European Blenders Establishing Himalayan Brand

NepalEuropean tea companies typically purchase about half of the 8.5 to 9 million kilos of India’s Darjeeling tea – but not this year.

Indian growers noticed in April that European buyers were not placing orders. Low yields of first flush Darjeeling due to dry weather and high inventories from 2013, combined with a stronger rupee in currency markets were initially thought to have dampened demand. Darjeeling was on offer for $10 to $15 per kilo at the time. Darjeeling teas trade for up to $35 per kilo in quantity and $400 per kilo in select grades from the best-known gardens.

Ashok Lohia, chairman of Chamong Tee, the largest Darjeeling tea producer, told the Economic Times last week that “we are [still] not getting many trade enquiries from Europe. During the beginning of the season, there were some enquiries for 15-20 days. After that, it dried up.”

Other growers are experiencing a similar lack of interest.

It is now apparent that German and other European blenders are dealing with alternate suppliers, principally in Nepal where quality high-grown tea sells for less than $5 per kilo.

Instead of buying Darjeeling, German traders are promoting their own less expensive “Himalayan” blends marketed to compete with tea sold by the 87 Indian gardens protected by the European Union’s Protected Geographical Identification (PGI).

In response the Darjeeling Tea Association’s governing body is meeting this week to discuss the situation. Once they agree on a course of action planters are likely to meet with the country’s Minister of State for Commerce and Industry, according to DTA Chairman SS Bagaria.

“Darjeeling is not treated as a commodity in the world market. It is treated as a product,” explains Sanjay Bansal, Chairman of the Ambootia Group which owns 10 Darjeeling gardens. He told the Economic Times in May that “currently an internal adjustment in distribution is going on in the European market.”

Darjeeling black tea, one of the most expensive teas in the world, has been cultivated in the foothills of the Himalayas since the 1850s. At least 65% to 70% of the tea is exported, making foreign sales critical. Germany and Japan are the largest buyers, followed by UK and the US.

When the PGI mark was approved in November 2011, blenders that had marketed Darjeeling teas in Europe for at least five years were given five years to withdraw from the market any tea labeled “Darjeeling” that did not contain 100% Darjeeling tea. It had been the practice for blenders to mix up to 49% of less expensive tea from the region with genuine Darjeeling and market the combination as Darjeeling, one of the most prized and profitable teas in the world. The less expensive teas were grown in Nepal, Pakistan or on Indian gardens outside the protected zone.

Darjeeling has a three-year shelf life. The EU rules will be enforced by the European Trade Council in 2016, suggesting that European buyers should begin re-stocking this spring and should be aggressively negotiating for 2015 teas as those plucked this year and next will be sold in 2016. Instead several European buyers have renegotiated their contracts seeking lower pricing.

“The best brands are still totally unchanged but almost everywhere things are in a flux,” reports Rajiv Lochan, a tea supplier with many years of experience growing and marketing Darjeeling teas.

“There are a lot of tea gardens who are buying Nepal green leaf in Darjeeling to augment their own counterfeit production,” he said.