Report Feasibility study organic bitter tea Cao Bang - Helvetas

Feasibility Study Organic Bitter Tea in Cao Bang: 2007
Once the ICS has been set up, the annual running costs are mostly limited to payments for
personnel and travel. When the ICS is being managed by the BTC, staff costs will be
minimal and the only costs will be the fee for the inspectors. When working with local ICS
inspectors travel costs will also be quite limited. The requirement for the number of visits
to each farmer in the ICS is normally two per year.
The operation of the ICS should in principle be funded out of the additional income from
sales of organic products, unless there is a general fund available for training activities or
so. Farmers could also contribute to the operation of the ICS. Ecolink, for example, has the
agreement with its producers that they pay 5% of the price of the tea bought by Ecolink to
the ICS.
6.3. Cost - benefit analysis
Since there are no market data available for organic bitter tea, the cost benefit analysis was
made using a different approach. In discussion with the BTC, the director remarked that the
Korean company interested in the (clean) bitter tea was willing to buy 1 ton for a price of
250,000 VND/kg. However, the BTC was negotiating for a price of 300,000 VND/kg. So
let us assume a premium of 50,000 VND/kg: possible for a better product, including
organic. For an order of 1000 kg, this premium would generate an additional income of 50
million VND or 3,100 US dollar. In section 6.1 the total costs for certification and
inspection were estimated to be 3,550 US dollar annually.
The break-even point for the cost of certification is as follows:
1. With the three certificates required and at the current Euro - US Dollar exchange rate of
1.40, the amount of tea required to recover the cost of certification would be 1,140 kg.
2. When only two certificates would be required, for example only the Japanese and the
Korean, then the break-even point would be at 995 kg.
3. When the exchange rate would change in favour of the US dollar (for example, to 1.20)
then the break-even point for three certificates would be at 1,000 kg.
7. SUMMARY AND CONCLUSIONS
7.1. Production and processing requirements
Although there is no immediate demand for organic bitter tea (since the Korean buyer is
more interested in "low chemical" than organic) it would be useful to consider conversion
to organic at an early stage. Since a variety of chemical inputs is being used in the current
bitter tea production, one has to consider a conversion period of some two years before the
product can be sold as organic. However, during the conversion period all organic
requirements already have to be met.
Technically there do not seem to be any obstacles for organic bitter tea production. As
discussed in Chapter 4 a number of measures have to be taken to conform to the organic
standards.
Organic bitter tea should be seen as part of the diversification process of the BTC so that a
larger variety of clients can be reached. It would therefore not be recommended to convert
the entire production of the BTC to organic. Thus, a system has to be developed to manage
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