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Analysis on Indian Tea Industry (With Special Focus on Export & Consumption) Management Research Project 1 Submitted In the partial fulfillment of the Degree of Master Business Administration Semester III Submitted By: Mehul Bhatt (03) Ankit Patel (18) Shwetang Trivedi (37) Jaydeepsinh Vaghela (39) Under the Guidelines of: Prof. (Dr) Mahendra Sharma Prof. & Head, V.M.Patel Institute of Management. & Dr. Rohit H. Trivedi Assistant Professor, V.M.Patel Institute of Management. Submitted To: V.M.Patel Institute of Management. Ganpat University, Kherva.

December 3, 2009

CERTIFICATE

This is to certify that the contents of this report entitled Analysis on Indian Tea Industry (With Special Focus on Export & Consumption) by Mehul Bhatt (03), Ankit Patel (18), Shwetang Trivedi (37) and Jaydeepsinh Vaghela (39) submitted to V.M.Patel Institute of Management for the Award of Master of Business Administration (MBA Sem-III) is original research work carried out by them under my supervision.

This report has not been submitted either partly or fully to any other University or Institute for award of any degree or diploma.

Prof. (Dr.) Mahendra Sharma, Professor & Head, V. M. Patel Institute of Management, Ganpat University, Kherva

Date: Place:ii

CANDIDATES STATEMENT

We hereby declare that the work incorporated in this report entitled Analysis on Indian Tea Industry (With special focus on Export & Consumption) in partial fulfillment of the requirements for the award of Master of Business Administration (Sem-III) is the outcome of original study undertaken by us and it has not been submitted earlier to any other University or Institution for the award of any Degree or Diploma.

___________________ Mehul Bhatt (03)

___________________ Ankit Patel (18)

___________________ Shwetang Trivedi (37)

___________________ Jaydeepsinh Vaghela (39)

Date: Place:

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Preface

This report owns its origin in the requirement of our subject Management Research Project I in the semester III of the Masters of Business Management course. In this report we have to make analysis of the particular Indian industry. For our report we have chosen Indian Tea Industry (With Special focus on Export & Consumption). This report will help us to know about the different aspects of the Indian tea industry. This report includes the introduction of Indian tea industry, the scenario of the Indian tea industry, the role of tea industry in national economy, the rivalry among tea industry etc. With the help of this report we will also be able to know about the different points of the tea industry like History of the industry, Market of the industry, Government policies and regulations etc. All this research work and study will be done on the bases of secondary data. So we are not going for field work and data collection. Thus this report will help us to know lots of things about the Indian tea industry and this will be a great experience of our life.

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AcknowledgementMany people have guided and influenced us in preparing this project. First of all, we are grateful to Prof. (Dr.) Mahendra Sharma, Professor and Head, and Dr. Rohit Trivedi, assistant professor for the MBA program at V. M. Patel Institute of Management for giving us an opportunity to experience the analytical way of working and in the process help us in learning. We are also thankful to all our faculty members who guided us throughout the project. Last but not the least, we would like to cite our beloved parents and all our friends for their and encouragement, support and blessings. These pages could scarcely have been written without their help.

Mehul Bhatt (03) Ankit Patel (18) Shwetang TrivedI (37) Jaydeepsinh Vaghela (39)

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Executive SummaryOur project title is Analysis on Indian Tea Industry (With Special Focus on Export & Consumption). The project includes collecting information about Indian tea industry. In this report we have also tried to know about the global scenario of the tea industry. The idea for this project arises in my mind during the discussion with our guide Prof. (Dr.) Mahendra Sharma, Professor and Head, and Dr. Rohit Trivedi, assistant professor for the MBA program at V. M. Patel Institute of Management. Our Project includes analysis of export and consumption of Indian Tea. It also considered Five Forces analysis, SWOT analysis, and PESTEL analysis to understand the Indian Tea Industry deeply. Also Industry financial analysis is done for identifying the financial strength. The forecasting is done by the trend analysis method it shows the future trend of the Tea Industry. India plays a significant role in world tea trade, being the world's largest producer, consumer and exporter. Hence fluctuations in India's tea production, consumption and exports are enough to disturb the international tea trade. The India is decreasing in export side at everywhere also in the percentage shares in total world export. It is now only around 11.90% which was 18.85% in the 1991. India is the largest tea producing and consuming country in the world and Productivity and quality of tea, Labor intensity, Long gestation, Commodity nature of tea, Inconvenient but healthy drink, Tea organized industry etc are characteristics for industry. In India out of the 757 M.Kgs of tea consumed, around 41% is sold in the form of branded products The total net foreign exchange Rs. 1,847 crore, highest foreign exchange earning agriculture product of India and the global demand growth at around 2 per cent per annum will be easily met by rising production from Kenya, Sri Lanka, Malawi, Indonesia and other countries. The impact of WTO on Indian domestic industry will be negligible because of the re-export clause. Tariff reduction is likely to cause higher imports by Pakistan, Iran, Iraq, and Egypt. WTO, Tea board of India and the effect of other factors like health, price variability, FAO tea mark, Labor problems and also the domestic market consumption is on India Tea Industry.

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Agricultural industry plays a key role in the economies of many developing countries. The prices of exports have in the last two decades experienced considerable declines that have negatively affected the incomes and well being of producers. The expansion of consumption of tea in all of its many forms, black, green, soluble, tea bags, specialty etc, will lend underlying strength to the market and eventually benefit producers. Quality assurance is of the utmost importance, and ever more so among the health conscious consumers of the future and provides a great employment opportunity mainly for the backward classes and tribal. To improve the Indian economic position, Government should take appropriate steps.

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Content

Chapter Preface Acknowledgement Executive Summary1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2 2.1 2.2 2.3 2.4 3

Particular

Page No.iv v vi 1 1 2 2 3 3 4 4 7 7 9 9 10 13 14 17 17 17 20 20 21 23 23 23 24 24 27 28 28 30 32 34 36 40 44

3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.1 0 Role of Tea Board of India in Indian Tea Industry 4 Research Methodology 5 Analysis Of Tea Industry (Export & Consumption) 5.1 Performance of Indias Tea Exports 5.2 Analysis of Indias Tea Export 5.3 Movement in Quantity and Value of Export 5.4 Competitiveness of Indian Tea Exports 5.5 Indias Tea Export in World Scenario 5.6 Tea Export from the view point of Growth Rate 5.7 Factors Affecting Global Tea Export

Introduction Global Scenario of Tea Indian scenario Industry scenario Industry growth Regional differences Consumption in Producing Countries of Tea Medium Term Export Strategy by Tea Board Story of Tea Background of Indian tea industry Indian Tea Industry Overview of Tea Industry Types of Tea The Competitors The Markets Factor Affecting To Tea Industry Health Benefits Price Variability Non Tariff Trade Barriers FAO Tea Mark Competition and Competitiveness Diminishing Market Leadership WTO and Tea Commodity prices and Outlook Domestic Market as a price taker

5.8 Prospects for Indian Tea Exports in World Market 6 6.1 6.2 6.3 6.4 7 7.1 7.2 7.3 7.4 7.5 7.6 8 8.1 8.2 Analysis of Indian Tea Industry 6.1 Michal Porters Five force Model Analysis 6.2 SWOT Analysis 6.3 PESTEL Analysis 6.4 Financial Analysis Trend Forecasting Trend Forecasting Production Export Consumption World Demand and Supply of Tea Future Outlook Findings & Conclusion Findings Conclusion Bibliography Annexure

45 47 47 51 57 69 80 80 80 81 82 83 84 88 88 89 91

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CHAPTER 1 - INTRODUCTIONThe decade of Nineties has been quite depressing for the tea industry in India. First, it was the disintegration of the erstwhile USSR which was solidly a loyal market for the Indian teas. The USSR lifted huge volumes. In the mid 90s, when the market revived, the Russians were looking for cheaper teas. There was a scramble in the tea industry, particularly in the South, to meet the Russian demand at their prices. The South Indian teas deeply destroyed their image while matching the prices offered by the Russians and in the process totally disregarding the quality, In the North, and later in South too; the industry was continuously facing labour problems. Some gardens had even closed and were bought by traders who had money on their hand since their plywood business had been closed down under orders from the Supreme Court of India. The traders had expected large profits from the tea gardens and did enjoy that for some time. Later when the fortunes of the tea industry declined in consequence of the Kenyan bouncing back in the global markets, the traders simply abandoned the plantations and disappeared to avoid payments on account of social obligations. They were too new to the industry to understand its complexities