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A PROJECT OF
STRATEGIC MARKETING MANAGEMENT
Black tea Industry Analysis
Name: Saba Latif Name: Naima Khan Name: Sara Syed Date of Submission:
ID #: 063832-048 ID #: 053632-075 ID #: 053632-017 02/11/06
First and foremost, we express our gratitude to Almighty Allah, the sources of knowledge and wisdom endowed to mankind, We have revealed unto you in order that
you might lead mankind out of darkness into light by their Lord's Leave to the Path of the All-Mighty, the Owner of all Praise.
We extend gratitude to our resource person, Honorable Mr.Mobin-ul-Haque who provoked us to research on this particular industry, his valuable suggestions, constructive criticism and helpful discussions broadened our vision and helped us conduct this research. Here we also express are gratitude to the brand activation manager of Unilever Mr. Abid R. Jaffri with Tapal Tea Private Limited Corporate manager Mr. Waheed Sarwar for there deep guidance on the product. And specially would like to thank our dear parents, who are a constant source of inspiration for us.
Saba Latif Naima Khan Sara Syed
Tea discovered around 5,000 years ago, tea is generally considered the oldest prepared beverage. Whatever its color (black, green, yellow or white, depending on how it has been processed), tea can be produced from three main varieties: camellia sinensiss, camellia sinensis assamic and camellia seinensis Cambodians. The main
global producing countries are India (accounting for about 26 percent of world production); China (26 percent); Sri Lanka (9 percent); Kenya (9 percent); Indonesia (5 percent) and Turkey (4 percent) Black tea dominates world tea production, accounting for more than 70 percent of the global total in 2004. Green tea production has continued to increase its share of the world total, largely due to China’s heavy focus on green tea. Some 76 percent of China’s production is green tea. Tea is a product widely & extensively used its trend pattrens in different parts of world are
Pakistan relies on imports to meet all its consumption needs. In 2003 the dominant supplier was Kenya, which supplied 66 percent of total imports. Pakistan’s apparent consumption in 2003 of 109 000 tonnes placed it seventh in the world. Annual consumption has varied considerably year on year as shown in Table 6, ranging from a low of 85 400 tonnes in 1997 to a high of 119 700 tonnes in 1999. Average consumption over the 10 years 1994-2003 was 108 000 tonnes. Consumption per capita has been declining and at 0.71 kg in 2003 is below that of the late 1990s but still above that in many other important consuming countries. Needs it satisfy are Alertness, Keeping hot, Keep awaken, For elimination of depression for entertaining guests etc.
Tea industry History:
Tea discovered around 5,000 years ago, tea is generally considered the oldest prepared beverage. Whatever its color (black, green, yellow or white, depending on how it has been processed), tea can be produced from three main varieties: camellia sinensiss, camellia sinensis assamic and camellia seinensis Cambodians. When the tea tree grows under natural conditions, it is evergreen and can reach 10 to 15 meters, but when it is cultivated in gardens (the name given to tea plantation worldwide), its height is artificially limited to one meter in order to facilitate the pickers. Tea trees are grown mainly in tropical and subtropical regions with humidity of 70 to 90 per cent. Rainfalls must be abundant and regularly distributed throughout the year, with a yearly average of 1,500 to 2,500 millimeters.
World tea situation and production:
. World tea production reached 3.2 million tonnes in 2004, up from 2.6 million tonnes a decade earlier. This represents an annual average growth rate of 2.2 percent. Most of the growth was due to increased productivity rather than an expansion in area, as producers sought to reduce marginal costs in order to adapt to depressed prices. The main global producing countries are India (accounting for about 26 percent of world production); China (26 percent); Sri Lanka (9 percent); Kenya (9 percent); Indonesia (5 percent) and Turkey (4 percent) Black tea dominates world tea production, accounting for more than 70 percent of the global total in 2004. Green tea production has continued to increase its share of the world total, largely due to China’s heavy focus on green tea. Some 76 percent of China’s production is green tea. Table 1 – Tea Production, imports and exports: Selected countries 2003 2003 World India Sri Lanka USA China Kenya Russian Fed. UK Egypt Iran Production ’000 Mt 3,146 860 305 0 791 294 3 0 0 50 Imports ’000 Mt 1,554 22 305 94 34 0 169 157 79 33 Exports ’000 Mt 1,399 176 291 7 263 269 0 37 2 5
Imports are diverse with both developing and developed countries represented. The largest importers, in order of volume imported, are the Russian Federation (11 percent of the world total), UK (10 percent), Pakistan (7 percent), the USA (6 percent) and Egypt (5 percent). Together these five countries account for nearly half of total world imports, which totaled 1.6 million tonnes in 2003. By contrast, exports, as with production, are dominated by developing countries which account for 90 percent of the world total, with the major exporters in 2003 being Sri Lanka (21 percent of the world total), Kenya (19 percent), China (19 percent) and India (12 percent). Together these four countries accounted for 72 percent of the world exports of 1.4 million tonnes in 2003. As well as being significant exporters, India and China are also the two largest tea consuming countries, accounting for 21 percent and 17 percent, respectively, of the global total (Chart 2) in 5
2003. These were followed by the Russian Federation and Turkey each accounting for 5 percent, United Kingdom and Japan with 4 percent, and Pakistan and the USA with 3 percent.
Types of Tea Black Tea
Black tea is a "true" tea (i.e. Camellia sinensis) made from leaves more heavily oxidized than the white, green, and oolong varieties. Black tea is generally stronger in flavor and contains more caffeine than the more lightly oxidized teas. In Chinese and culturally related languages, black tea is known as red tea, perhaps a more accurate description of the color of the liquid. However, in the western world, "red tea" more commonly refers to South African rooibos tea.
Green tea has been around for more than 4000 years. Chinese folklore attributes the discovery of green tea as a drink to a Chinese leader from that era named Sheng Nong. It is said leaves of the tea tree fell into a pot that he used to boil his water. After tasting the sweet taste of the tea he proclaimed it was a gift from heaven and added green tea to his list of medicinal herbs.
Green tea is made from the leaves of the ‘Camellia Sinensis’ plant. The mature leaves are picked and kiln dried to maintain the correct humidity during the drying process. The dried leaves are then further processed to remove stems and debris so that only the leaves remain. The dried leaves are what we think of as green tea. Green tea is still very popular in Asia and many people believe it has a wide range of health benefits. There are studies that suggest green tea can inhibit the growth of certain types of cancer cells and contains certain elements that slow the aging process. Green and black tea come from the same plant and differs only in their method of production. Green Tea is dried for a shorter time, and is heated sooner to prevent fermentation. Green tea extract is one way of getting all the green tea benefits Diet green tea and green tea extract: Diet tea will help lose weight - if you are having a green tea drink or green tea extracts as a part of a healthy diet or if you take another green tea product such as green tea powder, green tea supplement, green tea patch, and green tea capsule - your weight loss program may be the successful.
Dust tea is a low-quality grade of fine grained black tea. Traditionally these were treated as the rejects of the manufacturing process in making high quality leaf tea like the Orange Pekoe. When leaves break or get crushed during the manufacturing process they are variously labelled as Broken Orange Pekoe, Fannings and dust based on the particle size. The smaller the particle, the lower the quality. This traditionally low quality tea has however experienced a huge demand in the developing world in the last century as the practice of tea drinking became popular. Cheap tea stalls in India and the South Asian sub-continent, and Africa prefer dust tea because it is cheap and also produces a very strong brew - consequently more cups are obtained per measure of tea dust.
Pakistan tea industry:
Pakistan is a leading tea consumer in the world. In fact, the consumption of tea is so widespread in Pakistan that it possesses 3rd position in the tea importing countries of the world Tea is Pakistan's favorite hot beverage. Tea imports rose from approximately US$ 120 million in 1998-99 to US$210 million in 1999-00, showing an increase of over 65 per cent. Its imports were US$173 million in 2002-03. In rupee term, imports increased from Rs348 million, in 1990-91, to as high as Rs1, 8754 million in 1998-99. However, the imports decreased to some extent, and reached Rs1, 040 million in 2001-02. Pakistan needs a total area of 250000 acres under tea cultivation to achieve self-made efforts have been made to
cultivate tea in the mountainous areas; the projects could not achieve the desired results.
The already high tea consumption level may further increase in future due to urbanization and increase in per capita income. The per capita monthly consumption of tea (black & green) is 56.29 grams. Tea imports rose from approximately US$ 120 million in 1998-99 to US$210 million in 1999-00, showing an increase of over 65 per cent. Its imports were US$173 million in 2002-03. In rupee term, imports increased from Rs348 million, in 1990-91, to as high as Rs1, 8754 million in 1998-99. However, the imports decreased to some extent, and reached Rs1, 040 million in 2001-02. Pakistan relies on imports to meet all its consumption needs. In 2003 the dominant supplier was Kenya, which supplied 66 percent of total imports. Pakistan’s apparent consumption in 2003 of 109 000 tonnes placed it seventh in the world. Annual consumption has varied considerably year on year as shown in Table 6, ranging from a low of 85 400 tonnes in 1997 to a high of 119 700 tonnes in 1999. Average consumption over the 10 years 1994-2003 was 108 000 tonnes. Consumption per capita has been declining and at 0.71 kg in 2003 is below that of the late 1990s but still above that in many other important consuming countries (Table 8). Table 7 – Tea imports, exports and consumption in Pakistan: 1994-2003 Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Imports (‘000 tonnes) 116.1 116.6 114.8 85.4 111.6 119.7 111.4 106.8 98.0 109.0 Exports (‘000 tonnes) 1.5 7.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Consumption (‘000 tonnes) 114.6 109.0 114.8 85.4 111.5 119.7 111.4 106.8 98.0 109.0
Table 8 – Tea consumption in Pakistan: 1998-2003 Total population (‘000) Total consumption (tonnes) Per capita consumption (kg per cap)
1998 1999 2000 2001 2002 2003 Av 1998-2003
135,381 139,018 142,654 146,277 149,911 153,578
111,500 119,700 111,400 106,800 98,000 109,000
0.82 0.86 0.78 0.73 0.65 0.71 0.76
. Pakistan is a developing country market with a per capita GDP of US$ 2 100 in 2004. Growth of its economy has picked up in recent years and was estimated at 5.5 percent in 2004 with a relatively low inflation rate of 2.9 percent. Although it is an extremely price sensitive market dominated by bulk CTC teas, there is a small market segment for high quality teas. In 2003, the population of Pakistan was estimated to be 154 million, 66 percent of whom lived in rural areas, where tea consumption was highest. Tea is the most popular and cheapest beverage in Pakistan, but is increasingly facing competition from other beverages.
Companies in Pakistan:
Company Description Uni Lever Brothers (Pakistan) Limited Formerly known as Lever Brothers (Pakistan) Limited. The Group's principal activities are to manufacture and sell spreads and cooking products, ice cream, beverages and home and personal care products. The brands of the Group include Brooke Bond, Lipton, Lux, Rexona and Lifebuoy, Sunsilk, Surf, Vim, Dalda, Blue Band and Planta. The operations of the Group are carried out in Pakistan. Beverages accounted for 40% of 2002 revenues; Home and personal care, 35% and Spreads and cooking products; 19% and Ice cream, 6%. Unilever at a glance Our mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of life. Key facts
in 2005 our worldwide turnover was €40 billion we employ 206,000 people in around 100 countries worldwide
• • •
every day, 150 million people choose our brands to feed their families and to clean themselves and their homes over half of our sales are generated by our 12 €1bn brands: Knorr, Flora/Becel, Hellmann's, Lipton, Omo, Surf, Lux, Dove, Iglo/Birds Eye/Findus, Blue Band/Rama, Sunsilk and our Heart ice cream brand we are the global market-leader in all the Food categories in which we operate: Savoury & Dressings, Spreads, Weight Management, Tea and Ice Cream we are also global market-leader in Skin and Deodorants, and have very strong positions in other Home and Personal Care categories by 2005, we invested around €1 billion in research and development, for example at the Unilever Food and Health Research Institute, which has a worldwide reputation for scientific excellence in 2005 we spent over €79 million on a wide range of community projects we have 337 manufacturing sites across six continents, all of which strive for improved performance on safety, efficiency, quality and environmental impacts, working to global Unilever standards and management systems we invested €5 billion in advertising and promotions in 2005
Lipton yellow label:
Lipton is one of the world's great refreshment brands, making a big splash in the global beverages market with tea-based drinks including leaf tea, infusions, ready-to-drink tea and other healthy, refreshing alternatives to soft drinks. Lipton continues to lead as the global tea beverage market, making a big splash with a variety of tea-based drinks. Lipton is growing fastest in ready-to-drink teas Lipton ready-to-drink teas in Asia which can be served hot or cold. Other recent flavour innovations cater to changing and adventurous tastes, Leaf tea remains a favourite in many markets and Lipton is making it tastier and easier to make with innovations. While tea is a naturally rich source of antioxidants, it is not a substitute for fruits or vegetables which provide a wide range of antioxidants and essential vitamins and minerals.
Key success factors of Lipton
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Tea is the world's favourite beverage, after water. Independent scientists also place leaf tea second only to water as the most ideal beverage in the world. All leaf teas are naturally zero calories and so can help with your weight management programme. Lipton tea provides you with flavonoid antioxidants. Antioxidants are thought to help keep our body healthy by preventing every day wear and tear by free radicals. 10
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Studies observing large populations and there eating and lifestyle habits over a long period of time show that regular tea drinking may help maintain heart health. A number of studies showed that people consuming tea (without milk and sugar) on a regular basis as part healthy lifestyle tend to maintain better heart health better than those who do not drink tea. Lipton is the world's best-known and best-selling brand of tea, with sales of nearly €3 billion today. Lipton is the global market leader in both leaf and ready-to-drink tea, with a global market share nearly three times larger than its nearest rival. Available in over 110 countries, Lipton is particularly popular in Europe, North America and the Middle East and parts of Asia. Tea revitalises your mind and body. Tea – half the caffeine of a regular cup of coffee. All teas – black, green, oolong or white provide you with an antioxidant boost. Just one 200ml cup of Lipton Yellow Label will provide you with around 135mg of antioxidants.
Lipton Yellow Label tea
Lipton Green Tea
Lipton Iced Tea
Lipton Ice Tea
Tapal started out as a family concern Tapal moved from success to success introducing tea brands to suit every taste and pocket,. Tapal introduce professional management and unique production ideas to the business Tapal introduced new tea concepts and developed a wide range of tea blends catering specifically to the tastes of people throughout Pakistan. Today Tapal has become the largest, 100% Pakistani owned Tea Company in the country. It has modern tea blending and packaging factories, warehouses equipped with state-of-the-art equipment and a team of highly dynamic professionals.
Gulbahar green tea
Tapal jasmine green tea
Tapal family mixture
Tapal special teabags
Mezban premier dust
Tapal special round teabags
Tapal safari chai
Tetley(Tata tea) :
Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop valued-added tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley Group, today represent the world's second largest global branded tea operation with product and brand presence in 40 countries. Among India's first multinational companies, the operations of Tata Tea and its subsidiaries focus on branded product offerings in tea but with a
significant presence in plantation activity in India and Sri Lanka. Tata Tea and the Tetley Group have full-fledged research and development centers that focus on the branded business. Tata Tea has a research centre at Teok (Assam) and a product development centre at Bangalore focused on the entire gamut of tea operations The Tetley Group Headquartered in Great Britain, is a leading international tea company selling over 60 Tetley branded products to over 40 countries world-wide. Tetley is the second largest tea bag brand in the world; it is the number one tea bag brand in Great Britain and Canada and has significant market shares in the United States, Australia, Poland and France. Beyond these markets Tetley is steadily growing its presence in the rest of Europe, particularly the former Eastern block countries and throughout the Caribbean and lesser developed markets such as Bangladesh, Pakistan and Russia where Tetley was launched last year. Tetley has a customized portfolio of offerings for each country, ranging from black, green, fruit and herbal teas, iced ready-to-drink teas and an extensive range of exotic specialty tea. The Tetley brand is accorded "Super Brand" recognition in Great Britain. Tetley own one manufacturing facility at Eaglescliffe in the north of England. Established since 1969, it currently occupies 220,000 square feet and is believed to be the largest tea bag factory in the world. Its quality management systems are accredited to the ISO 9002 standard and are also in the process of receiving the ISO 14001 certification.
Statistics of Pakistan &market situtaion:
The market situation that Worldwide tea production in 2001 was over 3 million tons (Table 1, data in metric tons). The greatest production was from China and India, which generated about half of the total world production. Indonesia, Sri Lanka, and Kenya together account for another quarter of the total production. In 2000, India was the leading black tea producer (815,000 tons, 38% of total black tea production), while China produced the most green tea (500,000 tons, 73% of total green tea production) (FAO 2001). Exports totaled 1.4 million tons in 2001, with the top four exporting nations, Sri Lanka, Kenya, China, and India, accounting for (respectively) 21, 18, 18, and 13 percent of the exports.
STATISTIC Location: Southern Asia, bordering the Arabian Sea, between India on the east and Iran and Afghanistan on the west and China in the north. Area: 796,095 Square Kilometers. Area-comparative: slightly less than twice the size of California.
Climate: mostly hot, dry desert; temperate in northwest; arctic in north. Terrain: flat Indus plain in east; mountains in north and northwest; Balochistan plateau in west. Natural Resources: land, extensive natural gas reserves, limited petroleum, iron ore, copper, salt, limestone, marble, chromites and precious stones. Natural Hazards: frequent earthquakes, occasionally severe especially in north and west; flooding along the Indus after heavy rains (July and August) Population: 130,579,000 Male: 67,840,000 Female: 62,739,000 Urban: 42,458,000 Rural: 88,121,000 Population Growth: 2.11% (2001 est.) Birth Rate: 31.21 births/1,000 population (2001 est.) Death Rate: 9.26 deaths/1,000 population (2001 est.) Ethnic Groups: Punjabi, Sindhi, Pashtun, Baloch, Muhajir Religions: Muslim 97.96 (Sunni 77%, Shi?a 20%), Christian, Hindu, and other 3%. Languages: Punjabi 48%, Sindhi 12%, Siraiki (a Punjabi variant) 10%, Pashtu 8%, Urdu (official) 8%, Balochi 3%, Hindko 2%, Brahui 1%, English, Burushaski, and other 8%. Literacy Rates: Both Sexes: 45.0 % Male: 56.5 % Female: 32.6% Country Name: Islamic Republic of Pakistan Government Type: Federal Republic based on Parliamentary Democracy Capital: Islamabad Date of Independence: August 14, 1947 Suffrage: 18 years of age; universal; separate electorates and reserved parliamentary seats for non-Muslims. Chief of State: President General Pervez Musharraf Flag Description: green with a vertical white band (symbolizing the role of religious minorities) on the hoist side; a large white crescent and star are centered in the green field; the crescent, star, and color green are traditional symbols of Islam. GDP:3726 (Billion Rupees) Per capita 440 (US Dollars) Exports: 2000-2001 539070 (Million Rupees) Imports: 627000 (Million Rupees) Insurance Companies: 55 Joint Stock Companies: 40901 Cooperative Societies: 57935
Labor Force: 40 million Labor Force by Occupation: agriculture 44%, industry 17%, services 39% (1999 est.) Industries: textiles, food processing, beverages, construction materials, clothing, paper products, shrimp Agriculture products: cotton, wheat, rice, sugarcane, fruits, vegetables, milk, beef, mutton, eggs Currency: Pakistani rupee Exchange Rates: Pakistani rupees per US dollar - 59.152 (January 2001) Tourist Arrivals: 543.40 (In ?000?) Telephones - main lines in use: 2985.52 (In thousands) 1998-99 Telephones - mobile cellular: 158,000 (1998) Post Offices: 12,854 1999-2000 Hospitals: 876 Dispensaries: 4635 Doctors: 91823 Dentists: 4175 Nurses: 37623 Television broadcast stations: 22 (1997) Internet country code: .pk Cities/Towns connected with Internet: (i) Punjab------ 613 (ii) Sindh---------138 (iii) NWFP---------240 (iv) Balochistan---91 Total-----------1082 Time Zone: 5 hours ahead of Greenwich Mean Time (+5 GMT). Daylight Saving Time is observed. Internet Users: 1.2 millions Railways: Track Kilometer 11515.00 Route Kilometer: 7791.00 Highways: total: 247,811 km Ports and harbors: Karachi, Port Muhammad bin Qasim Airports: 22
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Consumer Packaging and Labeling Act The Consumer Packaging and Labeling Act, requires that prepackaged foods either imported or made in within the country, must not bear any false or misleading information regarding its origin, quality, performance, net weight or quantity. Food and Drug Act Tea manufacturers maintain that one of the challenges their industry faces involves the labeling of antioxidants.
The Food and Drug Act sets out conditions regarding health and quality requirements that would apply to tea and coffee manufacturers just as they would to other food manufacturers so that consumers will have confidence in the safety of the products they purchase. Firms have not been allowed to make health claims on food labels unless those foods are classed and approved as drugs. At the time this profile was being prepared Health was consulting on a list of health claims that might be permitted on labels of specific foods. If a final decision is made to permit health claims similar to those proposed by tea manufacturers and others, the Food and Drug Act Regulations would have to be amended. Food and Drug Administration (FDA) has regulatory authority to assess the accuracy of claims made by manufacturers about the health benefits of their products. Currently the FDA does not provide detailed information about healthful patterns concerning beverage consumption. If a tea producer claims that a tea product prevents or cures a disease, then the FDA would consider the tea a drug and regulate it as such. This would mean that the tea would need FDA approval as safe and effective for its intended use.
Tea prices are highly volatile. However, with the closing of the London Tea Exchange, it has become increasingly difficult to hedge price risks. Currently around 85 per cent of domestic production is sold through regional auctions; the balance is being supplied through forward contracts. In 2002-03, a packet of 200 grams was sold for Rs340. The price per unit in international market, however, has not increased as compared to an increase in local market. Here are some statistical facts about the Tea Industry: The total turnover of the tea industry is around Rs. 10,000 crores. Since independence tea production has grown over 250%, while land area has just grown by 40%. There has been a considerable increase in export too in the past few years. Total net foreign exchange earned per annum is around Rs. 1847 crores. The labor intensive tea industry directly employs over 1.1 million workers and generates income for another 10 million people approximately. Women constitute 50% of the workforce.
Macro Indicators and Implications for the Trade Policy Spread over an area of 796096 square kilometer, Pakistan is inhabited by 153.98 million people, the population growing at the rate of 1.9 per cent p.a., a literacy rate of 53 percent, infant mortality rate of 77 per 1000 live births and life expectancy of 63 years.1
Economic Survey of Pakistan 2005-06
Macro Indicators2 Trade to GDP Ratio In the backdrop of more than 4% per annum growth in the world economy for the fifth consecutive year and wideranging structural reforms, Pakistan witnessed Fig. III.a . Tra de a s P e r c e nta ge of GDP overall improvement in it exports. While its exports grew at an average rate of 16.45 40 percent per annum over the last four years, it saw 34 35 31.6 doubling of exports during the last seven years. In a 29 28.4 28 27.2 30 25.8 bid to improve exports and liberalize the 25 economy for increased participation in global 20 trade, it carried on reforms especially in the 15 areas of trade and tariffs during the past six 10 years or so. A manifestation of reform output can 5 also be seen in the Fig. III.a. which shows 0 changes in trade-to-GDP ratio which has 1999- 00 2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 ( E) increased from around 26 percent in 1999-2000 to estimated 34 percent in 2005-06. Trade as P erc entage of GDP Real GDP Growth and Sectoral Contribution Real GDP grew strongly at 6.6 percent in 2005as against the revised estimates of 8.6 percent year and 7.0 percent growth target for the year. When viewed in the backdrop of rising and volatile energy prices and the extensive damage caused by the earthquake of October 2005 Pakistan’s growth performance for the has been impressive.
Fig . III.b. Re a l GD P Grow th
10 9 8 7 6 5 4 3 2 1 Key drivers of this year’s growth have been 0 service sectors and industry. Large-scale 1980s 1990- I 1990 - II 2000- 01 2001- 02 2002- 03 2003- 04 2004- 0 5 2005- 06 manufacturing grew by 9.0 percent as against 15.6 percent of last year and 14.5 percent target for the year, exhibiting signs of moderationowt h R at e GD P Gr on account of higher capacity utilization on the one hand and strong base Fig. III.c. Sectoral Contribution to the GDP Growth effect along with several other factors on the 5 4.5 other hand. The services sector 4 continued to perform strongly and grew by 8.8 3.5 percent. Construction too continued its strong 3 showing, partly helped by activity in private 2.5 housing market, spending on physical 2 infrastructure, and reconstruction 1.5 1 activities in earthquake affected areas. 0.5 Consumer spending remained strong with 0 real spending rising by 8.1 percent and 2001/02 2002/03 2003/04 2004/05 2005-06 investment spending maintaining its strong Agriculture Industry Manufacturing Services momentum at 10.3 percent increase in real investment. Agriculture and particularly its crop sector could not perform up to the expectation and registered a contraction in growth. Livestock, a major component of agriculture, exhibited strong showing and pulled the overall growth in agriculture to 2.5 percent as against the target of 4.2 percent. Livestock has been the only saving grace as far as the performance of agriculture is concerned this year.
6 .1 4 .9 4 1.8 3 .1 4 .7
7 .5 8 .6
Figure III.b. shows the trend of GDP growth over time. During 1980s, GDP grew with an average rate of 6.1% while during the first half of 1990s it moved ahead with 4.9% and coming down to 4% during the second half of the 1990s. The year 2000-01 witnessed it falling down to 1.8% while from 2001-02 onwards it shows signs of picking up increase and reaching 8.6% in the year 2004-05.
Figure III.c. illustrates the diachronic Fig. III. d. Per Capita Income US$ sectoral contribution in GDP growth from 847 2001-02 to 2005-06. Sector wise 742 669 analysis shows that the agriculture 582 526 501 503 sector started with 0.03% in 2001-02 and reached 1.4% of contribution during the year 2004-05. It witnessed decline in contribution during 2002-03 and 2005-06 with 0.55% contribution to GDP growth. The Industrial sector reached its peak 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 contribution of 3.8% during 2003-04 and now stands at 1.5% staring from 0.6% during P er Capita Income US$ 2001-02. During the last five years, the manufacturing sector reaching plateau of 2.2% during 2004-05 contributed 1.5 percent during 2005-06. However, the services sector seems to have contributed steadily from 2.5% share during 2001-02 and contributing 4.5% to GDP growth in 2005-06. Per capital income, in current dollar terms, has grown at an average rate of 13.6 percent per annum during the last three years rising from $ 669 in 2003-04 to $ 742 in 2004-05 and further to $ 847 in 2005-06. The main factor responsible for the sharp rise in per Fig. III.e. Average Inflation (Headline Inflation) capita income include acceleration in real GDP growth, stable or even appreciation in 12 exchange rate and four fold increase in the 10 inflows of workers’ remittances. Per 11.4 8 capita income in current dollar term rose from 5.7 9.7 $ 742 last year to $ 847 in 2005-06, 6 depicting an increase of 13.6 percent. 4 Figure III.d shows the trend in per capita 5.5 2 income from 1999-00 to 2005-06. Inflation measured by the Consumer Price 1990s 1990-97 1998-2000 2000-06 Index was 9.7 percent during the 1990s. It Average Inf lation rose to 11.4 percent during 1990-97 and then fell to 5.7 and 5.5 percent during 1998-2000 and 2000-06. Figure III.e. shows this trend in inflation rates. However, during 2005-06 (July-April), it remained at 8 per cent.
Major Imports Pakistan's imports are also highly concentrated in few items namely, machinery, petroleum & petroleum products, chemicals, transport equipment, edible oil, iron & steel, fertilizer and tea. These eight categories of imports accounted for 72.5 percent of total imports during 2005-06. Among these categories machinery, petroleum & petroleum products and chemicals accounted for 53.4 percent of total imports. Concentration of imports remained, by and large, unchanged over the last one decade with the exception of 2000-01. [See Table III.e.] The import of textile machinery in anticipation of the quota phase-out of textile and clothing has boosted the share of machinery over the past three years.
Table- III.e. : Pakistan’s Major Imports (Percentage share) Commodities Machinery Petroleum & Products Chemicals Transport equip. Edible oil Iron & Steel 99-00 13.9 27.2 17.5 5.5 4.0 3.0 00-01 19.3 31.3 20.0 4.0 3.1 2.6 01-02 17.1 27.1 15.9 4.8 3.8 3.3 02-03 18.5 25.1 15.1 5.6 4.8 3.3 03-04 17.8 20.3 16.1 5.6 4.2 3.3 04-05 22.5 19.4 15.5 6.2 3.7 4.3 05-06* 18.0 22.3 13.4 7.7 2.7 5.1
Fertilizer 1.9 1.6 Tea 2.0 1.9 Sub-total 75.0 83.8 Others 25.0 16.2 Total 100.0 100.0 Source: MOC/FBS/Economic Survey of Pakistan * Provisional Major Source of Imports
1.7 1.5 75.2 24.8 100.0
2.1 1.4 75.9 24.1 100.0
1.8 1.2 70.3 29.7 100.0
2.0 1.1 74.7 25.3 100.0
2.4 0.9 72.5 27.5 100.0
USA, EU, Japan, Kuwait, Saudi Arabia and Malaysia remain important suppliers of imports into Pakistan. Pakistan’s imports are highly concentrated in a few countries and over 40 percent continue to originate from just seven countries namely, USA, Japan, Kuwait, Saudi Arabia, Germany, UK and Malaysia. It may be noted that Saudi Arabia is emerging as major supplier to Pakistan followed by USA and Japan. [See Table III.f.] Table-III.f. : Major Sources of Imports (percentage shares) Country 99-00 U.S.A. 6.3 Japan 6.3 Kuwait 12.0 Saudi Arabia 9.0 Germany 4.1 U.K. 3.4 Malaysia 4.3 Sub-total 45.4 Other countries 54.6 Total 100.0 Source: MOC * Provisional 00-01 5.3 5.3 8.9 11.7 3.5 3.2 3.9 41.8 58.2 100.0 01-02 6.7 5.0 7.1 11.6 4.3 3.4 4.4 42.5 57.5 100.0 02-03 6.0 6.6 6.6 10.7 4.6 2.9 4.6 42.0 58.0 100.0 03-04 8.5 6.0 6.4 11.4 3.9 2.8 3.9 42.9 57.1 100.0 04-05 7.6 7.0 4.6 12.0 4.4 2.6 2.6 40.8 59.2 100.0 05-06* 5.8 5.6 6.2 11.2 4.7 2.8 3.0 39.4 60.6 100.0
With respect to environmental issues, processing firms must meet all laws (e.g. the Environmental Protection Act, the Environmental Assessment Act and each province's legislation) and regulations. Under the Pest Control Products Act and regulations pursuant to this Act, determines which pesticide sprays are approved for use and how they are to be used. Firms check pesticide residue levels in their products to ensure that they are within regulation levels. Consumer awareness of pesticide residues and their impacts on human health and the environment is increasing. One environmental issue that food processors in general have faced is waste remaining from packaging. Reductions in container weight can result in reductions in fuel used by large trucks as well as wear and tear on tractor trailers when hauling product to market, with the added environmental benefits of reducing the amounts of wasted materials as well as emissions of greenhouse gases and other air pollutants. Waste reduction is important everywhere and particularly for large urban centers that are rapidly using their landfill capacity and are experiencing difficulty and expense in finding and using acceptable new landfill sites. Reduction of materials in packing cartons can potentially provide both financial and environmental benefits.
Similarly, reductions in waste go hand-in-hand with cost savings as food processors and other manufacturers make increasing use of plastic, rather than wooden, pallets. Although more expensive to buy, plastic pallets, which can be made from recycled plastic, can be used many more times than wooden pallets which tend to be mangled fairly quickly by fork lifts and then sent to landfill. Prior to plant construction, food processors must meet municipal zoning requirements. A proposal to build a new state of the art plant or to substantially enlarge an existing facility could result in hearings to assess environmental impacts before construction may proceed. Provinces and municipalities have to be satisfied that systems will be put in place for waste water treatment. Some processors take a pro-active approach by developing "best practices" with respect to the environment, for example reducing their energy and water usage as well as their creation of both solid and water waste. Overall, there is a trend to internationalize regulations through general trade treaties, and the industry will face the challenge of looking at regulations that could be harmonized, either bilaterally with the U.S. or multilaterally through the World Trade Organization and Codex Alimentarius.
Tea plucked from the garden is sent to the factory for processing, which in most cases, is in or near the tea garden. This processing, earlier, used to depend solely on the natural weather conditions, but to become less dependent on the unpredictable weather conditions which affects productivity adversely, modern technology has been introduced in the tea industry. This has made it possible to increase the plantation area by minimizing space; also labor cost has come down and the entire process has become much speedier. The starting material in black tea processing is the young shoot, the terminal bud and the two adjacent leaves plucked from the tea plant. The flush is processed in four distinct stages, which are withering, rolling, fermentation and drying. Each stage involves characteristic changes in the physical and biochemical composition of the leaves and the cumulative effect of these changes are ultimately reflected in the quality of the finished product, namely the black tea. After the drying is over, the leaves are sorted, that is, divided into different grades and made ready for the market.
Unlike other perennials, tea is unique because only its vegetative parts - the two leaves and the bud - are commercially exploited. Tea is also maintained as a low bush in a continuous phase of vegetative growth. Both these aspects call for manipulation of plant parts for optimal productivity and growth.
Plucking & Leaf Handling :
The plucking of the two leaves and a bud involves a number of systems - Janam plucking, fish-leaf plucking , step-up plucking etc.. Shear plucking is done when there is a scarcity of pluckers during July to September. Pluckers' productivity is found to be maximum in unpruned teas. The plucked leaves are processed to produce the black tea.
It is a procedure which brings about physical and chemical changes in the shoots to produce quality, apart from conditioning the flush for rolling by reducing turgor, weight and volume. Previously the flush used to be withered under the sun. Now this process is generally achieved either by thinly spreading the flush on mats, or in thick layers in troughs for 8-18 hours depending on the condition of the leaves.
The object of rolling is to macerate the leaf so that the enzymes and their substrates get intimately mixed up. This is achieved mechanically either by the use of an orthodox roller, the rotor vane, or by CTC (crushing, tearing and curling) machines. Rolling ruptures the cell wall thereby enabling the production of enzymes.
It is the process of oxidation of leaves. The mechanical aspect involves spreading out of the leaves macerated by rolling a layer 5-8 cms thick, for 45 minutes to 3 hours, depending on the quality of the leaves. Fermenting machines make the process continuous, that is, every unit of macerated leaf has to be spread out for individual treatment.
It reduces the moisture content of rolled and fermented leaves from 45-50% level to a 3% level in dried black tea. It also allows development of black tea aroma. Drying is physically achieved by blowing hot air through fermented leaves as they are conveyed in chains. The drying process lasts for about 20 minutes.
Sorting may be defined as a procedure in which particles of bulk tea are separated into grades of different sizes. This sizing can be done either manually or by using different sizing equipments. Sorting meshes of various sizes are used to grade the tea.
Factors/Trend Business Implication Redesign of old packages with new improvement and better quality. Company Response
Political & Legal
FDA) has regulatory authority to assess the accuracy of
New technology is always welcomed by the company but it is always under the law. 23
claims made by manufacturers about the health benefits of their products. The Consumer Packaging and Labeling Act, requires that prepackaged foods either imported or made in within the country, must not bear any false or misleading information regarding its origin, quality, performance, net weight or quantity. Economic
Tea prices are highly volatile. The price per unit in international market, however, has not increased as compared to an increase in local market. The labor intensive tea industry directly employs over 1.1 million workers and generates income for another 10 million people approximately. Women constitute 50% of the workforce. Around 85 per cent of domestic production is sold through regional auctions; the balance is being supplied through forward contracts.
Social & Cultural
Pesticide sprays are approved for use and how they are to be used.
Prior to plant construction, food processors must meet municipal zoning requirements. A proposal to build a new state of the art plant or to substantially enlarge an existing facility
Reductions in container weight can result in reductions in fuel used by large trucks as well as wear and tear on tractor trailers when hauling product to market.
Technology is moving faster and faster to high performance.
could result in hearings to assess environmental impacts before construction may proceed. Company is using new technology as for packaging and quality.
New technology is always welcomed by the company.
5 Forces Analysis of Tea Industry Rivalry:
In tea industry the rivalry between firms is high because there is concentrated market and the competitive advantage is high over every rival. To pursuing an advantage over their rivals the several tea companies take some competitive moves like they change their prices twice in a year .rivalry in tea industry also influenced by different degrees. First of the entire Exit barrier in Pakistan tea industry is high because of the high investment and the existing firms invest a huge amount of capital and this tea is a bidding product so the exit barrier in this tea industry is high. Concentration ratio of tea industry in Pakistan is high because there are only 5 major companies in Pakistan so the tea industry is concentrated. The tea
industry growth is low because it is high investment industry and the share of market is limited among few firms in Pakistan. There are different types of tea product in Pakistan herbal tea green tea and ice tea. Switching cost in tea industry is low because the customer has different choices because of different brands of tea and also different substitute industries. Intermittent overcapacity in tea industry is high because the tea is a bidding product so some times in firm’s capacity are more than its production but other costs remain the same so the intermittent overcapacity rate is high.
Threats of substitutes:
Every industry has some threats of substitute. In tea industry they also some threats of substitute there substitutes are coffee, cold drinks, mineral water, juices, colas, open tea etc. but the customer have nil switching cost and the trend of consumption of coffee in Pakistan increasing day by day. The buyer inclination to substitute is increasing like coffee nestle introduce instant coffee easy to make that’s why buyer switching towards coffee. If the price of tea increases then customers go towards the substitute like if the government increases the sales tax on tea then customer go towards tea or other substitute. If the substitute give extra value added services then customer switch towards.
Barriers to entry:
In tea industry barriers to new entrant is high because it need high investment and high concentration .In the tea industry Access to inputs is to low because of the limited resources and the import of tea. Pakistan is the second largest country in tea consumption so most of the part of our economy is spent on tea consumption if our government increase the sales tax and stop providing subsidies to tea industry or if increase the income tax then it will become barrier to entry so any negative change in government policies regarding tea industry create the barriers for new entrant. In the tea industry there is large capital required in order to compete others so this is also barrier to entry. Tea is a bidding product so the high bidder has the raw tea material. Every brand have different identity and have some goodwill so to capture the customer entrant have to invest heavy amount to overcome the customer loyalty like there is a case that is tapal dander changed its packaging when they advertise it customer perceived that they transfer the old material of tea into new cover or packet so they lose the trust of their customer and they invested heavy amount to overcome that trust. So barriers in the tea industry is high and in this industry the switching cost is low so it’s also cause barrier to new entry.
Supplier Bargaining Power:
The supplier power of tea industry is high because raw tea is sell on auction the higher the bid get the raw tea. The concentration of suppliers is low because there are many suppliers with market share like Sri lank, Japan, Kenya, China, Vietnam, Hawaii, etc. so, the power of supplier is high .the volume of material of to supplier is very important if they have the high volume then they get the highest bid but if the material is in good condition because the tea is a perishable good. Every supplier has different input process. The switching cost of the industry is low. the tea industry spent a big amount in purchasing a raw tea or tea leaf if there is 100% expense then they spent 70% on raw tea purchasing out of there total purchases. Yes there is a threat of forward integration from supplier if they stop forwarding then the industry will suffer
a lot. So the supplier power of bargaining is high and its effected tea industry a lot because the supplier is the most important for the firms in tea industry.
Buyer Bargaining Power:
There is bargaining leverage to the buyer of tea industry because the numbers of buyer is very big. So to overcome the loyalty of buyer they give bargaining leverage. The volume of buyer of tea industry is really high in Pakistan. The information about buyer and information to buyer is plays a very important role for tea industry which type of buyer are permanent user and what are there expectation. Buyers are sensitive enough so they are price conscious. Yes there is threat of backward integration because the buyers are powerful. If the industry providing different product then buyer do not look for alternative. Buyer concentration ratio is low vs. industry. There is huge availability of substitute.
Stronger forces for Tea industry:
The stronger forces for these industry are buyer bargaining power, supplier bargaining power and barrier to entry because these forces have great impact on tea industry so these are the stronger enough these forces have heavy requirement and these have low switching cost.
Impact on growth and profitability:
Barriers to entry:
This force have great impact on growth because there are many barrier like if new entrant doest not join this industry then industry cannot grow and its profitability will also be low. So that’s why tea industry cannot grow but its profitability is good in Pakistan.
Threat of substitute:
There is always a threat of substitute there is low switching cost so the customer easily switch towards substitute to the profit of the industry does no increase and the industry growth will low and low profitability. there is many substitute of tea industry in Pakistan and its effect a lot on tea industry but its vary from seasons to season, in winter the tea consumption increases but in summer its low.
In tea industry the major part of their cost spent on raw tea purchasing because the supplier power is higher so if the revenue is low and cost is higher than the industry will fall down, tea is abiding product so the tea industry suffering with high auction prices and no new investments are coming in this industry. So the growth is limited and profitability is suffering due to high powers.
The volume of tea buyer is high in all over the world but the in Pakistan the ratio of tea user is really high and there is low switching cost so the buyer can easily switch to substitute if the buyers are loyal the it really helpful in growth and profitability and in Pakistan the buyers are helping in profitability of tea industry.
If the industry is concentrated and exit barriers are high then industry is less competitive the industry growth is slow and profitability is lees.
5 Forces Analysis on Lipton yellow label
The exit barriers for Lipton is very high because the Lipton is a international brand and it invested a huge amount in tea industry and it develop a name in black tea industry in Pakistan so the barriers for Lipton is high. The concentration is also high for this firm in tea industry in Pakistan. They have different product and there is also differences in their every product of tea. In Pakistan there is a separate brand identity for Lipton yellow label between rivalries.
Barriers to entry:
Due to high barriers the Lipton have the advantage of absolute cost and access to inputs and access to distribution is easy and there is also the threat of low switching cost. It’s also needed a huge capital investment by Lipton which creates barriers for new entrant, and also there brand identification and fame also create barriers.
Threat of Substitute:
Lipton have also threat of substitute but and there is also a threat of change in technology in their substitute like instant coffee by nestle also a threat for Lipton and over all tea industry. the switching cost is zero for the customer the customer can easily switch to other brand like wise the Tapal tea introduce Herbal tea in Pakistan so the diet conscious customer switch to herbal tea. The Lipton has the threat of substitute.
The supplier power is higher soothe Lipton spent huge amount on raw material the switching cost of the firm in the industry is low and the importance of volume to buyer is very important because Lipton is big buyer of tea material.
The buyers volume is higher the most of the buyer of Lipton tea is offices and different working sectors. Lipton has a unique brand identity among buyers, and the buyers also price sensitive enough but the loyal and taste conscious buyer never switch to other brand if the substitute is available in suitable price with incentives for buyer then buyer power is also higher to switch the brand. Like many buyer switch to Tapal tea because of its Danedar quality taste and 28
color. tapal dander changed its packaging when they advertise it customer perceived that they transfer the old material of tea into new cover or packet so they lose the trust of their customer and they invested heavy amount to overcome that trust.
5 FORCES ANALYSIS OF TAPAL TEA Rivalry:
There is high exit barrier and because of huge investment. The exit barriers for TAPAL is very high because the TAPAL is a international brand and it invested a huge amount in tea industry and it develop a name in black tea industry in Pakistan so the barriers for TAPAL is high. The concentration is also high for this firm in tea industry in Pakistan. They have different product and there is also differences in their every product of tea. In Pakistan there is a separate brand identity for Tapal tea rivalries.
Barriers to entry:
Due to high barriers the TAPAL have the advantage of absolute cost and access to inputs and access to distribution is easy and there is also the threat of low switching cost. It’s also needed a huge capital investment by TAPAL which creates barriers for new entrant, and also there brand identification and fame also create barriers.
Threat of Substitute:
TAPAL have also threat of substitute but and there is also a threat of change in technology in their substitute like instant coffee by nestle also a threat for TAPAL and over all tea industry. the switching cost is zero for the customer the customer can easily switch to other brand like wise the LIPTON introduce DIET tea in Pakistan so the diet conscious customer switch to diet tea. The TAPAL has the threat of substitute.
The supplier power is higher so the TAPAL spent huge amount on raw material the switching cost of the firm in the industry is low and the importance of volume to supplier is very important because TAPAL is big buyer of tea material.
The buyers volume is higher the most of the buyer of TAPAL DANEDAR tea is for family. TAPAL has a unique brand identity among buyers, and the buyers also price sensitive enough but the loyal and taste conscious buyer never switch to other brand if the substitute is available in suitable price with incentives for buyer then buyer power is also higher to switch the brand. Many buyer switches to Tapal tea because of its Danedar quality taste and color. Tapal dander changed its packaging when they advertise it customer perceived that they transfer the old material of tea into new cover or packet so they lose the trust of their customer and they invested heavy amount to overcome that trust. In this case the buyer switch to other substitute.
There is the existence of substitute with complements like Lipton offers tea whitener cup and biscuits with their brand so the cup ,tea whitener and biscuits are their complements.
Differences between these two groups:
The major difference is that Lipton growth rate is very high and its profitability rate is also high but in the tea industry overall growth rate is very low and profitability ratio is low. The concentration in industry is high but in Lipton is low. No this company should not change its strategic group because it is in growth and profitability stage the company made its name among all so it should not change its strategic group. Strategic group maps:
P R I C E
Tapal Brook Bond Supreme Vital
Dust Open tea
QUALITY Strategic group map1
G E O G R A P H I C A L L Y
Tetley Dust Open tea
Tapal Supreme Vital
VOLUME OF SALES Strategic group map2
Porter analysis of Strategic group map:
Rivalry: In tea industry the rivalry between firms is quite high as there are quite a many firms and articulates a cut throat competition .There are not much exit barriers& industry concentration is showing a wide gap as though local tea being not up to the mark in quality but do present justified price penetration in market .the major players also includes Lipton & Tapal as both are forward with controlled market skimming strategies. Threat of substitute: Of course there are a high percentage of threat of substitute due to various other choices in beverage industry. Switching cost is now not usually high as there are a lot of options to fall in. And due to buyer inclination and impulse decision also exhibit it to make the product basis highly differenciated. From the strategic map 1 it is so clear that low price intensely grab major market share but as well it depends on the segment inclination & purpose. Barriers to entry: There are low barriers of entry in global phenomenon yet they are high if locally to think about it as tea is not been produced locally and have to import. Trends in Trade International trade in Pakistan has witnessed growth in the last several years, although its share in world exports trade during 2004 has remained around 0.153 percent compared to around 3.14 percent for China, 1.96 percent for Singapore, 1.08 percent for Thailand, 1.46 percent for Malaysia, 0.77 percent for India and 0.54 for Turkey. The share in world imports for Pakistan was 0.17 percent compared to China’s 4.48 percent, India, 0.86 percent and Turkey’s 0.75 percent.
Fig. III.f. Pakistan's Share in W orld Exports (percent)
0.2 0.16 0.15 Percent 0.16 0.14
0 1990 1995 Export Share % 2000 2004
Bargaining power of supplier: Bargaining power of supplier is quite low as the industry is quite in its boom and there are many supplier countries available out there which discriminate from each other due to quality strong ness-basically content level variation due to various reasons. Still there are quite a lot un served markets also been depicted by the strategic group map1. Bargaining power of buyer: The power seems to be intensely high as from the map there are many firms in the same business which are accelerating due to low pricing strategy & strong taste. Still people have high purchasing power and therefore there is intense demand for Lipton due to conformity its quality standard even though with high price. This is also possible due to the product good will and its geographically dealing strategies.
Impact of forces on cost and price structure:
Barriers to entry:
Cost: The cost is the main reason for barriers and the market is concentrated so the cost is high but the switching cost is low.
Price structure: Sometime the government changes its policies and the profit of the company is distributed among five companies because there is no new firm so the companies’ structure there prices according to this situation.
Cost: As above explain that the supplier power is high the cost is also high in tea industry because the tea is an import product so the supplier charges according to their money value or according to their prices so this increases the cost. Price structure: When the cost high the firm tries to recover its cost so they structure the price to keep in view the cost and high cost push towards high prices.
Threat of substitute:
Cost: There is low switching cost but the change in technology increases the cost of substitute. If the substitutes reduce the prices then the cost is higher for tea industry because there is low switching cost. Price structure: The companies structure their prices by keeping in view of the prices of their substitute. If the price if substitute id reduced they have to reduce the price also. And give some incentives to the buyer to compete in the market.
Cost: If the buyer power high and bargaining leverage is there then its increases the cost and the high the cost higher the prices and price sensitive buyer switch to other brand. Price structure: The firms structure their prices keeping in view their buyers which type of segment using their product and if there is need of incentives how, what, and when they give incentives.
Cost: There is high exit barrier if the industry earning profit or not the cost is there it is a high budget investment industry so you cannot easily take out your money or leave the industry. Price structure: The rivalry companies structure their prices according to their competition it increases the prices if they want high revenue and the quality is good ant they have the loyal customers and high market share. So these forces have some positive and negative impacts on cost and price structure.
Crop figures (in m.kgs) Aug 06 Aug 05 Jan/Aug 06 Sri Lanka Kenya 21.8 23.21 24.5 21.79 210.0 181.19 Week 41 93.461 3,620 Week 42 96,255 4,740 Jan/Aug 05 215.1 209.8 Week 43 106,765 N/A N/A 11,440 N/A N/A
Forthcoming auction quantities (pkgs.) Mombassa Blantyre Colombo Jakarta Kolkata Guwahati
6.2 m.kgs 5.6 m.kgs 10,080 143,039 156,094 10,460 N/A N/A
Potter’s 5 forces model of tea industry
Supplier’s power India, Kenya, China, Sri Lanka, Assam, Ceylon
Barriers to entry High investment Low switching cost Govt. policies Huge Capital requires.
Tea industry Rivalry
Lipton, Tapal, Supreme, Tetley, Open tea
Threat of substitute Coffee, soft drinks, carbonated drinks, mineral water and other beverage items.
Buyer power High volume buyer Low switching cost High range of substitute
The economic situation of industry:
In south Asia tea consumption is very high, It is a profitable industry, because the Pakistan the biggest buyer of tea.
Lipton introduce its other brands like “ice tea” & “herbal tea & flavor tea” it is the oldest brand in Pakistan so its quality is best people prefer Lipton and they use to of its taste. The company can increase its market share in a growing market. New innovative products to meet the customer requirements can be introduced. Fast growing economy and per capita income is an opportunity. Expansion in consumer base of the country has opportunities to develop new products and find new markets.
Lipton is facing tough competition from tapal because it come up with Danedar quality and with herbal tea in Pakistan and its market share increases day by day now there is another international brand come into the Pakistan’s market name Tetley it also increasing its market share day by day. The company has a threat of being a foreign company. Increasing competition is a threat. Free Trade Agreements with the countries like Srilanka (SAFTA) that are heavy exporters of tea pose a threat of their tea could be available in the market in cheaper prices. Smuggling of tea also poses a threat. Innovative products by the competitors.
Rate of change of technology
The rate of change in technology in tea industry is very low but they are taking action on small scale in changing the technology here are some steps taken to change the technology from tea cultivation to production(from net ).
Monitoring in Tea Production
By Nigel Melican
Because tea factories have, for so many years, been producing tea that always finds a market,
monitoring for optimum efficiency and quality has not necessarily been built into the production process. But things are changing, and as packing companies are now buying more tea directly from the producers, entering into forward contracts, and specifying exactly the type of teas they want, it is becoming more important for manufacturers to be able to meet those specifications. International regulations controlling acceptable levels of pesticides and other residues, health and hygiene, among other things, also make measuring and monitoring an essential part of factory operations. Every tea factory manager should ask himself daily about his process conditions, “If you are not measuring them, how are you going to control them?” The secret to the successful running of a tea production unit is to assess anything that could possibly go wrong, to isolate it, and then modify procedures to ensure that it will not go wrong in the future. If the risk areas are monitored and all procedures are followed correctly, then the risks are eliminated. Built in alarm systems that alert managers and workers when things threaten to malfunction will help to reduce errors. MONITORING IN THE FIELDS The two aspects of monitoring needed for the growing crop are of the local climate and attacks by pests. Tea yield and quality are very dependent on the weather, so the first stage of monitoring is the regular collection of data about climatic conditions. Every tea estate should have efficient equipment to measure temperature, humidity and rainfall, and should collect such information as part of the efficient running of the estate. Monitoring methods can range from visual reading to collection of weather records by satellite link. With modern technological methods of weather recording, and routine collection of data, it is often possible to predict such factors as the onset of insect infestation and changes in crop yield, which can be directly influenced by weather patterns. Methods such as plucking rounds, irrigation, fertilizer rates and applications of relevant pesticides can then be adapted to suit the prevailing conditions on a day-to-day basis. The crop should be regularly monitored for attacks by pests. This is usually done through careful observation by the naked eye, and information should be shared with neighboring estates in order to avoid the rapid spread of infestations over a wider area. MONITORING THE PLUCKING AND TRANSPORTING OF LEAF As soon as the green leaf has been plucked, things can very easily start to go wrong unless temperature is carefully monitored and controlled. First of all, tea should be processed as soon as possible after plucking, so the fresh leaf must reach the factory in as short a time as possible. Two hours is the recommended; three hours is the absolute limit. During transportation the leaf must also be kept cool or it will start to ferment (oxidize), producing tea with an unpleasant, stewy flavor. Simply throwing the sacks of tea into the back of a lorry in very hot conditions will create these kinds of problems. A better method is used by some estates: they hang the bags of leaf on Lorries with racks. This allows air to circulate freely around the sacks and helps to keep the leaf cool. Some also use plastic stacking baskets to stop the leaves being crushed and becoming overheated.
It is much cheaper and more efficient to make sure that leaf is handled correctly than to introduce expensive refrigerated Lorries. The leaf should be transported in sensible containers and the monitoring of the temperature of the leaf inside the sacks or baskets is essential. If leaf temperature goes above 43ºC, the cell walls begin to break down, release enzymes and the catechins in the leaf begin to oxidize. What plantation workers often do not appreciate is the fact that when leaf is picked in a field where the ambient temperature is 40ºC and is loaded into a sack where the ambient temperature is also 40ºC, the temperature of the leaves nearest the outside of the sack will drop down to 28º, 29º, or 30º, as water is evaporated from the leaf. But the water stops evaporating in the middle of the sack where the leaf is packed more tightly and no air is circulating, and here the temperature can rise to as high as 50ºC due to the heat of respiration. To avoid such high temperatures, leaf should be packed loosely and air must be allowed to circulate freely. Packing can be controlled by monitoring the weight of each container and the heat inside the containers is easily monitored by inserting a thermometer probe into the sacks. Use of portable data loggers ensures that factory management has a permanent record of green leaf transport conditions.
MONITORING DURING WITHERING Withering is normally a 16-20 hour process carried out under ambient conditions which can often fluctuate. It involves two processes. The first is the biochemical process during which the starch in the leaf is converted to sugar, and some of the proteins in the leaf turn to amino acids. The withering process prepares the juices in the leaf for the manufacture of tea. If leaf is taken directly from the field and processed without withering, the resulting liquor will have a harsh, grassy, and unpleasant flavor. This biochemical wither takes an absolute minimum of 12 hours and cannot be speeded up without losing quality-but it can be extended to 24 hours by cooling the leaf. As yet, there is no on-line test to monitor the optimum biochemical wither, but tea scientists are working on it. The second part of the process is the physical wither during which water is removed from the leaf, in order to reduce the moisture content from 80% to 68%. This part of the process can be accelerated by blowing dry air through the leaf and by applying heat. To ensure best quality, there should at least be some checking of the temperature of the air the leaf is receiving. An air temperature of a steady 25-30°C is ideal, but if it goes above 35°C the leaf may become overheated and quality will fall off very rapidly. A temperature of 40°C is definitely damaging. Alarm bells therefore need to sound-perhaps when air temperatures reach 33°-35°C-warning staff to turn down the heat. Measuring of how much moisture has been lost from the withering leaf is traditionally carried out by examining and squeezing a handful of leaves. Checks are also run by weighing a bag of leaf into the withering trough and then taking the leaf bag out at intervals and weighing it again to see how much moisture has been evaporated during that time. The first of these monitoring methods depends on the skill and experience of the individual worker. In a factory of 50 troughs, the second method is laborious. With orthodox leaf, the target moisture content after withering is between 50% and 75% moisture, depending on the type of manufacture. Assam’s are traditionally soft withered (65-75% moisture) and Ceylon’s are hard withered (50-60% moisture). In CTC leaf, wither of between 68% and 70% is usual. Variations in the moisture content of leaf after the withering process are, however, often greater than
variations in the moisture content of fresh leaf coming into the factory from the fields. This means that the withering process often widens the standard deviation of moisture content, instead of reducing it, in the withered leaf. This quite common problem can be expensive and complicated to solve. The best way to tackle it is to install Near Infra Red (NIR) moisture measurement. NIR equipment shines a light on the leaf and measures the amount of interference caused by water in the reflected light. Measurements are taken 10 times every second by a sensor head as the tea moves along on a conveyor belt. This is the only known way of accurately measuring moisture content instantaneously and on-line. Its use is standard in other related industries (tobacco, coffee, flour milling and food products). NIR is expensive but can also reduce production costs at the later drying stage. Dryers work best when run under constant conditions. If the tea to be dried enters the dryer at a fixed rate with fixed moisture content, the dryer will work more efficiently. As the moisture content varies, the dryer conditions also have to be varied to suit the tea, or factory managers have to accept that some tea will not be dried enough and other tea will be dried too much. The former compromise increases fuel costs and both compromises reduce tea quality. NIR moisture monitoring allows dryer feed rate to be varied automatically to ensure a constant load of water into the dryer. One liter of oil is required for every two kilograms of tea dried, and running the dryer at a constant setting optimizes evaporation, saves fuel, reduces costs and improves quality. These kinds of savings and improvements are particularly relevant to larger factories where up to four or five million kilos of tea are being dried annually.
MONITORING DURING CUTTING Leaf maceration by cutting is swift and little monitoring is needed during the cutting process, but checks on increases in temperature in the Rotor vane and the CTC machines will give the factory manager an indication as to how efficiently his machinery is working. If the temperature rises too high, it is an indication that the nip is too tight. If there is no steady increase in temperature from one machine to the next, then one nip is insufficiently closed. In the ideal factory, this background information should be consistently monitored and logged. The actual temperature does not need to be checked all the time, but staffs do need to be quickly aware if it is too low or too high. The size of CTC cut or degree of maceration will usually be checked by eye, but monitoring the efficient use of machinery will help to ensure that costs are kept down and machinery is well maintained. The electric current drawn, the sounds the machine makes while operating, the vibrations, and the smells of the process, all add to the overall picture of how the factory is running and operators should be constantly aware of them. MONITORING DURING OXIDATION More can go wrong during the natural oxidation (fermentation) stage of processing than in any other part of tea manufacture. This is because oxidation involves a very sensitive, exothermic reaction that produces heat and which can easily get out of hand and goes too fast. Monitoring the time and temperature of fermentation is therefore crucial. The modern method of temperature control is to blow cool moist air through the dhool (macerated or rolled withered leaf). Temperature, humidity and airflow all therefore need to be monitored.
The duration of oxidation at a given temperature determines the rate of change of green catechins to theaf lavins and the amounts of thief lavins that are converted to thearubigins. Thus time determines the final briskness, strength, thickness and the flavor of the liquor. So, timing also needs to be monitored. Given that during oxidation, cool air is blown from bottom to top, the dhool at the bottom of the layer is cooler than that at the top. Ideally, the dhool should be forked over at regular intervals to prevent the lower layer remaining under-fermented and the upper layer from over-fermenting. This can happen even more easily if the layer of dhool is too thick. It is possible to install continuous monitoring to check the temperature at different depths to see what the differential is. Too great a difference indicates either that the air is not moving fast enough through the dhool or that the air temperature is too high. The best thermometers to use for this 3-level temperature checking are stainless steel probes or electronic thermometers that are inserted into the dhool at appropriate depths on the oxidation bed. On a continuous fermenter, which generally turns the tea throughout the process, it is important to monitor the inlet air temperature, the inlet air humidity, the temperature of the surrounding air, and the temperature of the dhool. The length of time that the fermenter is set up for varies according to conditions and often needs resetting to suit the optimum oxidation time for the leaf on any particular day or hour. This varies according to the raw material, the time wither and the oxidation temperature. The only way that the factory manager can know the optimum fermentation time is to run his process line with the fermenter set at a particular time and save a sample of black tea from the dryer, then to repeat that process three more times at a range of fermentation times, until the optimum time of oxidation has been decided by liquoring and tasting the four samples. The problem with this method is that it takes four hours to run the test and, during that time, the temperature, humidity and general conditions in the oxidation room can change, often negating the purpose of the test. And yet, a factory can be losing between 5 and 7 US ¢/kg of tea by being 10 minutes wrong with the fermented setting. To save time and to accurately find out the optimum setting for the fermented, we recommend the use of the Tea craft Op-Tea-Mizer. This unique piece of QC equipment allows the factory to take samples from four timed points on the fomenter and to dry the tea under similar conditions in 20 minutes instead of the normal four hours mentioned above. The fermented can then are set to its optimum time and ensure that the factory produces the best tea possible from any given line of dhool. MONITORING DURING DRYING During drying, both temperature and airflow need to be monitored. Most tea driers have some kind of system for indicating temperatures, but they are often inaccurate-sometimes by as much as 10° Cbecause they are old or they were wrongly calibrated in the first place. Temperature variations of only 3°-4° can mean the difference between good and spoiled tea. Thermometers need to be absolutely accurate and they need to be in the right position in the drier to be of any use. If an accurate thermometer is in the wrong place in the drier, or is the wrong length, it is of no use at all. Two aspects of airflow need to be checked-both the volume going into the drier and the air pressure inside the drier. Because in a fluid bed drier the air passes through the bedplate at high resistance, it goes through the holes into the chamber very quickly to fluidize the tea particles. As water is lost from each tea particle, its temperature increases proportionally and so, by measuring and comparing the temperature of the inlet air and the temperature of the exhaust air, it is possible to monitor the moisture content of the tea accurately within the drier.
Most modern fluid bed driers have built-in temperature recorders but, again, these are only any good if they are accurate. It is necessary to check and recalibrate thermometers to be absolutely sure that readings are accurate and to use a reliable platinum resistance thermometer as the factory standard. In some driers, there can be a +/- 3% deviation in moisture content of the made tea. Final monitoring needs to be carried out as the dried tea exits the dryer in order to again check the moisture content. Ideally, NIR equipment should be used here for purposes of accuracy. Alternatively, tea samples need to be taken every 10-20 minutes to check the moisture content using a reliable moisture meter such as the Tea craft Thermoray. It is also advisable to check the moisture meter regularly for accuracy: ISO standards exist for this. MONITORING GRADING In the tea factory, checks on grading are traditionally done by eye. The grading machines (sifters) are set up with standard meshes which must not have any faults or large holes in, and a more exact way to check that the meshes are doing their job of separating the leaf into particles of regular sizes is to use particle size analysis. This passes a set amount of tea through the sieves in a set time to check that the grading profile is the same each day or each week. The grade profile is measured using a set of certified sieves and a laboratory sieve shaker to test that the size range of particles going into a grade is always the same. If it is not, then the settings and meshes of the factory sifters must be adjusted slightly. The amount of emphasis put on grading depends very much on what packers and blenders are demanding from their suppliers. It is especially important for teabag manufacturers. If the density of a given tea is incorrect, it can affect the amount that goes into the tea bags and may mean that expensive adjustments have to be made to packing machinery. To help with this problem, modern factories use tapped density volume meters to make sure that after grading; a given volume of tea has a certain weight. The old-fashioned way to check this is to use a measuring cylinder that is filled with tea, and then bang on a hard surface to see how the level of tea settles. However, there are too many variables for this method to efficiently measure density and it does not meet international standards, thus an automatic tapped density voltmeter is recommended for consistent monitoring. MONITORING THE MOISTURE CONTENT IN MADE TEA Once the made tea has been packed it is possible that it will absorb quality-destroying moisture during transportation and storage. Paper sacks, with their four layers of paper, foil and polythene, are a vast improvement on tea chests, but if sacks are not made to internationally acceptable standards, are not properly sealed at the valve or are ruptured in any way, the tea will not be totally protected from taints and moisture. When sacks of tea arrive in the factory where they are to be blended, it is important to check the moisture content so that tea with a higher level of moisture content is used before tea with a lower level of moisture. Monitoring bulk moisture content can be carried out by plunging a probe moisture meter into the sacks or tea chests. FUTURE EXECUTION Tea companies may feel that all the tea they make will find a market and that they therefore do not have to worry very much about monitoring the various stages of the manufacturing process. But monitoring can help them to save money by making efficient use of machinery and equipment, and by improving and standardizing quality they will attain better prices in the marketplace.
The amount of monitoring needed varies from one factory to another and monitoring must be appropriate to the particular situation. Many factories would benefit from the use of simple equipment to run simple checks. But the most important aspects of manufacture that every factory should be concerned with are the monitoring of temperature, humidity, airflow, moisture content and density in the packing room. One of the most useful pieces of equipment that can help tea manufacturers improve quality and reduce costs is the unique award-winning Tea craft ECM System for Miniature Manufacturing of Black Tea. This mini-scale tea factory can precisely simulate any process conditions and is being used by tea research institutes and forward-looking tea producers throughout the world. It can be set up to show how tea quality varies according to process conditions and helps the factory manager to set conditions that are ideal for the quality he is trying to achieve. Samples of teas made under a range of different process conditions can be sent to brokers who can immediately put a value on the tea and therefore tell the manufacturer how much he would make or save on the production of that tea in the factory situation.
Supply chain of Tea:
Production process of black tea in Japan
All Green Tea, Black Tea, Oolong Tea and White Tea Comes from the same plant
In some places tea is cultivated in neatly manicured rows.
In other places tea grows in clumps of bushe That spread up and down hillsides.
In most countries tea is plucked by women. BACK TO TOP
They pick the top two leaves and bud from new shoots that sprout on the top of the bushes.
Here is a close-up of the top two leaves and Bud.
Black Tea production process
Here the pickers take their tea to be weighed.
These withering troughs are set on screens with air flowing underneath to remove moisture.
Rolling will expose the inside of the leaves to air.
The exposure to oxygen will activate the enzymes to change the flavor and make the leaves turn dark and end up as black tea.
Next the tea must be dried.
Finally it is sifted for size. Smaller particles are perfect for teabags.
Larger leaves will be used as loose tea.
At the end of the journey the tea will be blended and packed and sold to happy tea drinkers around the world.
Figure 1 Tea value chain
Value chain analysis: Input logistics:
In inbound logistics the company receive material from supplier .in tea industry the company receives raw material of from grower to supplier and supplier tocompany.the first one is leaf brought in to the factory and then they process the leaves and turn them into raw tea then this tea brought to the broker and then it would sale by auction to company.
The tea company perform some processes like Withering, rolling, roll-breaking and green leaf shifting., Fermentation, firing, orthodox, CTC, The legg cutter, Restrovane, oxidation , Grading ,flavoring turn into danedar and other crush or dust form.
On this stage the tea turn into finish product all packaging would do and sent for store and go down and storage places.
Marketing and sales:
In this stage the company starts its advertising campaigns and distributes their product. And open their distribution channel and outlets.
In tea industry the services are the complains by the customer like the tea is a perishable good and its suck the smell of other products like food ingredients and detergents so this complaints fulfils by the company and they do regular visits to their distribution centers and retail stores.
Problem in supply chain:
Yes there is a problem in supply chain that companies did not get direct from suppliers they get from brokers or auctioneers and there is no proper supply of raw tea and companies come after a long time in supply chain.
International scenario in light of WTO:
The international scenario is two types for Pakistan tea industry: Negative affects Positive affects
The negative is that the international brads come in and try to capture the tea market of Pakistan. India also a big producer of tea and they also have the well known brands like TAJ MAHAL, RED LABEL, TATA TEA etc. so they will also try to damage the tea industry of Pakistan.
On the other side Pakistan has the opportunity to introduce their brands on international level and also have the opportunity to capture the market of India and other neighbor countries. This will increase the investment level in tea industry of Pakistan.
Need analysis Need satisfaction:
• • • • • • Alertness Keeping hot For elimination of depression. Addiction Time pass Entertaining guest
The worldwide low prices for tea are finally forcing modernization among the specialty tea producers. Premium tea is a niche market and a wonderful beverage, but often remarkably 45
inefficient from a business perspective. This inefficiency has diverse causes, many revolving around almost unchanged multi-generational family business practice. Family feuds span generations, and ultimately lower the regional image for all involved. The basic requirements and functions/uses are to cater need like hunger, pleasure, addiction, alertness, entertaining guests to maintain body temperature in winter specially of course for time pass SHARE OF MARKET: Tea popularity in the beverage industry is surprisingly sprouts in recent decades .By the questionnaire we have conducted there is quite positive trend towards its consumption.
WHAT TYPE OF BEVERAGE DO YOU DRINK MOST FREQUENTLY Frequency Percent Valid Cumulativ Percent e Percent Valid tea 21 52.5 52.5 52.5 coffee 2 5.0 5.0 57.5 soft drink 14 35.0 35.0 92.5 juice 3 7.5 7.5 100.0 Total 40 100.0 100.0
what type of beverage do you drink most frequently
10 0 tea coffee soft drink juice
what type of beverage do you drink most frequently
DO YOU DRINK TEA Frequency Percent Valid no yes Total 7 33 40 17.5 82.5 100.0 Valid Percent 17.5 82.5 100.0 Cumulativ e Percent 17.5 100.0
do you drink tea
0 no yes
do you drink tea
RECOMMENDATIONS The potential markets should be tightly captured & expansion should be made to serve the un served markets
To eliminate the possibility of organic matter interfering with taste or color the demonized water had to have a total organic carbon (TOC) content below 50 parts per billion. The water purification specialists at ELGA LabWater reviewed the quality of the mains water at Unilever’s thirteen tasting sites and proposed two models from their PURELAB Option range: the Option-R and the Option-E.
• • • • • •
Surge for non users proportion and there fears regarding the specific product use. Product up gradation anticipation is intensely required to keep ahead with Competitors Must explore the new scales & dimensions for expending the existing market by inventing new product performances. Total demand increase for product category Rekindle interest in a mature market Increase usage rate & i.e. frequency of use very important to play as Think global & act local. Increase total no of users.
The first step in w
Segment N ( Non users)
Participation and demographic information Do you drink tea? . Yes . No Which of the following age groups do you belong to? . Less than 21 years old . 21–44 years of age . 45+ years of age What was your highest level of education completed? . Primary level . Secondary level . Intermediate level . Graduation level . Masters level . PhD level Beverage consumption Excluding water, what type of beverages do you drink most frequently? (Check one) . Tea . Coffee . Soft drink . Juice . Other: ______________________________. . Do not know / No response When do you drink tea? (Check all that apply) . In the morning . At noon . In the afternoon . At night . Never (please quit questionnaire.) . Do not know / No response Tea consumption In what form do you buy tea? (Check all that apply) . Tea bags . Tea leaves (Open tea) . Sachets . Bags . Box packing . Jar
. Other: _____________________________. Where do you usually buy tea? (Check one) . Supermarket . Specialty store . Natural food store How often do you drink tea? (Check one) . Daily . Every other day . Weekly . Monthly . Do not know / No response What type of tea you consume? (Check one) . Black tea . Green tea . Pink tea . Other: _____________________________. . Do not know / No response How much of tea do you consume per day? (Check one) . One cup or less . Two to three cups . Four to five cups . More than five cups . Do not know / No response What is your main reason for drinking tea? . Fun . Brightness . Taste . Health . Other: _____________________________. . Do not know / No response Which of the following attributes do you consider when purchasing tea? Rate the attribute below according the following scale: 1 = Very important 2 = Important 3 = somewhat important 4 = Not very important 5 = of no importance Attribute
Price Consistency of taste Quality Brand name Source of production Nutritional content Health benefits Organically produced Naturally produced If you do not take open tea under which label you prefer to buy? (Check one) . Supreme . Lipton . Tetley . Vital . Tapal . A1Karak . Other: _____________________________. . Do not know / No response.
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