“We should go for quality, not for volume”

Uday Chapagain President of HIMCOOP

How do you assess the standing of Nepal Orthodox Tea in the international markets?

Nepal Orthodox Tea in the international market is gaining popularity because of its unique characters in terms of liquor and flavour. Furthermore, we are making our product as tea from the top of the world which is far from pollution and with the mixture of Himalayan fresh air. None of the other tea producing country can compete with that. We are branding Nepal tea in the international market as “Quality from the Himalayas”. We are actively participating in the tea world exhibitions from America to Europe, GTZ , WINROCK International and HMG is co-operating to promote our brand image. We are grateful to have Mr. Reinhold Messner, the famous mountaineer as a Brand Ambassador of Nepal tea in Europe. European tea buyers are very much interested in Nepal tea and started buying our quality tea through HIMCOOP. HIMCOOP is the marketing office of Orthodox tea of Nepal . We have also introduced a Code of Conduct which is very new in the international tea market.

Which markets do you export to on a regular basis? And what is mechanism of the exports? What are the feedback that you have received in terms of product quality and quantity?

Japan, Germany, America and India are our regular export markets. Manufactures are selling directly to the respective countries and a joint marketing office HIMCOOP organises combined container loads to the buyers to promote our product actively and aggressively in the international tea market. Our buyers are encouraging us by saying that a good appearance, light liquoring, unique flavours and good infusion are the positive feedback for the quality product.

What are the constraints that we are facing in accessing the international markets?

We have many constraints that we are facing in accessing the international market like,

a. difficulty in procuring package materials such as tea chests, paper sacks;

b. container availability in right time to dispatch our product;

c. lack of fumigated pallets;

d. transportation and delay in sea-port. Beyond that, promotional programme is very much needed in the international tea market on a regular basis. We need good financial support for that.

According to you what strategy should Nepal tea adopt? Do you suggest that we go for volume or for quality?

The strategy of Nepal tea should be different from the other tea producing countries as the nature of Nepal is god gifted. We must say

a. our tea is from the top of the world;

b. the gardens are very small, nurtured by the small growers with their own hands;

c we are committed to nature, culture, people and quality while producing the tea. So the product is unique, natural and environment friendly.

We must go for quality not volume.

“We should go for the highest niche market”

suraj vaidya Vice-Chairman, Nepal Tea and Coffee Development Board

How is the Nepali tea industry evolving?

I can see a tremendous prospect in the tea industry of Nepal. It is one area Nepal can benefit from in the long run and it will have a huge benefit for small farmers. The difference between Nepali tea and other teas produced in different parts of the world is: in Nepal the small farmers are owners of the tea they produce whereas in other countries companies produce tea. So, in the latter case there’s no origin, there is no character of the tea. For example, we do not know the origin of Tata tea. In Nepal there are different teas produced by 11 different factories, and have different characteristics. There are small growers who make handmade tea, which have special characteristics of their own.

I was in Calcutta recently where I met the chairman of the Indian Tea Board. He clearly said that Nepali tea is better than Darjeeling tea. Therefore, we need to focus on managing the issue. The prospects are enormous.

Given this context, what should be our competitive strategy in both CTC tea and orthodox tea?

Nepal needs to brand itself. Internationally, consumers don’t know that Nepal produces good tea. However, the brokers and the big buyers know this. Therefore, we need to brand Nepal as a quality tea producer but this will take some time.

We are thinking of making a Nepal logo, a quality logo which will define the quality of Nepali tea. For CTC tea what we could start doing is to look at improving the quality. The quality of Nepali CTC tea is still substandard compared to the region. We need to improve management in the tea garden with small farmers. We also need to improve the techniques in the factory in terms of packaging and promoting them.

What are the constraints that the tea industry is facing both at macro and micro levels?

In the WTO ministerial that was held in Hong Kong recently, the biggest issue was subsidy. And I am not afraid to take on this issue of subsidy. Nepal is one of the poorest countries. And all subsidies in agriculture have been removed. There is no subsidy on farms, or plantation or fertilizers. Take for example, in neighbouring India (Darjeeling), if a company goes into re-plantation, it gets 50 per cent rebate on the investment it makes from the government of India. The price of fertilizer, urea for example, is Rs 5 a kilo in Darjeeling. The price of the same urea would come to be Rs. 10 a kilo in the hills of Nepal. The government should understand that we need to formulate a strategy to help bring down our cost of production. That can be done through providing not just subsidies but incentives to farmers. Subsidies are not so effective. But incentives provoke people better and quicker. The second constraint is finance. It is a huge problem with the farmers. There’s no financial institution in Nepal that caters to the needs of small farmers. Therefore, we need to create a system where we have micro-financing for better utilisation of funds. The Agriculture Development Bank interest rate today for tea gardens in Nepal is about 10 per cent. But from the same bank if you were to ask for a lease for a vehicle, you would get that for 7.5 per cent. You can see where the priorities lie. Therefore the government needs to understand that certain rules have to come up in order to give incentives for this sector. If the government can resolve the financial issue, branding issue, the private sector is capable enough to handle the other issues like marketing.

The industry watchers say that Nepal is still left disadvantaged as far as the quality is concerned, because there are hundreds of farmers involved whereas in other countries it is concentrated. What is your comment?

My belief is “you have to do with what you have”. You cannot always wish for the best. Every country has its advantages and disadvantages. I would convert this into an advantage by saying Nepal’s uniqueness in its tea is that it comes from small farmers. And that has a huge benefit in the consumer market of the west who believe the benefit for small farmers is good. That is branding and marketing. Therefore from that point of view it is an advantage. Yes, it is going to cost a little bit more. We need to work with more farmers, more groups. The cost of training is substantially higher but I think that is a cost we can meet provided the government provides incentives to the farmers. So, that is actually a benefit and not a disadvantage.

There have been reports about small farmers not being satisfied about pricing of green leaves they are getting from factories.

I cannot agree with that because at this moment there is no indicated price as what the fair price is. If I know the cost of production and presume the cost of production to be Rs. 10, and if the farmers are getting Rs 8, then we know that they are being cheated. At this stage the farmers have a valid point for dissatisfaction that there is no benchmark for what the price of tea should be. The Tea and Coffee Development Board would be coming up with a study to verify the cost of production for small farmers in CTC and in Orthodox Tea. And we hope the benchmark prices that we give to the farmers will be fair for them and that they would be able to negotiate prices with the buyers.

What is the trend in global tea market?

People’s drinking habits are changing very quickly. We are living in the generation of Cola drinkers. That could be dangerous because there’s very little market in tea. If you look at coffee, there are many big names like Starbucks who market coffee very aggressively. In tea there is not much marketing. To the extent that I know most of the tea producing countries are nations which have a very traditional approach to marketing. Look at India, or Kenya or Indonesia, whereas in coffee production there are Latin Americas, Spanish who have always been very expansive and gourmet.

Therefore, for Nepal, we need to produce premium quality tea and not look for the quantity but look at the niche markets, where we can get high prices. Therefore, the Nepali tea industry needs to invest a lot more money in marketing in the EU.

As the Vice-Chairman of the Tea and Coffee Development Board of Nepal. What are your plans?

The Tea and Coffee Development Board, has about 50 employees. We need to motivate them. Unfortunately, working in the government sector is different from the private sector. Salaries are extremely low. There is no motivation for work. And therefore the first thing that I am trying to do is to give them credit to their good work. Secondly, we need to speak for farmers. Eventually, we would help them on the financial issues, technical know-how issues etc.

We are trying to set up a research and development centre. We are now dependent on Indian/Sri Lankan research centres. We need to have such centres in Nepal as well. We are trying to set up research centre in Dhankuta and Jhapa. With the growth in tea plantation, we need to have human resource. So, we are trying to convert one of our Phikal extensions into a human resource pool for tea development where the farmers will have access to information.

I would strongly request the government of Nepal to take tea and coffee as a very important primary product. Especially with the issue of WTO coming up, Nepal needs to identify its products, where it has competitive advantages over other countries. And thereby Nepal should make a long term strategy in tea. Thousands of small farmers will be affected by the policy. Therefore, we need to come up with a national policy on our targets, productivity, quality in the farm level, and on branding Nepal as a serious tea grower in the international market.

We want the political parties to take this as an important agenda because it involves people. Many of them come from areas where tea is grown. Those leaders should come to the Parliament with that issue so that we can have policy makers understand the importance of this sector. My appeal to the political parties is to consider this a very serious product. In India, Sri Lanka and Kenya it is found that tea industry employs a maximum number of people. And today Nepal is in dire need of employment opportunities. This is one area that can provide employment significantly. Maybe the revenue generated from tea is not as much as those of the garment or carpet industry, but I can assure you that one of the few sustainable products for Nepal in the long term would be tea and coffee.

There are some donor institutions that are helping this industry. What problems are they facing?

There needs to be a coordinated approach to help in development strategy. Duplication of work is not helping anybody. The resources are limited, so we need to pool them together and make sure that every dollar we spend has at least substantial benefit to the small farmers. For that I truly believe the Tea and Coffee Board needs to at least disseminate information to the farmers.

“Postal Department can help us”

Ashwini agrawal Chairman, Nepal Tea Association

We believe that Nepal Tea Association is primarily involved with the manufacture of CTC. Is it true?

Yes, Nepal Tea Association is primarily involved with the manufacture of CTC tea, because more than 90 per cent of the tea produced and consumed in Nepal is CTC. We also have an interest in high grown Orthodox Teas. In fact two of our vice-presidents are Orthodox Tea producers.

Could you tell us your views on the way the Nepali Tea Industry is evolving?

The Nepali tea industry is going ahead full steam and has achieved its primary goal of self sufficiency in tea. In fact we are now a tea exporting country with a surplus of 5-6 million kgs of tea.

What are the major constraints in CTC tea industry?

The major constraint for the Nepali tea industry is, in my opinion, the unavailability of resources - financial as well as human and environmental. The present instability in our country is a detrimental factor in the development of the tea sector which is mainly in the rural and hilly areas which are disturbed.

Trained human resource is needed to overcome the quality aspect of the Nepali tea. Qualified manpower in the tea sector requires high salary plus good living conditions and a peaceful environment.

What are your views on expanding agricultural area for tea cultivation?

Now that we have achieved self sufficiency in tea production we need to concentrate on producing teas of higher quality so that we can demand better prices for them. The world needs quality teas and price is no constraint.

The per capita consumption of tea in Nepal is calculated to be 350 gms which is very low by all standards. It translates into half a cup of tea per person per day. Tea needs to be promoted as a health drink and the cheapest of all drinks. Tea is proven to be helpful in cancer patients and also heart diseases. This fact has to be brought into the knowledge of Nepali people and thus the tea consumption has to double. The tendency of small farmers getting involved in tea production is a very good signal and this will help increase their socio- economical conditions. The labourers involved in such productions will be equally benefited. Tea is the most environment-friendly crop. It will be a great asset for Nepal if the plains and the hills are covered with tea plantations.

Is it possible to further add value to the Nepali tea?

Of course Nepali tea has a great future. The need of the hour is to produce and market good quality teas. Direct consumer marketing is a good idea to introduce Nepali tea to tea connoisseurs throughout the world. For this, the help of the postal department to deliver the tea and collect the value and provide service in the line of Value Payable Post service in India is essential. This will help Nepali producers to add value to their teas and realise better prices.

The overall effect of all this will benefit the farmers, the labourers, the factories, the traders and above all the nation.

“It’s success of small farmers’ unity”

Dilip Rai Chairman, NESTPROL

We know that you operate a factory where small farmers are the shareholders. What has been your experience in running such a tea business? Is it successful?

Established with the aim of poverty alleviation and direct empowerment to local farmers, Nepal Small Tea Producers Ltd.’s (NESTPROL) initiative has been to promote participatory style of community level business venture(s), simultaneously increasing the level of local ownership in it.

Operating a public company where small tea farmers are the stakeholders, where there are as many ideas as there are people and knowledge, is quite challenging. It becomes especially very difficult when farmers (stakeholders) do not understand the underlying themes of a Public Limited Company, Rules/regulations and its functioning processes... but suffice to say that the farmers are all very enthusiastic and hard working which all adds up to making our endeavour a success—a most satisfying challenge if one must put it that way.

I must say, our endeavour—our factory—is successful and one of the major reasons is the transparency and clarity in our dealings. Nothing is hidden and anything and everything is crystal clear. We are as honest as can be.

How did the concept for your factory evolve?

Darjeeling gardens used to be the biggest customers for our Green Leaves. However, with the growing political unrest due to the Gorkhaland issue, we faced a lot of hindrances and of course, losses. So, we thought, why not open our own processing plant in Nepal. This was back in 1994 when we produced our first lot of Nepal Orthodox Tea and we haven’t looked back since.

What are the constraints that you are facing now?

One major constraint for us is the lack of security and indeed peace. The situation in Nepal is very precarious, uncertain, unhealthy and unpredictable. This has had an impact on our day-to-day business and planning for the future. Though I must reiterate that there are boundless opportunities for small ventures like ours where farmers themselves have a say in how we do things. Big industrialist manipulating poor and innocent farmers—all for a buck—has no place in ventures like ours. Another constraint is the lack of government support. There is very limited support in terms of fiscal and technical knowhow and it needs to be addressed as well. Perhaps an introduction of trainings in tea related courses would benefit all and provide much needed expertise.

We are a simple, no frills, yet modern and enterprising business that prides, as its biggest asset, on its members and their honest, sincere and dedicated service and loyalty to producing good quality tea.