Research on Supply Chain in the Tea Sector in Indonesia
FINAL REPORT RESEARCH ON SUPPLY CHAIN IN THE TEA SECTOR IN INDONESIA By: Veronika Ratri Kustanti Theresia Widiyanti To: SOMO The Business Watch Indonesia 2007 1 INTRODUCTION Background Tea is an important commodity with many benefits to human life. Drinking tea has become a culture in countries like Japan, Britain, and China and the catechin it contains is a cure to a number of illnesses. As a commodity, tea sustains lives of growers, pickers, factory workers as well as brings in foreign exchange to tea producing countries. Global tea consumption and production keep growing. Production increased from 3,152,987 in 2003 to 3,233,216 tons in 2004, while consumption from 1,344,200 in 2003 to 1,414,400 tons in 2004 1. In terms of trade, global tea export increased from 1,397,389 tons in 2003 to 1,522,290 tons in 2004. Indonesia is tea fifth largest tea producer in tea world, after India, China, Sri Lanka and Kenya, with 65% of tea product for towards export. The large export volume, however, has little impact on welfare of tea plantation workers and smallholders. The majority of growers are oriented more to domestic market of green and jasmine tea, while export is dominated by large plantation, both state and private. Many researches come to the conclusion that growers are put under the pressure to sell fresh leaf to collectors and processing factories for low prices which can not cover the production cost before tea leaves wither and the quality drops. 2 Although the Indonesia tea sales orient to export, the price of tea leaves at smallholder level is same as its domestic sales (IDR 600 – 800 per Kg in October 2006 and has increased from IDR 1000 to 1100 between November 2006 and May 2007 3).
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