Tuesday, October 13, 2009

Tea Sector.

What is the production and consumption of tea globally? What would be India’s share? What is your outlook for the tea industry?
The total annual production of black tea globally is estimated at 2.3bn kg. The main producing countries are India (980mn kg), Kenya (350mn kg), Sri Lanka (325mn kg), other African countries (140mn kg), Vietnam (140mn kg) and Bangladesh (60mn kg). Tea production has been stagnant in the last 3 years globally, since area under tea plantation has not increased significantly. Tea plantation has a gestation period of 5 years thereby tea production is expected to remain stagnant / insignificant increase over next 4 to 5 years. Tea consumption growth is estimated at the rate of 2% per annum globally, whereas in India, consumption is growing 3 to 3.5% per annum. Currently, the total production is unable to meet consumption and consumption growth thereby creating shortage in the global markets
India produces 40% of the world's black tea.

What is the size of the Indian tea industry – in value and volume terms?
The total black tea production in India is estimated at 970 to 980mn kg per annum. The average price for the year 2008-2009 was Rs90 per kg, as explained earlier due to mismatch of demand and supply and strong consumption growth tea prices in India are expected to rise further and this cycle should last at least 3 to 4 years.

Comment on the seasonality of the tea industry?
Tea production in North India is seasonal in nature. There is no production from mid-December to mid-March due to winter. July–October period is the peak season of production with approximately 60% of tea being produced. The quarter ending September is the best quarter while the quarter ending March is a negative one.

What are your current realization levels? What are you expectations for FY10?
Our current averages are Rs140 per kg. We are expecting the annual averages to be between Rs130 to Rs135 per kg.

What were your inventory levels in FY09? What levels you expect for FY10? What is the logic behind holding inventory when there is a shortage in the market?
Black Tea Inventory as on March 31, 2009 was 3.2mn kg and estimated to be the same at the end of FY10. There is cycle and seasonality involved in the tea. The major consumption months are the winter months and the production months are non-winter ones, so normally there will always be an inventory. We produce 60% in four months, so it is only when one has to look at from the overall perspective that by the year end what will be the additional shortage. So inventory will always be there as far as tea industry is concerned.

Courtesy: http://archives.indiainfoline.com/news/showleader.asp?storyId=824&lmn=1

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