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Value Chain/ Market Analysis of the Orthodox Tea Subsector in Nepal

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Value Chain/ Market Analysis of the Orthodox Tea Subsector in Nepal VALUE CHAIN/ MARKET ANALYSIS OF THE ORTHODOX TEA SUB- SECTOR IN NEPAL Contract No. AID-367-TO-11-00001 August 2011 This publication was produced for review by the United States Agency for International Development. It was prepared by ANSAB- sub-contractor to NEAT Activity under Prime Contract No. EEM-I-00-07-00008, AID-367-TO-11-00001 Nepal Economic Agriculture, and Trade Activity—Value Chain/ Market Analysis of the Orthodox Tea Sub-Sector in Nepal Contract No. EEM-I-00-07-00008, AID-367-TO-11-00001 United States Agency for International Development General Development Office Kathmandu, Nepal The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. CONTENTS Acronyms ..................................................................................................... iii Executive Summary ...................................................................................... 1 1. Introduction .................................................................................................. 3 1.1 Background ................................................................................................... 3 1.2 Objective .......................................................................................................... 4 1.3 Scope of the Study ............................................................................................ 4 1.4 Study Approach and Methodology ................................................................... 5 1.5 Limitations of the Study ................................................................................... 5 2. Industry Analysis .......................................................................................... 6 2.1 Production Situation ...................................................................................... 6 2.1.1 Worldwide Production ............................................................................. 6 2.1.2 Domestic Production ............................................................................... 7 2.1.3 Cost of Production ................................................................................ 10 2.1.4 Distribution of Value Added .............................................................. 10 2.1.5 Impact of Organic transition .............................................................. 11 2.2 World Market .............................................................................................. 12 2.2.1 World Export of Tea .............................................................................. 12 2.2.2 World Import of Tea .............................................................................. 13 2.2.3 Quality Standards of Tea ........................................................................ 14 2.3 Domestic Market ......................................................................................... 14 2.3.1 Exportation of Tea ................................................................................. 14 2.3.2 Tea Imports ........................................................................................... 17 2.3.3 Domestic Consumption of Orthodox Tea ............................................ 18 2.3.4 Price Trends of Orthodox Tea ............................................................. 19 3. Value Chain Analysis ................................................................................. 19 3.1 Value Chain Map ......................................................................................... 19 3.2 Functions ..................................................................................................... 21 3.3 Actors .......................................................................................................... 21 3.4 End Markets ................................................................................................ 23 3.5 Enablers and Facilitators .............................................................................. 24 3.5.1 Commodity Specific Organizations ........................................................ 24 3.5.2 Development Organizations and Donor Projects .................................... 25 3.5.3 Government Agencies and Projects ........................................................ 26 3.6 Policy Framework ....................................................................................... 26 3.7 Value Chain Governance ............................................................................. 27 3.7.1 Horizontal and Vertical Linkages ........................................................ 28 4. Analysis of Constraints and Opportunities ............................................... 31 4.1 Constraints .................................................................................................. 31 4.1.1 Production and Productivity ................................................................... 31 4.1.2 Processing........................................................................................... 32 4.1.3 Marketing ........................................................................................... 32 4.1.4 Enabling Environment and Policy ....................................................... 33 Value Chain/Market Analysis-Orthodox Tea i 4.2 Opportunities ............................................................................................... 33 4.2.1 Production and Productivity ................................................................... 33 4.2.2 Processing ............................................................................................. 34 4.2.3 Marketing .............................................................................................. 34 4.2.4 Policy............................................................................................... 34 5. Strategic Areas for NEAT Interventions ................................................... 35 5.1 Short-term Strategy .................................................................................... 35 5.1.1 Production and Productivity ................................................................... 35 5.1.2 Processing ............................................................................................. 37 5.1.3 Marketing .............................................................................................. 38 5.1.4 Policy and Institutions ......................................................................... 39 5.2 Long-term Strategy .................................................................................. 40 6. References ................................................................................................... 42 7. Annexes Annex 1: List of Major Importers ................................................................ 43 Annex 2: Contact Information of Specialty Tea Buyers ............................... 44 Annex 3: Export Data of Different Categories of Tea from Nepal ................ 47 Annex 4: List of Top Exporting Countries ................................................... 48 Annex 5: List of Top Importing Countries ................................................... 48 Annex 6: Top Tea Producing Countries ....................................................... 49 Annex 7: Existing Tea Cooperatives ............................................................ 49 Annex 8: Types of Orthodox Tea ................................................................. 51 Annex 9: Cost of Production of Green Tea Leaf in 0.5 ha of Land ............... 52 Annex 10: Export Data (ITC, 2011) ............................................................. 53 Annex 11: Import Data (ITC, 2011) ............................................................. 55 Annex 12: List of PSDM Participants .......................................................... 59 Annex 13: List of Offices and People Visited .............................................. 60 Annex 14: Orthodox Tea Producing Factories in Nepal ............................... 61 Annex 15: List of Cooperatives with Mini-Processing Units ........................ 64 Annex 16: Orthodox Tea Sector Cost/Benefits ............................................. 65 Annex 17: Estimate of Profits Gained/Lost When Converting to Organic ... 68 Annex 18: Estimated Production Levels of Various Tea Factories in Nepal 69 Value Chain/Market Analysis-Orthodox Tea iii ACRONYMS ANSAB Asia Network for Sustainable Agriculture and Bioresources AEC Agro Enterprise Center BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation CAA Commercial Agriculture Alliance CADP Commercial Agriculture Development Project COP Cost of Production CTC Cut, Tear and Curl CTCF Central Tea Cooperative Federation CoC Code of Conduct CBS Central Bureau of Statistics DADO District Agriculture Development Offices FAO Food and Agriculture organization FBOs Farmers’ Based Organizations GDP Gross Domestic Production GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GAP Good Agriculture Practices GMP Good Manufacturing Practices GoN Government of Nepal ha Hectare HOTPA Himalayan Orthodox Tea Producers Association HIMCOOP Himalayan Tea Producers Cooperative HS harmonized System HACCP hazard Analysis and Critical Control Point IDE International Development Enterprises ITC International Trade Center JICA Japan International Cooperation Agency kg Kilogram MoCS Ministry of Commerce and Supplies MRLs Maximum
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