Internationalization project: Nepalese Sustainable Tea in Europe

Organic Black Tea of

KTE
Kanchanjangha Tea Estate & Research Centre

Group – 3
Aayush Kumar Chaudhary (21305)
Sakhil Pant (21319)
Sabal Shrestha (21331)
Himal Thapa (21335)
Saurav Timilsina (21339)
Established in 1984 by
Mr. Deepak Prakash
Baskota.

The first garden in

the country to achieve
organic certification by the
Institute for Market
ecology (IMO)

Production averages about

60 metric tons per
year of the 200 metric tons of
organic grown in Nepal.

Have Fair Trade Certified (FLO)

garden in Nepal,
employing 600 farmers
(200 directly and 400 indirectly)

2
 Product
Black fermented tea
and partly fermented
tea > 3kg (HS090240)
• Organic Black Loose Leaf
Tea
• Black Ruby Tea
• Buddha's Blend
• Black Teabags
• Kanchanjangha Noir
KUMARI GOLD Organic
Black Stevia - Sugar Free
• Organic Ginger Black Tea
• Organic Masala Tea
• Organic Nepali Breakfast
• Organic Tulsi Tea
• Silver Yeti
• White Prakash
• Ginger Black Tea

3
 Potential Market in Europe

Method we used for market selection are:

Quantitive Analysis Denmark

• Decision Support Model (DSM)
• ITC Tools
Poland
Qualitative Analysis
• SWOT Analysis
• PESTLE Analysis
Austria

4
d Finland
Denmark
Norway
Estonia
Around

$10M worth
From Decision Selection Model, Latvia
Denmark selected as a target
market categorized as Lithuania
Black Tea is
Denmark

‘Leapfrogging’ i.e.
reland
United Kingdom opportunities in target markets which imported
Belarusin 2021.

13% Average
exhibit long-term growth
Netherlands Poland
Ukraine
Belgium
Germany growth in 4 yrs.
Czechia (-ITC Trade Map)i
Slovakia Moldova

5
Austria Hungary
Denmark

Strengths Weaknesses Opportunities Threats

• Political risk short term • Tea market forecasted to • Denmark 7th in the • Over reliance in the
and long term of only 1 in reach 120.90 million USD world as the most public sector for
crendendo scale. by 2025 at growth rate of inviting countries for employment in the
• Denmark ranks No. 1 in 2.28% per annum. Which capital investment. economy.
Europe and No. 4 in the is decline from growth • In Denmark, the • Danish wages are high
world for ease of doing rate of 16.20% from consumption of and personal taxes are
business. 2015-2019. specialty tea (products among the highest in the
• Denmark ranks 1 in 2021 • Small market size as a from the bush Camellia world.
Corruption Perception consequence of small sinensis) is steadily
index. geographical size. increasing.
• Sound social order. • Tea drinkers are more
Diverse culture with low interested in healthy
crime rates. 8400 crime green, functional
reported in year 2021. botanical tea and herbal
blends
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PESTLE Analysis
Denmark Poland Austria

Political Factor Rated 1 in Crendendo rating scale Rated 2 in Crendendo rating scale Rated 1 in Crendendo rating scale

Tea market forecasted to reach 120.90 million Tea market is estimated to reach USD Tea market is forecasted to reach
Economical Factor USD by 2025. 539.41 million by 2025. USD 398.29 million by 2025.
Coffee is still widely preferred
The consumption of black tea and green tea People with higher educational level
Social Factor also termed as healthy tea is on the rise. consumed black tea.
although the consumption of tea is
on the rise.
Denmark is rated as one of the most Corporate fund needs to account for
Technological innovative countries in the European Union 53.3% of Gross domestic expenditure on Difficult to open a startup due to
Factor as per the European Commission’s European research and experimental development technological limitation.
Innovation Scoreboard for 2019 (GERD)
Ranked 4th in ease of doing business in the Ranked 40th in ease of doing business in Ranked 27th in ease of doing
Legal Factor world the world. business in the world.
Environmental Focus is on Green Growth and Green Air pollution is a serious environmental Provision to reduce transportation’s
Factor Transition. challenge faced. role in air pollution.

https://data.worldbank.org/ https://www.statista.com/ https://credendo.com/en/country-risk/ 7

Value Imported in
2021 from world
(USD Thousand)

Denmark = $10,110

Poland = $ 69,586
Austria = $ 2,397
- ITC (Trade Map)

Value Exported in
2021 from world
(USD Thousand)

Nepal = $ 22,562

- ITC (Trade Map)

We will entered single European Market = Denmark

8
Market Analysis

Consumer Taste Culture Economics Politics

A Natural, earthy A Start of Tea Culture A Until 2025, the tea A Nepal-Denmark
alternative flavors A Premiumization with market in Denmark is relations Since 1967
such as ginger, Private label RTD tea forecast to reach A Denmark, member of
matcha, turmeric and more accepted 120.90 million USD in EU, trade
cumin are in higher A The perception of tea retail prices, transactions with
demand has also changed, as A Boost on Online Nepal is governed by
A different restaurants it is viewed by most Shopping due to EU
have been trying to younger consumers Pandemic
enhance culinary as a sensual and
experience by wellness drink.
introducing a several
course tea pairing
menu.
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 Sustainability Standards in
Denmark
CERES, Fair Trade Certification,
USDA-NOP

• Institute for Market Ecology

(IMO).
Any of these Certification

Common Certification
• Certification of Environmental
• Certification of Environmental Standards(CERES)
Standards (CERES), • NASAA (National Association
• USDA-NOP (National Organic of Sustainable Agriculture,
Program) Denmark KTE Australia)
• Rainforest Alliance, UTZ
Certified, Certification Certification • JAS (Japanese Agricultural
Standards)
• Fair Trade Certification • USDA-NOP (National
Organic Program)
• Fair Trade Certification

Import Requirements Applied for Black Tea (HS 090240) have 42 Standard Measures in Denmark
(-ITC market access map) 10
 Legal Requirements
Tolerance limits for non-
microbiological
Packaging Requirement
Tea Sacks are of food grade foil lined substances
paper sacks Eu legislation ensure the safety of
weighs between 700kg to 1500kg consumer.

0% Tariff
In 2017, for Transparency
SCOPE- Season, cultivar
and Origin Picking Standard
& Process and Elevation

Label Requirement 0% AVE Maximum Permitted

On bulk packaging
identification number, Residue Levels (MRLs)
quantity of content General conditions concerning
ingredient list contaminants in food Contaminant
statement of identity substances may be present in food
& country of origin are required as a result of the various stages of
its production and marketing or due
to environmental pollution.

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 Price ↑
(High) Competitor Analysis

50% of the Danish tea market that was

occupied by multinational companies which
is declining
Increase in the market share of the
private labels against MNCs

Customer Taste→
← Customer Taste
(High)
18% Growth in Retail Value For
(Low) Economical & Organic Fair Trade Certified
Code Companies
Team
While KTE have wide range of
products but it lacks in Brand
Awareness and Local Dealer
Partnership.

Price ↓
(Low) 12
 Mode of Entry : Strategic Alliance Partnering

Activity-domain-based Partner-characteristics-
Option based Option

KTE operational responsibility: Partners Operational responsibility

Production Quality management Inventory management Distribution
Packaging Awareness
Alliance-structure-
based Option

Combined operational responsibility

Marketing Transportation Storage/ Inventory
management 13
 Pricing Strategy

Targeting High End Niche Market

With Support of
Danish Tea Association

Competitive Optimal Price

Pricing 01 02

$28/kg
Strategy Possible Partners
A.C. Perch’s Thehandel
Osterlandsk

Black Orthodox Tea

Premium Tea of
Consistent Quality
Price Like High value
Darjeeling Tea = $29/kg
(-ITC-Trade Map)
Mode of Entry:
Strategic Alliance Partnering
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 1. Electronic &
Print
Advertisement

(€5,000)

Budgeting 4. Digital
Marketing
of Amount
€35,000 (€3,500)

5. General
2. Samples &
Awareness
Tea Tasting
Campaign
(€3,500)
(€5,000)

6. Research &
Development
3. Tea Events
(€10,000)
(€8,000)
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 Forecasted Annual Revenue of KTE in Denmark

12 MT
$20,000.00
$18,000.00
7.00
6.50

Revenue Amount

Market Share (%)

Quantity $16,000.00 6.00
$14,000.00 5.66% 5.50

(in 000’s)
Exported 5.10%
$12,000.00 5.00
in first $10,000.00 4.60% 4.50
year $8,000.00 4.14% 4.00
3.73% 3.50
$6,000.00 3.36%
$4,000.00 3.00
$2,000.00 2.50
$- 2.00
0 1 2 3 4 5
Total Revenue of KTE
$336.00 $421.44 $528.62 $663.05 $831.66 $1,043.15
(USD in 000's)
Total import Value from World
$10,000.00 $11,300.00 $12,769.00 $14,428.97 $16,304.74 $18,424.35
(USD in 000's)
Proft Before Tax
$216 $271 $340 $426 $535 $671
(USD in 000's)
Market Share (%) 3.36 3.73 4.14 4.60 5.10 5.66
Year

Total Revenue of KTE Total import Value from World Proft Before Tax Market Share (%)
(USD in 000's) (USD in 000's) (USD in 000's)

According to ITC – Trade map, 11%

growth in imported quantity and 13% growth
in imported value between 2017-2021 in Denmark
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 We would like to
Thank you
KTE,
Mrs. Shanta Baskota
Mrs. Aasha Bhadhari
& BG Tea Bar for
supporting us in this
project

17
Thank You !!
Reference
https://marketanalysis.intracen.org/en
https://www.trademap.org/
https://www.macmap.org/en/
https://exportpotential.intracen.org/en/
https://findrulesoforigin.org/
https://www.danishteaassociation.com/english/
https://denmark.dk/society-and-business/business-environment
https://www.statista.com/statistics/
https://www.teaandcoffee.net/f
https://credendo.com/en/country-risk/world
https://www.theigc.org/project/using-decision-support-model-identify-export-opportunities-
rwanda/#:~:text=The%20Decision%20Support%20Model%20(DSM,sales%20reach%20into%20foreign%20markets.
https://www.researchgate.net/publication/255522676_The_methodology_of_the_decision_support_model_DSM_Overview
_of_international_market_selection_methods
ANNEX
Decision Support Model

Process of Filtering Data of Poland, Denmark & Austria for Filtering

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Decision Support Model

Taking advantage of a growing market’, i.e. opportunities in

Poland target markets that are growing in both the short and long (REO 1,2)
term;
‘Leapfrogging’, i.e. opportunities in target markets that exhibit
Denmark (REO 1,4)
longterm growth;
‘Growing and consolidating’, i.e. opportunities in target
Austria markets that experienced growth in the recent past/emerging (REO 1,3)
opportunities;

REO Map for Finalizing the market opportunities Result of the DSM

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5 year Financial Projection

Year 0 1 2 3 4 5
Production cost $5 $6 $6 $7 $8 $9
Carrying Cost $5 $6 $6 $7 $8 $9
Selling price/ Export price per KG $28 $32 $36 $40 $46 $52
Profit before tax $18 $20 $23 $26 $29 $33
Annual Export Of KTE(Quantity KG) 12000.000 13320.000 14785.200 16411.572 18216.845 20220.698
Total annual profit of KTE $216,000 $270,929 $339,826 $426,244 $534,638 $670,596
Total Revenue $336,000 $421,445 $528,618 $663,046 $831,658 $1,043,149
Total Import of black tea in denmark from world $10,000,000 $11,300,000 $12,769,000 $14,428,970 $16,304,736 $18,424,352
Contribution of KTE in import of black tea in Denmark 3.36% 3.73% 4.14% 4.60% 5.10% 5.66%

Long term import Growth in Denmark(2017-2021)

According to value 13%
According to Quantity 11%

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