India is one of the world’s largest consumers of tea, with about three-fourths of the country’s total produce consumed locally. India stands fourth in terms of tea export after Kenya (including neighbouring African countries), China and Sri Lanka. However, consumers of tea in India are increasingly not getting to taste high quality premium tea varieties as most of them are exported and only a small part is supplied in domestic markets. This is happening even as the domestic tea industry is facing the onslaught from more and more coffee chains which are aggressively capturing a larger pie of the quality beverages market in India.
According to industry insider, due to the shortage of high quality premium tea supply in India, branded tea marketing companies are forced to buy premium tea from Kenya and Sri Lanka at a very high 100 percent import duty. Such a scenario makes it very difficult for companies to aggressively increase sales of premium tea brands and take on the increasing competition from domestic and foreign coffee chains in the domestic market. The India tea market can grow by at least five percent if consumer preferences for quality tea are met and import duty is lowered.
Why tea export is important to India?
Tea worth 704.36 million dollar was exported overseas in FY21; Russia, Iran, UAE, the US and China are leading markets for export of Indian tea where flavours like Assam, Darjeeling and Nilgiri among the finest in the world, recognised for their strong flavours and intense aromas are popular. Despite this reputation, India has not been able to capitalise on its potential for tea export; it is the fourth-largest exporter (11 percent of global exports) after Kenya (28 percent), China (19 percent), and Sri Lanka (14 percent). A variety of reasons such as lack of access to capital, inefficient supply chains and non-adaptability to changing trends and technologies can be held responsible.
Early this year, tea industry has urged the government to come up with schemes to help increase tea exports from India and give financial support to set up tea lounges to promote tea drinking in the country in the upcoming budget. Exports of Indian tea have dwindled by 9 percent in the first ten months of 2021 compared to the same period of the previous year and it is unlikely to cross 200 million kg in 2021.
India is working on a strategy to fill the supply gaps that have opened up in the global tea market following the sudden economic crisis which engulfed Sri Lanka, the world’s largest tea exporter. Sejal Purohit, founder of Seven Spring shared that premium tea leaves are getting exported because of better prices than homeland. There is an awareness and demand. Most importantly government supports export hence the respective companies get a lot of benefits and aids. Purohit also added that it adds value to the company's brand positioning in the market.
Why India needs to raise the bar for premium tea?
According to the industry stakeholders retailing of premium teas through specialized ‘Tea Boutiques’ should be encouraged and financially supported by the Tea Board as this popularizes the concept of drinking specialty teas in the country. This will not only encourage people to imbibe a healthy lifestyle, but will surely help the tea industry in these troubled times of production loss owing to climate change and other factors, especially in Darjeeling.
But things are looking to improve. “I would say post the pandemic all of us have realized the value of health. As a result, we have started showing interest in health products and educating ourselves. Due to this, there is a rise in premium quality tea. Moreover, the spending power has been increased for the health and lifestyle segment products. Teas like white tea, Matcha, Oolong, and Darjeeling First flush which fall into the premium category are packed and picked because of lots of health benefits,” Purohit commented.
Indian tea is also at the centre of indigenous holistic wellness traditions, interest in which has grown tremendously since the Covid-19 pandemic. An uptick in demand for herbal and organic teas has created a shift in consumer purchasing habits. More people are now looking to buy domestically produced products. This holds potential for Indian tea to expand its reach.
Another major trend amongst the middle and upper income level consumers in India in the past few years has been the increasing attraction for ‘organic’ products. Considering the benefits for organic and green tea, there has been a surge in the demand for these types of tea varieties over the last few years. But, for few companies, they have been unable to meet this growing demand as supply of organic tea is very limited in India.
Interventions needed from the govt
“Markets are driven largely by supply and demand for tea. Quality tea demand has increased over the year and positively impacted the industry from the consumers end directly,” Rudra Chatterjee, managing director of Luxmi Group shared. According to him, for tea businesses, rationalization of high logistics cost, especially costs of shipment etc. can be crucial factors to resolve. “Also a focus on quality tea manufacturing across Bought leaf and organized sector help the industry to maintain consistency in quality of tea that again helps manufacturers as well as consumers,” he further added.
Mirroring the sentiment, Piyush Desai, managing director of Wagh Bakri had shared that the priority should be to increase domestic consumption of tea. As per him, there will be severe competition in the international tea market. On the other hand the domestic market sales and marketing by competing beverage coffee is rapidly creating challenge to the consumption of tea. The branded tea players will have to aggressively taken on these challenges and their success will hinge on the supply of high quality premium tea.
What are tea companies now doing?
A multi-million-dollar industry, India's tea manufacturing industry has not just helped employ hundreds of thousands of workers but also put the country on the map for quality tea exports.Tea has become India’s national identity of sorts. From high quality first, flush harvests steeped only for a set number of minutes to homemade tea quickly brewed for friends and family, this beverage has managed to remain a constant even as the rest of the country was metamorphosing.
Tea companies are now growing tremendously and are introducing more varieties that are tasty as well as healthy. India, a predominantly tea-drinking nation with its swathes of tea-growing valleys, is eyeing the top spot for quality tea production in the world. And, homegrown brands have been helping preserve the rich heritage of tea drinking in the country. By translating consumer requirements to farmers, brands can create sustainable supply chains that answer to changing market trends and create a market for premium quality Indian tea in all corners of the nation.