ADDING VALUE TO TEA

It is believed by some that ‘value addition’ transformation in tea takes place in an estate factory through manufacturing sorting and bulk packing in chests. This is a misconception as merely finishing a product does not necessarily or automatically ‘add value’.

It is not easy to measure value and making an accurate assessment of value is an impossible task. This is because value tends to change from person to person, place-to-place, country to country and in terms of time, from hour to hour. Value measurement can at best be a subjective assessment under given conditions. Then again, estimation in terms of money only will be inadequate. When a person says that, ‘he now knows the value of a drug’, he is not thinking of monetary value alone. His statement is similar to expressions such as, ‘I now know the value of fresh water or friendship or sunshine or children’, etc. Along with money, he is thinking of fulfillment, enjoyment, happiness, contentment, gratification, pride and satisfaction. Values are largely linked with psychological and emotional motives.

Traveling business class by any airline may have some marginal benefits, but a higher price is not paid for these reasons. The only extras you get are more legroom, a wet towel, occasionally a soft drink and 10kg additional baggage allowance, a platter of gourmet food… It is debatable whether the comfort offered one a short flight of 2-3 hours is worth the addition charge. Majority of the people who travel in executive class do not need the additional baggage allowance as they carry their belongings in their hand so that they can move out from the airport quickly. People pay extra money for a red and a gold tag, which makes them, feel superior and good.

How is this enormous value added?
It is only through years of investment in brand name and promoting it as the most desired, the most sought after and the most exclusive of all. The image of the product is such that people derive immeasurable satisfaction and pride from their association with it.

Some may argue that adding a high value may be tantamount to exploitation. A consumer has the choice of buying unbranded goods but he still goes for ‘designer brands’ because he has the needs and desires beyond physical needs. There are no compulsions in a free market. There are always two sides to a coin; a manufacturer or a producer takes tremendous risk by increasing the price of his goods. There is always danger always a danger wether his goods are sold out in the market or not. What is wrong with optimizing profits, at minimum cost through high ‘value addition’ if customer benefits are protected? In any case, if you will not do it, knowing consumer psychology, some one else will. It is an established fact that human beings are often quixotic with their money.

By comparison, ‘value addition’ in tea packets in small. As per January 1990 levels, good quality CTC tea in loose form is retailed at Rs. 55 per kg; in packets, similar tea is sold at around Rs. 65 a kilogram. In comparison to the actual tea cost, the consumer price is higher by approximately 22% for loose tea and 44%for packed tea. The mark up, however on the end cost of the product in loose form is around 13% and in packet form around 27%. Tea bags and instant tea, of course have an addition of two to three times.

Tea does make people feel good and therefore it should not be difficult to add greater value to tea. But the cheapness slogan will have to go; the image of tea will have to be built up as an exclusive, satisfying drink, superior to other beverages.

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