global tea market

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ContentsGLOBAL TEA MARKET2Production, Consumption and Exporting of Tea2Global Production of Tea2Global Consumption of tea3Global Tea Exports3The influence of Individual grower on the price of tea4The role of transnational corporation in tea market4DEMAND AND SUPPLY FACTORS IN TEA MARKET5Kenya demand and Supply in the general rise in price of tea6EFFECTS OF CHANGES IN TEA PRICES ON THE ECONOMY OF KENYA8Would rises in the price of tea in shops necessarily mean a rise in the price for tea growers?8PART B9AGENCIES SET UP TO CONTROL ABUSE OF MARKET POWER IN UK9Actual case on the abuse of market power in UK British Airways (BA)9FISCAL AND MONETARY POLICY MANAGEMENT IN SOUTH AFRICA10Three Key areas that areas that relates to the South Africas macro financial affairs.10Government debt as a % of GDP (domestic and foreign total gross debt)11South Africa Budget deficit as % of GDP (Fiscal years)12South African Government Revenue and Expenditure Trends12Government finances avoiding deeper recession13SWOT ANALYSES OF GLAXOSMITHKLINE PHARMACEUTICAL COMPANY.14Strength14Weakness of GSK15Opportunity of GSK15Threat of GSK16REFERENCE18

GLOBAL TEA MARKETProduction, Consumption and Exporting of TeaGlobal Production of TeaThe annual production of tea in the world is about 2.9million tons. The most production of tea and the largest area of tea planting are belonged to India and China respectively. India produces about 720,000 tons of tea a year.Production and Area of tea in the world (1999-2000)

*Production and Area of Tea in the world 1999-2000 cited in Aginsky. A, 2009. P1

In 2007, China became the worlds largest producer of tea followed by India. Kenya increased in production in 2006 rising up to the same level with Sri Lanka and 2007 Kenya made more productive gap ahead.

*Major tea producers of the World 2006-2007 cited in Aginsky A, 2009.p2

Global Consumption of teaToday the consumption of tea is just as important as the consumption of drinking water. On the average about 2 1/2million metric tons of tea are produced world wide. Some of this tea is retained by producing countries for internal consumption while the rest is traded either directly to value added resellers in other countries or bought through auction on the open market India and China are the largest consumers of tea.(Anon. 2009).From 2004 through 2007, global supply of tea has exceeded demand. When quantity supplied is more than quantity demanded price falls, up to the point at which some suppliers decide they would rather not sell the product at that low price. When price falls, demand increases. As the global supply of tea has consistently outstripped global demand, major tea producers have been pursuing differentiated marketing strategies and focusing on those marketing strategies and focusing on those markets with high rates of growth. (Alexander A. 2009)Global Tea ExportsIn 2007, Kenya was the largest exporter of tea followed Sri Lanka, China and India. Though India is the second largest producer of tea in the world, the domestic consumption of tea is very high resulting to lower tons for exportation. This had made Indian the fourth largest exports of tea.

*Export Statistics for Major tea Exports of the world cited in Aginsky A, 2009.

Presently there is a speculation about the global tea shortage increasing by 10% due to droughts in Kenya, Sri Lanka and India, the top exporters, damaging crops and propelling prices to a record (Thomas K.A., 2009)If supply of tea reduces, the cost will increase making no relief for tea consumers. India, the worlds largest tea consumers, wont boost exports to benefit from record global prices as local demand has increased 1% an average over the past few years. This would give consumers no choice but to look for a cheaper substitute like coffee.

The influence of Individual grower on the price of teaTea is a commodity that is consumed by all. Its target market is focused on all demography. As an inelastic good, tea consumers tend to still buy tea even as price increases because of it essential nutrients to the body. Nevertheless tea growers also influence the price. The demand for tea in the market is high so therefore the price increases along with supply. During the rainy season in most tea growing like Kenya and Indian, the growers picks lots of tea grown due to adequate rainfall and sells to transnational corporation whom would then package the tea for consumption and distribute with sales to the market. As a result of adequate rainfall much supply will be made by tea growers and when there is excess supply of tea, the price falls. In dry season, the speed in the supply of tea by growers reduces making higher demand and less supply of tea. The growers harvest the available tea and sells at a high price to the transnational corporation at high price because scarcity will result to increase in price. Then the transnational corporation will make profit by selling at a higher price. So it can be said that the influence of individual tea growers on the price of tea varies because it could influence to a rise and fall in price due to the demand and supply of tea market. The role of transnational corporation in tea marketTransnational Corporation has a role to market access for tea exports, sourcing of raw materials and horizontal or vertical integration. It analyses how internationalization is changing the nature and corporate production of tea and the implications and roles played by tea industries. They are to revolutionize the tea industry by committing to purchase all its tea from sustainable, ethical sources. They have the potential to reassure consumers about the source of the tea they enjoy drinking, to improve the crops, incomes and livelihood of 2 million people around the world and to create differentiated brand from competitors.

DEMAND AND SUPPLY FACTORS IN TEA MARKETThe demand for tea is expected to increase worldwide, with the European Community, the United States, and Japan being major importers

Why are tea prices increasing?Demand has remained strong, despite economic down turn. Even if incomes fall, consumers see it as an essential item. It can be said that the demand for tea is income inelastic. Tea may even be an inferior good as incomes fall people may buy more tea rather than more expensive drinks. Drought in major area of production such as India, Sri Lanka and Kenya has also donated to the increase in price. These draughts are leading to lower supply. The nature of growing tea is that producers cant easily supply in the short term.Demand in price inelastic. A rise in the price of tea doesnt deter consumers from buying it. There are few alternatives to like coffee and most parent consumers do not request coffee for their kids. Therefore the higher price of tea does not reduce demand.A Growing demand from China, which is developing a taste for drinking more tea having a real large population. (Pearson C., 2009)P S2S1P2

P1 D2D1

Q1 Q2 QThe Demand for tea increased since 2005, so had supply. The higher the price, the higher the quantity supplied. Most customers demand for tea even as its price increases. But when the supply of tea becomes excess in market, then price will fall. They have to keep up to market equilibrium were demand is equals to supplyWorld production of black and green tea (1000 metric tons) in 2000 projected for 2010. Black Tea Green Tea 2000 2010 2000 2010World 2145 2443 681 900India 815 1070Sri Lanka 305 329Kenya 236 304Bangladesh 54 62Malawi 42 42Uganda 29 29China 65 54 500 647 Indonesia 131 147 38 49World production of black and green tea 200-2010 cited in Aginsky .A, 2009.

*World demand and supply 2004-2007 cited in Aginsky A, 2009.Kenya demand and Supply in the general rise in price of teaKenya tea has long been considered a health enhancing beverage. It is a natural drink that contains no additives, preservatives or artificial coloring and its cholesterol free when taken without milk or sugar. Kenyan teas are famous for their brightness, attractive color, brisk flavor and textures of fragrant leaves. Despite all these, Kenya tea still experiences volatility in price.Drought and cold weather in growing areas cut production in Kenya. Although the Kenya auction system would seem to approximate a fair market in which prices are determined solely by the interplay of supply and demand, the system does not always work well for small scale producers. Auction prices vary considerably with both the quality and quantity of tea on offer and a demand for tea at a given time.There is evidence of collusion among brokers to influence prices. A number of investigations have revealed a high degree of collusion that prevails in buying and wide scope for collusion between brokers and buyers. Such collusion occurred would tend to reduce the price at which producers could sell tea at the auctions and would also affect prices of direct sales. In 2005, the situation was considered so bad that the Kenyan National Chamber of Commerce called for the elimination of tea auctions.Also, with demand growing and supplies fall, the cost of leaf tea at auction is being inc