ITC Shares

The First Flush

10 December 2020
Gregory Sampson, Aasha Bhandari, Evelyn Seltier, International Trade Centre

How tea cooperatives in Nepal survived the country’s lockdown during their most important harvest of the year.

In Nepal, the first tea harvest of the year – the First Flush – takes place in April. International buyers eagerly await this time of year because of the leaves’ fresh and fruity flavours.

But as we know, 2020 took another turn.

‘In my 25 years in the tea business, I have never seen the industry hit as hard,’ says Suresh Vaidya, talking about the effects of the COVID-19 pandemic. Vaidya is the owner of Guranse and Mai Tea, the world’s highest tea estate at 1,000 - 2,200 metres.

Milan Kumari Khatri of Sakhejung Tea, one of the numerous women to lead tea businesses in Nepal, agrees: ‘I never had to face such a crisis in my entire career. The market is closed, payments to farmers are pending and we have logistical problems. In addition, the timing could not have been worse: the crisis occurred just before Asar masanta (15 June) in the fiscal year when we need to pay taxes, interests, our farmers and organic certification.’

Due to the crisis, the tea industry in Nepal has been facing unprecedented challenges in terms of cash flow, transport and sampling.

As workers had to stay at home Vaidya did not have a labour force. ‘Not all of our garden leaves could be plucked on time and we often lost the best of them,’ he says.

Transport restrictions meant that tea could not be taken to the capital – and the cost of sending tea samples to international buyers as well as delivery times more than doubled. Nepalese tea was stuck in the region of Ilam, a blow made all the harder by the fact that competitors such as India were still exporting successfully. With zero cash flow, tea producers and farmers were at risk of missing the sale of the First Flush. To add to their problems, as time ran out, they had less and less bargaining power with potential buyers.

Take Arya Tara, for example. It is one of the smallest tea factories in the industry, located in Shree Antu Ilam. It has been a painful year for manager Rai. ‘We don’t sell to India and we don’t have an alternative market. Being a farmer and an entrepreneur, I suffer twice as much with no cash on hand in the picking season.’

Besides cash shortage, companies face tremendous transportation problems as farmers live in the remote highlands, with no proper roadways for easy access. ‘Even in the normal days, transportation was a problem. You see how difficult it is now to collect green leaves,’ concludes Rai.

Cash flow or transportation are not the only issues

Alongside these hardships, the producers have been facing challenges with sampling. Tea cannot be sold without sampling. And the costs of sending samples to Europe has risen sharply.

Seventeen tea cooperatives in the Ilam region of Nepal received continuous support during the country’s lockdown. The International Trade Centre (ITC) ensured their business continuity by sending their tea samples to potential buyers in Europe. Almost a dozen of sample boxes have been sent to international buyers like Schroeder and Hamann, Halssen & Lyon, Teegeschwender or Basu in China, Czechia, Germany or the United States.

This intervention generated over €425,000 of business for the farmers since March of this year.

‘This has saved us,’ says Vaidya. ‘Otherwise I would have lost all hope to survive this year. Going forward, we definitely would appreciate support in managing our transportation costs.’

Kamal Mainali, Director of Himalayan Shangrila points out that, ‘while 2020 was more of a survival year in terms of business, we did not expect any profit. With the support of ITC however, HIMCOOP producers made good sales. We were able to pay our farmers having received a good price for our leaves.’

One for many

Through its Trade for Sustainable Development Programme, and with the support of the llam Chamber of Commerce and Industry and its local counterpart the Himalayan Tea Producers Cooperative Ltd. (HIMCOOP), ITC used the local weekly milk delivery from the province to Kathmandu, to transport tea samples from Ilam to the capital.

‘I thought COVID-19 will be our downfall as we only survive on tea exports,’ adds John Taylor, HIMCOOP marketing manager. ‘We don’t have a local market for the quality we export. ITC has not only helped our producers to survive on the international market but maintain a decent profit. Our international presence has been even stronger than in previous years.’

The Himalayan Tea Producers Cooperative is responsible for more than 20 tea factories – so Taylor felt the pressure.

‘We worked from home but how is this effective when working on a product where you have to be physically present? With no vehicle movements allowed, we walked eight to 10km a day to work on samples.’

From picking up samples to commuting, from the scarcity of resources to finding alternatives while fighting problems with internet connection, transportation and packaging: Taylor’s dedication and the support of his producers were the backbone of HIMCOOP’s successful performance. ‘We had to take initiative,’ says the manager.

ITC was able to support HIMCOOP in its crucial shipping of samples to international buyers using DHL, the only international carrier operating at the time.

‘DHL is expensive. We would not have been able to afford it,’ says the owner of Guranse and Mai Tea. ‘Despite the late sampling and the lower price, we did not lose this year’s sales nor any of our buyers. We can pay our farmers and employees, which is crucial.’

Sending out samples during the pandemic showed Nepal’s consistent performance in the international market. And most importantly, the farmers were able to keep their motivation to hold on – despite facing the hardest times in their professional existence.