05 May 2017
17 min read
The ritual of tea-drinking goes back centuries. It is believed that the first brew was created by nothing more than a chance encounter when, in 2737 BC, the Chinese emperor Shen Nung, while sitting beneath a tea tree, sipped on a cup of water seeped with the flavours of the tree's fallen leaves. Since then, tea has evolved through the years-from being a medicinal drink to being a commodity to now being the world's most consumed drink after water. Every year, over three million tonnes of tea is produced worldwide, and every day two billion people start their day with a cup of tea. A market research report published by Transparency Market Research in 2016 states that the global tea market is expected to reach USD 47.20 billion by 2020. For the many new tea manufacturers in Nepal, the future should be exceedingly bright.
Seventy-five per cent of what goes into making a great cup of tea-its flavour, aroma and body-is determined by the nature of the tea garden where the tea bush was grown. The factory does only 25 per cent of the work. Three ecological factors are vital for successful tea cultivation: a garden's climate, altitude and soil. The temperature of the soil is as important as the air temperature, as both of these influence the growth of the bush and its yield. Other factors crucial for a successful harvest are altitude and a garden's having a steep gradient. All of these variables are found in just the right mix in regions across Nepal, making Nepal geographically perfect for producing some of the best quality teas in the world. Yet, for an industry that started taking shape more than a century ago, in 1863, (when clones of tea bushes from Darjeeling, famed for producing the best teas, were planted in Nepal's first tea estate in Ilam), Nepal's industry is still in its budding stage. It has largely seen slow progress-save for the last 20 years or so after the privatisation of the tea sector-a period that witnessed a sudden upsurge in production and export. But today's tea companies in Nepal are increasingly aware of the potential and possibilities of how far Nepali tea can go, although quite a bit of the ground reality needs to change before they find sustainable success.
Types of tea
Tea leaves come from the bush Camellia sinensis, which has two principal varieties: Camellia sinensis and Camellia assamica. Camellia sinensis is a high-altitude bush that produces a more perfumed tea with a relatively lighter body, whereas the Camellia assamica is a low-altitude plant that produces tea with a strong body with relatively less aroma. Camellia sinensis is used for producing Orthodox and Speciality teas, which are whole-leaf teas, manufactured using the traditional process. Orthodox tea leaves have a strand-like or broken-leaf type of an appearance, and Specialty teas-comprising green tea, oolong tea and white tea-come in multifarious forms. Camellia assamica is used for producing CTC tea, through the Crush, Tear, and Curl (CTC) process of manufacture. This type of tea, which has a granular texture, is the variety most commonly found on the shelves of the kirana stores and supermarkets in Nepal.
Manufacturers and markets
Tea production entails an intricate process. The tea leaves are harvested daily from March to November, with workers plucking the bud and the bud's first two leaves, during four seasons: the first flush, or tea from the first season, is plucked from late March to mid-May and is known for its aromatic and refined taste; the second flush, plucked between mid-May to June, comprises leaves with a well-rounded and more mellow flavour; tea produced during the monsoon season (July to September) has a full-bodied, strong taste; whereas the autumn flush, which is picked between October to November, is recognised by its sweet, smooth flavour. Nepali tea gardens, owing to their geographical and topographical characters, can produce all four flushes of very good quality.
A lot goes into brewing a perfect batch of tea. It takes five kgs of green leaves to make a kilo of tea, and the process comprises the withering, rolling, oxidation, fining, grading and packaging of leaves. The process of oxidation is what determines the final colour of the tea: green, black, white, oolong.
An average Nepali's day starts with a steaming cup of milk tea, with a majority of people drinking CTC tea. According to statistics from the Nepal Tea and Coffee Board (2015/16), out of the total production of tea (24 million kg) in Nepal, 7.5 million kg of CTC tea and 0.3 million kg of Orthodox tea was consumed by Nepalis in 2015/16.
All the CTC tea that is produced in Nepal comes from Jhapa, predominantly from the Tokla Tea Estate.
Tokla, the largest producer of CTC tea in Nepal, produces around two million kg of CTC tea annually. It is a brand under the wing of the Nepal Tea Development Corporation (NTDC), which was established in 1966, with an aim to produce high-quality tea from seven tea estates (Burne, Chilingkot, Soktim, Kanyam, Tokla, Ilam and Baradasi) and was privatised in 2000. "Our focus has always been on capitalising on the local demand-of providing people what they want, that is, quality CTC tea," says Subhash C Sanghai, chairman of NTDC. "Tea is a long-term business investment, and the sooner entrepreneurs realise this the better. The potential is boundless."
While the majority of the CTC tea produced in Nepal is consumed locally, most of the Orthodox tea is exported. Annually, 80 per cent of Nepali Orthodox/Speciality teas are exported to India and 15 per cent to the international market (mainly France, Germany, the US, the UK, the Czech Republic, Australia) and only five percent of Orthodox tea is consumed locally. The prominent exporters in the Orthodox/Speciality tea segment are Guranse, Himalayan Shangri-La, Kuwapani, Jun Chiyabari, Mist Valley, Kanyam and Maloom. However, in the Speciality tea segment-which is relatively new but which has made rapid progress in the last couple of years-the factories that have made a mark in the international market are Pathivara, Arya Tara and Sandakphu.
The BLT model
Kamal Mainali, managing director of Himalayan Shangri-La Tea Producers Pvt Ltd, got drawn into the tea business back in 1982. After graduating from college, he, along with his brother, decided to invest in the tea business and started a small tea retail store-Nepal Tea House, in Basantapur. "When we started out, there was very minimal production of Nepali Orthodox tea. There were only about two or three factories doing so. Most of the tea was being processed in India and then brought back into Nepal. Around 60 per cent of tea used for local consumption was also imported from India. We realised the dire need to have our own factory, and in 1999, we started Himalayan Shangri-La, to start manufacturing our own Orthodox tea," says Mainali.
They had the marketing strategy and the skills to produce and market Nepali tea but did not own their own estate. They thus opted for the Bought Leaf Tea (BLT) factory model to generate leaves, a model that is used by 90 per cent of the tea producers in Nepal. In this model, small-scale farmers, with an average tea garden size of just 0.6 acres, either sell their harvest to tea factories or process it in their own mini-processing units. In 2015/16, 14 million kg of tea were produced by small-scale farmers and nine million by estates in Nepal.
"We talked to farmers and registered them into cooperatives to get them organic-certified," says Mainali. Through these cooperatives, Himalayan Shangri-La provides farmers with training, equipment, fertilisers and incentives. Today, Mainali's factory is one of the largest producers and exporters of organic Orthodox tea in Nepal, exporting 90 per cent of their production and employing over 900 farmers through different cooperatives. Currently, there are 24 large factories which produce almost 100 to 200 tonnes of tea and 80 small factories that produce 5-10 tonnes of tea. The process for starting tea plantations in 21 districts-Pokhara, Lamjung, Kavre, Sindhupalchok, Dolakha, Ramechhap, Okhaldhunga, Lalitpur-is also underway.
Spreading tea's reach
Nepali tea companies started branching out into the international market nearly two decades ago with the privatisation of the tea sector. And now with the formation of cooperatives like Himalayan Tea Producer's Cooperative, a joint marketing consortium for Orthodox teas, Nepali tea growers are working on creating better visibility in the international market. But for Nepali tea to create a niche for itself, it first needs to work on its brand image.
"We have always tried to break new ground for the Nepali tea industry. My father tried his hand at exporting tea for the first time, a first for Nepal, back in 1973," says Neeraj Rathi, managing director of the Rakura Group. A brand that has slowly replaced many international brands in Nepal, in terms of Speciality teas, Rakura, firmly believes that Nepal needs to carve its own identity internationally. "Despite being one of the best producers of tea, we are unable to reach out to the international market as much as we would like to because Nepali tea doesn't have a brand identity," says Rathi. "Paying attention to branding your tea is as important as paying attention to its quality. You have to start packaging your tea at the source and then sell it in the market following international protocol. China sells teas from Rs 60 a kg to Rs 4 crores a kg. We sell our best teas at just USD 20 to 30 a kg, but with a little value addition, we can easily sell it for at least USD 100. Sri Lanka is neither the largest producer in the world nor is it the highest exporter in the world. Yet its brand significance is immense, and it's all due to value addition. The Indian Tea Board and the Sri Lankan Tea Board annually spend Rs 40 million and Rs 2.7 million on their tea sectors respectively. That kind of focus is what we need from the government for us to flourish."
Darjeeling tea, which is one of Nepal's main competitors, is known around the world for making the best teas from estates like Chamong, Castleton and Margaret's Hope. "Darjeeling tea has created a niche for itself by producing high-quality tea. We have to focus on the same particulars: to provide the best of teas from the Himalayas, with absolutely no compromise on quality," says Rathi.
The other major issues that are restricting Nepali tea's impact in the international market is lack of consistency in the quality of tea and in production capacity. "As almost 90 per cent of the tea in Nepal is cultivated by small-scale farmers and processed through cooperatives, issues over quality control do arise," says Sanghai of NTDC. But as the cost of production of running a tea estate is comparatively higher for producers, they choose to use the BLT method for its affordability, flexibility and lack of other growing options-unless the government facilitates tea producers with land leases and reduced tax rates. To tackle the problem of inconsistency in the quality of tea, which has caused rifts before between farmers and cooperatives/companies, the producers have resolved to holding auctions that will ensure transparency for all stakeholders. "There is also an acute shortage of labour. There aren't enough people on the estates during harvests, which results in a limited production capacity. The tea sector's inability to retain its labour force also adversely affects the quality of green leaves because good pluckers need years of experience," says Sanghai.
Overcoming the drawbacks
"We are fragmented in our mindsets and flawed in our process of manufacturing and marketing," says Bhusan Subba, managing director of Sandhakphu, a factory in Ilam that produces Speciality teas. "To overcome our drawbacks, the entire tea sector has to come together-in terms of regulating our quality, prices, policies-and stand united in the international market as 'Nepal Tea'."
Rathi, whose company produces 1.5 million kg annually, believes the best way forward for Nepali tea producers is to create a high-value brand identity which can compete with the most niche brands in the world. "If we look at bulk sales in general, the whole tea industry has to unite in producing high-quality tea across the value chain. We have to unite in every market we go to and be on the same page in terms of pricing and branding. What would exponentially increase our brand significance is to move into producing high-value tea, focusing not only on quantity but on creating niche value."
"To change things, financial involvement of the government in the tea sector is absolutely essential, as is continuous support from the government. The private sector has and is doing its best, but we can only do so much. We don't have enough produce to market ourselves internationally, even if we have good quality," says Mainali.
The growing local market
To improve the export potential of Nepali tea, there are many factors that need to be addressed. "It's true that Nepali teas made a late entry. But there is no denying that Nepali teas are some of the best in the world. We are slowly building up our tea profile. Nepal is at the point of getting recognition as a tea-origin country that makes high-quality teas that can compare with the best in the world," says Mainali.
And Nepali consumers too have started becoming more discerning when it comes to the quality of tea they consume. In comparison to the tea-drinking culture that was prevalent in Nepal some 10-15 years ago, a gradual change has been witnessed. Nepalis are nowadays more conscious about quality, taste and the health benefits of tea.
The organic appeal
"In the next five to ten years, I think most Nepali tea will be organic, and that will also help us establish a great brand image for ourselves. If things fall into place, brands will have a larger multinational presence. All in all, the potential for Nepali tea can be met," says Rathi.
That said, the sector can be a tough one to thrive in. Tea production is a long-term investment. A plantation will yield results for a 100 years, but it takes at least 4-5 years for a bush to mature. It is a business that requires patience-even though it can reap great benefits.
"From importing a major share of our tea from India to now exporting most of our tea to India, I think we have come a long way. But there is much more to be done," says Sanghai. For Nepali teas, he and other stakeholders say, the journey to success has only just begun.