Darjeeling tea facing competition from Nepal

Demands switch because of lower prices; local growers also dealing with export and currency exchange problems

It’s a heady combination of the right amount of sunshine, rainfall, elevation and the mist that grazes the snow-capped Himalayas that makes Darjeeling tea the world’s finest cuppa. But, what happens if a challenger starts leveraging the same set of intangibles?

Once intertwined historically, Nepal, which borders Darjeeling, is giving serious competition to some major tea growers, who were already in dire straits. “The situation for Darjeeling tea is very bad. Exports are down and in the domestic market, Tatas and Hindustan Unilever (HUL) are not operating that much on Darjeeling, with the infiltration of Nepal tea in India. There is less demand for Darjeeling,” says Goodricke managing director and chief executive officer A N Singh.

Auction prices reflect this demand scenario. As of June-end, Darjeeling tea was Rs 350.86 a kg, compared to Rs 373.66 a kg last year. “Tata Global Beverages (TGB) has pared its usage of Darjeeling to a fourth. HUL was not a very big buyer of Darjeeling but they, too, have reduced buying to half,” says a top official of Duncans.

A TGB spokesperson says, however, that the company has been one of the leading buyers of Darjeeing tea, which it sources for the Tata Tea Gold blend. “We continue to support the industry and our total purchase from Darjeeling has remained approximately the same in the past five years,” the spokesperson adds.

J Thomas & Company, one of the largest and oldest tea auctioneers, says the buying pattern of companies fluctuates by need. “It is not restricted by origin,” says chairman and managing director Krishan Katyal. Also, buyers could stay away from auctions and resort to private sales. That said, what exactly is making the cheap teas from Nepal pass off as what is considered to be among the most exquisite of teas?

Nepal is a relatively new entrant. So, the soil is virgin and the teas are young. “Climatic conditions are not very different and young teas have their advantages. For one, they are brighter. But Darjeeling teas have a pedigree. The uniqueness during quality cropping periods are unmatchable,” Katyal explains.

“There is an initial flavouring in Nepal teas that are very similar to Darjeeling but it is not long-lasting. Not everyone is looking for a very lasting flavour,” the Duncans official adds. The price for the lasting flavour is steep; the teas from Nepal are about half the price. According to Tea Board of India data, as of 2013-14, imports from Nepal were 10.44 million kg versus total imports of 19.23 mn kg. The switch to Nepal teas is only one of the many problems affecting Darjeeling teas. “Darjeeling teas have a very high cost of production, while yields are low,” says Katyal. Darjeeling produces around 8.5 million kg or roughly 0.7 per cent of India’s total production.

What has further added to local producers’ problems is the euro’s depreciation. Last year, when export contracts were sealed, the euro was 84 to a rupee. This year, at first flush (the season from mid-March to May, it was at 69. Buyers are obviously not compensating. “Demand in Germany, the main buyer of first flush, is low,” says Singh. Traditionally, Darjeeling teas have been largely dependent on export. “Right now, we are banking on Bengalis, for their love of Darjeeling teas,” the Duncans official says, in lighter vein.