Tea in Indonesia


Tea is one of the world's most consumed beverages. It is thought to originate from China where tea has been drunk for thousands of years. Around the 16th century, when the Portuguese were expanding their power, this beverage was imported to Europe and quickly gained popularity. This popularity made the Portuguese and the Dutch decide to establish large-scale tea plantations in their tropical colonies. 

Constant temperatures and humidity are ideal conditions for the tea plant to grow. Such conditions can be found in the tropical and subtropical climates in Asia where currently more than 60 percent of global tea production is cultivated. In particular, the cooler highlands will produce a good quality of tea leaves. The tea plant can be first harvested after it has reached the age of around four years. When harvesting, only young leaves are selected, implying that manual picking is more efficient than using mechanical equipment. Tea production is therefore a labor-intensive business.

Two countries that dominate the global tea production are China and India. Together these two countries account for almost half of global tea production. 

Top Eight Tea Producers in 2011

1. China 1,640,310 

2. India 966,733

3. Kenya 377,912

4. Sri Lanka 327,500 

5. Turkey 221,600

6. Vietnam 206,600

7. Iran 162,517

8. Indonesia 142,400

in metric tonnes
Source: Food and Agriculture Organization of the United Nations

Tea in Indonesia 
Production and Export of Indonesian Tea 

Indonesia currently ranks number eight on the list of largest global tea producers. In the past it has been higher up that list but the lucrative business prospects of palm oil have caused the tea output to stagnate as some tea plantations were transformed into palm oil plantations. But tea estates have also been given up for the production of vegetables and other crops that are considered more profitable. Despite the resulting decrease in land acreage tea production has remained relatively stable. This indicates that the remaining tea estates have become more productive.

Indonesian Tea Production (in metric tonnes)
2007 : 150,623
2008 : 153,971
2009 : 156,904
2010 : 150,342
2011 : 142,400
Sources: Food and Agriculture Organization of the United Nations

The provinces that produce most of Indonesia's total tea output are:
1. West Java (produces around 70 percent of national tea production)
2. Central Java
3. North Sumatra

Approximately 65 percent of the Indonesian tea production is exported. The main countries of export destination are Russia, Great Britain, and Pakistan. Export is dominated by large plantations, both state-owned and private, while the majority of smallholders are more oriented towards the domestic market (which is not big as Indonesia contains a low rate of per capita tea consumption). This orientation towards the export market has implications for the Indonesian tea sector as it is highly dependent and vulnerable to the international market, in particular regarding the tea price. When supply exceeds demand in the international market, domestic prices fall sharply. This affects smallholder farmers severely, as they need to sell their tea at lower prices (which hardly compensate production costs).

Similar to other commodities, Indonesia relies on the export of bulk tea, which is a primary (upstream) product. The weak development of Indonesia's downstream tea industry curtails the competitiveness of the Indonesian tea industry on the international market. The export of downstream tea products is only around 6 percent of total tea exports.

Future Prospects

Global tea consumption rises by about four percent annually. Indonesia's domestic tea consumption is rising on a much higher level: more than 20 percent annually in recent years. As Indonesia's tea production is showing a decreasing trend and exports account for around 65 percent of tea production (mostly the premium quality), the country needs to import tea to satisfy domestic demand. Tea imports comprise about 25 percent of Indonesia's domestic tea consumption. Imports will have to be increased if the government provides no incentives to develop the country's tea industry. Moreover, Indonesia will keep losing ground to the other tea producing countries if no investments - whether public or private - are made.

Major Indonesian Companies Occupied in Tea Production
• PT. Perkebunan Nusantara VIII Company File
• PT. Perkebunan Nusantara IV Company File
• PT. Perkebunan Nusantara VI Company File
• PT. Perkebunan Nusantara XII Company File
• PT. Tatar Anyar Indonesia Company File

Source: Indonesia - Investments