Local Tea Producers Prepare to Seize World Market

Kompas/AGUS SUSANTO

Aerial photo of PT Perkebunan Nusantara (PTPN) VII Tea Factory in Pagar Alam City, South Sumatra, Sunday (21/7/2019).

There is an opportunity to expand the niche occupied by Indonesian tea producers in the global market. Product quality and competitiveness are the keys to success in the world of tea.

JAKARTA, KOMPAS— Indonesia is trying to seize the world tea market by taking advantage of the continuous increase in tea consumption. For tea exports to have an optimal impact on the value chain, from upstream to downstream, industry players need to strengthen their competitiveness in terms of product diversification, packaging, promotion and marketing image.

Based on data from the Food and Agriculture Organization (FAO), tea is the most widely consumed beverage in the world after water. In the last decade, per capita tea consumption has grown 2.8 percent per year. However, Indonesia is not yet among the biggest suppliers. The top four tea producing countries in the world, according to FAO, are China, India, Kenya and Sri Lanka.

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"Indonesian tea exports are on a declining trend. The world lost 42,000 tons of tea from Indonesia. Therefore, now is the moment for Indonesia to take back the world tea market,” said the chairman of the Indonesian Tea Council, Rachmad Gunadi, in a webinar commemorating International Tea Day, on Friday (21/5/2021).

To realize this plan, continued Rachmad, his side planned to hold the Nusantara Tea Festival, to which they would invite representatives from numerous countries. The hope is that this festival could become an entry for business players to market Indonesian tea abroad.

Separately, the Trade Ministry’s trade assessment and development head, Kasan Muhri, said Indonesia’s major tea export destinations were

Malaysia (accounting for 13.91 percent of Indonesian tea exports), Russia (12.67 percent) and Australia (8.83 percent). In the first quarter of 2021, these countries contributed US$23.44 million to Indonesia\'s tea exports.

On the other hand, during this period, tea exports to China and Britain increased significantly, rising by 494.09 percent and 134.5 percent, respectively. "The economies of the two countries have begun to recover from the impact of the Covid-19 pandemic, which has stimulated global demand for tea, including from Indonesia," said Kasan.

KOMPAS/RIZA FATHONI

Owner of a people\'s tea plantation and tea factory Ferri Kurnia sipping a cup of tea at his residence in Pasir Canar, Jayagiri, Sukanagara, Cianjur Regency, West Java, Thursday (27/6/2019).

However, continued Kasan, over the last five years (2016 to 2020), Indonesian tea exports had fallen by 5.2 percent. In 2016, Indonesia\'s tea exports were valued at $113.1 million. This value has decreased to $92.3 million in 2019 and $96.33 million in 2020.

This downward trend happened because the supply of tea from Indonesia began to decline amid high global demand for tea, especially during the pandemic. Supply needs to be jacked up to capture the opportunities stemming from global demand.

"The government will continue to promote Indonesian tea to make it more global. The government has also facilitated various Indonesian tea products to be traded through the e-commerce platform and strengthened its image with a geographical indication certificate," said Kasan.

One of the causes is that changes in consumer demand are faster than adaptability.

Meanwhile, the marketing director of state-owned Perkebunan Nusantara Holding, Dwi Sutoro, said tea had been facing a challenging period during the last 10 years. "One of the causes is that changes in consumer demand are faster than adaptability. We understand that the performance of Indonesian tea exports depends on PT Perkebunan Nusantara," he said.

He was referring to the decline in tea exports by Perkebunan Nusantara Holding in the last three years, as export value dropped from $23 million in 2018 to $19 million in 2019 and $15 million in 2020.

International Tea Day 2021, Dwi said, would be an opportunity to revive the company\'s tea export performance, with a target of returning to the 2018 figure of $23 million.

Kompas/AGUS SUSANTO

Production activities at the tea factory PT Perkebunan Nusantara (PTPN) VII in Pagar Alam City, South Sumatra, Sunday (21/7/2019).

To achieve this target, Perkebunan Nusantara Holding has approached a number of international companies engaged in the downstream tea industry. The company is also researching the quality, variants and grades of tea that are of interest in a number of potential export target countries. After doing the research, the company will direct the plantation to produce tea leaves according to the quality, variants and class the market is interested in.

Added value

The founder of PT Koleksi Teh Indonesia, Wahyu Raja Galuh, is of the opinion that Indonesian tea lacks added value, which implies that the impact on farmers\' welfare is not as big as it could be.

Indonesian tea, which is exported in the form of sacks, costs around Rp 55,000 to Rp 100,000 per kilogram. However, the same tea with the packaging and label/brand from an overseas company can reach Rp 2.5 million per kg. Domestic tea farmers do not enjoy this price difference.

Therefore, he said, domestic tea players should strive to strengthen the product image and increase competitiveness. This could provide added value for Indonesian tea and improve the welfare of the tea farmers.