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Bangladesh Production during 1970 was 31.6 millions kgs but just after liberation it slumped to 12 m. kgs. However, the recovery was quick and by 1974, production had again reached the pre-liberation level of over 31 m.kgs.

During the pre-liberation period the total tea production was entirely consumed within the country i.e. West and East Pakistan. Soon after liberation, the scenario changed dramatically and the country was left with a surplus which required alternative outlets. Strenuous efforts were made jointly by the Government, producers and traders to find markets abroad for Bangladesh tea. Some of the major tea producing companies began consigning tea to the London auction, barter agreements were signed with countries like the USSR, Poland, other East European countries and Egypt against import of capital machinery, chemicals and food. In 1980, a Special Trade Agreement (STA) was signed with Pakistan, as a result of which export during 1980 increased to 31 m. kgs i.e. roughly 76% of the total production. The USSR, Poland, Egypt and Pakistan emerged as major markets for Bangladesh’s teas.

These ‘captive’ markets ensured protection to the industry and whatever, irrespective of quality, found its way to these markets. The price received for Bangladesh tea was higher than its actual value in the open international market. Hence we lost our position as a supplier to those markets e.g. the U.K. who found alternative sources of similar quality tea to meet their demand. There was hardly any effort to improve quality as we were able to sell the quality that we were producing quite easily. Neither was there much effort made to run the industry efficiently by investing in inputs to increase yields and reduce costs.

Therefore, when barter and STA’s were withdrawn our tea came into stiff competition with tea from other origins to gain access to these markets. It was during this period that the Bangladesh Tea Rehabilitation Project (BTRP) financed by the ODA was taken up. The project was to help the industry improve quality and productivity in the existing plantations.

The producers had to think of fresh ways and means to produce the quality required to suit the need of the export markets. At the same time exporters had to find new strategies to market their tea against stiff competition from other origins. Most ‘free’ markets had been lost in this period partly due to the wild fluctuation in prices of our teas. This was caused by the barter buyers buying only during a short part of the Tea Season which tended to push up prices for that period. The market would get depressed again as soon as their buying was complete. At those times of year their prices were out of line with prices in the International market. No free market blender could depend on getting a consistent supply of Bangladesh teas at reasonable prices. Hence they looked for, and found, alternate sources as consistency is the most important component of any brand.

The tea season of 1991-92 was termed as a year of losses. A major broker in their tea review 1992-93 remarked “Depressed tea prices caused serious difficulties for the tea industry during the last season and as it came hard on the heels of poor results of 1991-92 season producers found the situation to be very grave as they faced yet another year of losses”. Egypt, USSR, Iraq, Iran and China were all gone. Poland emerged as the largest buyer, thanks to the marketing effort of the private sector exporters.

Between, 1995-2000 private sector exporters virtually by their own initiative and effort created new markets for Bangladesh tea in Jordan, Middle East, CIS, Japan, Afghanistan etc. By the year 2000, exports to Poland reduced substantially as cheaper teas of other origins made inroads into this market.

However the total volume of export started declining, as there was a continued growth in Bangladesh’s internal consumption with little noticeable increase in production. As a result of the greater demand and shrinking exportable surplus their teas once again became expensive compared to similar quality teas available from other producing countries, including producers like China and Malawi and new ones like Vietnam.

In 1985, the domestic consumption of tea was 13 million out of a total crop of 43.3 m. kgs. In 2001 consumption reached a record high of approximately 40 m. kgs. out of a total crop of 55 m.kgs.

Domestic consumption increased due to some of the following reasons: Urbanization and improved standard of living in the country. Better distribution as a result of the improved road communication network. Better marketing and promotional techniques. Ensuring of high level of consistency and quality of the product.

Re entry of multinational companies in the branded tea market, and Removal of price control which presented better quality teas reaching the branded market.

In the early days, tea was seen as one of the major foreign exchange earners and thus internal consumption was discouraged. There was an ad valorem excise duty on branded packet teas and the price was controlled by the Tea Board. Although the domestic market always wanted the best quality teas produced it was not possible for the packers to include these in their blends because of the controls. The higher price good quality teas were available in ‘loose’ form from tea shops. There were times when the retailer would buy branded packet tea at artificially controlled prices and would open the packet and sell the ‘loose’ tea at much higher prices.

With the onset of the free market economy the packers were allowed to sell their teas in competition with the loose tea traders. This gave the consumer a greater choice and the inherent advantages of branded teas soon started to sell in the market place. This is the period when the largest tea multinational company re-entered the branded Tea Market in Bangladesh. It was this entry, and the competition which resulted from it, that gave the initial boost to increase in domestic consumption.

The challenge posed by the multinational was well taken by the organized local private blenders and packers and huge capital was invested by them to improve the overall infrastructure from production to marketing. As a result, the sluggish growth of the market has gradually converted to rapid and sustainable growth. With the improvement of the rural economic environment, steady population growth as well as the emergence of an economically stable middle class the domestic consumption may reach approximately 55 m.kgs by 2010. Today almost all the tea consumed domestically is in branded form. There are several nationwide brands and hundreds of localized brands competing for this growing market.

Producers have also reacted to the changed scenario and have concentrated more than ever on improving quality as much as it is possible with a view to cater to the domestic market.

It is significant to note that in 2001, Pakistan’s production was 55 m. kgs. During this year the global supply growth exceeded demand growth and major auction centers in the world registered a downward trend in price. However, in Bangladesh the situation was quite different as tea export in 2001 plummeted to 12.9 m. kgs (yearwise) down by almost 30% on the previous year but domestic consumption touched 42.2 m.kgs (against 31 m.kgs), as a result of which the industry survived.

In this context what effect the recent duty free access of Pakistan to Bangladesh tea will have on our tea industry remains to be seen. It is already apparent that though prices have gone up the total volume of our exports has not risen. This duty free access will ensure that our prices are once again out of line with International prices. Those export markets that had been developed in recent year are already looking for alternative sources. With continued pressure from domestic demand it is unlikely that Pakistan will be able to purchase their target of 10 thousand tons per annum from Bangladesh. If we cannot ensure sufficient quantity of tea in the country in keeping with the increase of consumption in the domestic sector, it can lead to import of tea from other origins. This is something the producers have to be very careful about.

Tea & Coffee - May/June, 2003

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