as Czech consumers and firms are very price‐sensitive. Therefore the

quality of tea sold on the Czech market is often quite limited.

xi. Finland

Finland is a small‐to‐medium tea consumer, with an EU market share of 0.5% in 2008

Total Finnish tea consumption showed a strong annual average increase between 2004 and

2008 (5.3% annually), amounting to 1.2 thousand tonnes in 2008 (ITC, 2008)

Per capita tea consumption in Finland is rather low compared to West European countries,

but showed a stable increase over the period 2004‐2008, amounting to 0.23 kg in the latter

year.

Tariff Lines

Finland has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Finland has a marked preference for coffee and is hence a very small EU market for tea.

xii. Greece

The average annual increase was 8.4% between 2004 and 2008, amounting to a total tea

consumption of 1.3 thousand tonnes in 20087

Per capita consumption in 2008 remained quite limited, compared to other EU countries, at

100 grams (ITC, 2008)

Tariff Lines

Greece has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



According to Euromonitor reports, Greece has a very good potential for black tea consumption.

Also, better prices can be enjoyed by doing the same. India is a very small exporter of tea to Greek

markets and faces much competition from major EU nations other than Sri Lanka and China. The

increasing demand for green tea is a probable cause of the same.

xiii. Spain

Spain is a small tea consumer, with a market share of 0.5% in 2008 (ITC, 2009).

Between 2004 and 2008, total Spanish tea consumption achieved an annual average increase

of 3.2%, totaling 1.4 thousand tonnes in the latter year

Tariff Lines

Spain has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Spain is a small consumer of tea and the growth rate for green tea consumption in this market

exceeds that for the black tea consumption. India also seems to export very less tea to Spain which is

used for retail purposes.

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)

Total Danish tea consumption shows an average annual decrease of 1.4% between 2004 and

2008, with consumption amounting to 1.4 thousand tonnes in 2008

Per capita consumption was amounted to approximately 0.25 kg in 2008

Tariff Lines

Denmark has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Green tea consumption is showing considerable increases each year and this development is

expected to continue. This is also partly due to increased availability of green teas with added

flavours in the Danish market. India has a very small share of the same and also of the retail black

tea requirements.

xv. Baltic States (Estonia, Latvia, Lithuania)

Tea consumption in the Baltic States (Estonia, Latvia and Lithuania) is medium‐sized, with a

total EU market share of 1.5% in 2008 (ITC, 2009)

The joint tea consumption in the Baltic States shows a rather stable increase, with an annual

average increase of 2.9% between 2004 and 2008, amounting to 3.7 thousand tonnes in the

latter year

Per capita consumption in the Baltic States stands at around 500 grams, with Lithuania

somewhat lower (ITC, 2009)

Tariff Lines

The Baltic States have 4 different tariff lines for tea originating in India, one each for the 4 different

HS codes elaborated on below. The level of protection ranges between 0‐5 % of total value.


The Baltic States are absolutely under‐explored as far as Indian tea exports are concerned. This is

mainly because they procure a major part of their requirements from the nearby country of Poland.

One of the reasons for the same could be that the transportation and other logistical costs of reaching

their significantly lower requirements of tea may not be economically viable for Indian exporters.

xvi. Slovenia

According to FAO data, Slovenian tea consumption decreased from 0.2 thousand tonnes in

2001 down to 0.15 thousand tonnes in 2005

This would amount to around 70 grams of tea per capita, which is much lower than the EU

average

Tariff Lines

Slovenia has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Slovenia is a very underdeveloped market for tea, especially since tea is still considered to be a

seasonal drink in this nation. This makes the Slovenian market for tea limited in size. However, it is

in general showing a favorable development. Moreover, with domestic players accounting for most

of the Slovenian market, the industrial demand for tea should still be quite considerable, and should

increase parallel to consumption. Slovenia has not been a major export destination for Indian tea

because of its lower requirements which do not justify the logistical costs involved.

xvii. Hungary

Hungary is a medium‐sized tea consumer, responsible for 1.1% of total EU tea consumption

in 2008

Total Hungarian tea consumption showed a substantial increase, with an annual average

increase of 10% between 2004 and 2008, amounting to 2.9 thousand tonnes in 2008

Per capita consumption stands below the EU average at 280 grams (ITC, 2009)

Tariff Lines

Hungary has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Hungary is one nation that shows a steady increase in consumption of tea, though its import of the

same decreased marginally in the recession years. The market for organic and green tea is still

comparatively underdeveloped which augurs favourably for Indian exporters of black tea.

xviii. Portugal

Portugal is one of the smallest tea consumers in the EU, with a market share of 0.3% in 2008

However, between 2004 and 2008, Portugal showed an average annual growth in

consumption of 8.3%, amounting to 821 tonnes in the latter year (ITC, 2009)

Tariff Lines

Portugal has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Portugal is another market that shows a clear preference for tea for retail purchase and consumption

as evidenced by its greater import of tea in packages less than 3 kg. Portugal’s tea market is among

the fastest growing in the EU, which could offer opportunities for developing country tea producers.

However, it remains very small, and is mostly supplied by other EU countries.

xix. Austria

Austria is a small‐sized consumer of tea, taking the 13th position in the EU, with a market

share of 0.9% (ITC, 2009)

Between 2004 and 2008, total Austrian tea consumption marked a significant annual increase

of 8.3%, amounting to 2.2 thousand tonnes in the latter year

In 2008, Austrian per capita tea consumption was 0.3 kg

Tariff Lines

Austria has 4 different tariff lines for tea originating in India, one each for the 4 different HS codes



Though traditionally consumed, tea is still considered a winter drink by most Austrians. Although

tea drinking is slowly evolving due to the health and wellness trend, consumers are not expected to

develop the habit of drinking black tea more regularly throughout the year in the coming few years.

Green tea consumption in Austria is increasing. Furthermore, the developments in the segments of

herbal and fruit flavored teas are interesting. Austrian consumption of black tea remains more

limited. This offers limited opportunities to Indian tea exporters.

V. Conclusions and Recommendations

Based on the above analysis, we can identify certain EU member‐nations which are currently

important for tea exports and also ones that can be a major destination of Indian tea in the coming

years.

From a short term perspective, we need to consolidate our position in the traditional markets of

United Kingdom, Germany and Ireland. Not only are these some of the largest markets in the EU for

tea, but also the consumers in these nations are not as price‐sensitive as in the rest of the EU. One

issue that could cause some concern for Indian exporters in the markets of Germany and UK is that

the consumers are slowly moving away from black tea towards green tea. However, we can choose

to concentrate in extremely profitable niche segments with our offerings of Darjeeling tea, Assam tea

and the like, which are world‐renowned 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

profitable market.

Thus in this context we need to consolidate our distribution channels in these markets and look at

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

market their own tea after procuring it from other nations. The processing companies buy the raw

material from developing country producers and therefore do not compete directly with developing

countries on the market. The Indian tea exporters can thus look at vertical integration to capture the

opportunities in these markets.

As far as our long term strategy is concerned, clearly there is much benefit associated with

diversifying in non‐traditional 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.

Because of the nascent stage of tea penetration, these markets are still hooked onto black tea and this

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

cannot yet compete effectively with China as far as production and export of green tea is concerned.

However, the major competition in these markets will not be from other developing nations like

Kenya, Sri Lanka or China, but the major threat will be from the re‐exporters of tea within the EU

like UK, Germany and Poland. However, it is essential for us to move up the value chain by

packaging and marketing the tea according to local specifications as these will grant our exporters

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, from a long term perspective it is absolutely foolhardy for Indian exporters to ignore these

markets.

VI. References

1. CBI Reports on tea

2. ICRA Report (September 2009) on Indian tea industry

3. ICICI Report on the Indian Tea Sector, 2007

4. Trademaps.org for data regarding exports and imports

5. WIPO Report on Indian SME’s in tea sector

6. Performance of India’s Tea Exports: A Comparative Study of Major Tea Exporting Countries of

The World by B.H. Nagoor, Published by IGIDR

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