An Overview of the Indian Tea Industry

Summary

India has long held the title of being the largest tea producer and consumer in the world. Though traditionally exports have been the engine for growth (and profits), the collapse of India's biggest customer (USSR) exposed India's competitive weaknesses vis-à-vis producers in Sri Lanka and Kenya, whose tea gardens are much newer. Interestingly, despite the loss of major export markets, Indian companies have been somewhat insulated thanks to faster growing domestic consumption.

Many in the industry believe that by 2005, there will be a shortage of tea for the domestic market. At the same time, production of tea cannot be increased sharply since the constraint is land, which is scarce. Also, Indian companies have not invested adequately in replanting. However, recent moves to liberalize imports from the SAARC region have belied the hope of producers that prices will rise sharply. Further, when India lifts quantitative restrictions, the market will be further hit by cheaper tea products from Vietnam, Indonesia, and China. This has led Indian producers to invest in plantations outside India.

World tea production in the last decade has grown at an annual rate of 1.81% p.a. and consumption has kept pace at a slightly higher growth rate of 2.05% p.a. After India, the second largest producer is China but they mainly produce green tea, while India produces mainly black tea. World tea exports have grown by almost 2% over the last decade. Sri Lanka is the largest exporter followed by Kenya, China and India. World imports grew yearly at 1.2% over the last decade. The largest importers are the CIS, UK and Pakistan followed by the United States, Egypt and Japan.

India produces some of the world's finest teas, as also the largest variety. Among the famous speciality flavours are Darjeeling tea and Assam Tea from the north and Nilgiri tea from the south. Tea is normally classified based on the processing, leaf size and grade. Fermentation is the major process and creates two major classifications, black and green tea. Black tea is further classified into CTC (cut, tear and curl) and Orthodox tea. Consumers in different parts of the country have varied tastes.

Of the total Indian tea market, branded packaged teas account for 33-35% by volume. Hindustan Lever (HLL) leads with around 43-45% market share of the packaged tea market, while Tata Tea is the No. 2 with around 17-18% market share. Apart from these two players and Duncans, the market is extremely fragmented with many smaller /regional players.

Table of Contents

1. Demand and Supply

2. A Global Perspective

3. India - Types of Tea / Segments

4. Competitive Landscape (for packaged tea)

List of Charts & Tables

India - % Share of exports in total production, 1980-2000

India - Tea production, exports and surplus, 1980-2000

Yield figures for different regions in India

India - Import statistics

Global Production and Exports

Global Market Shares

Global Market Shares - Green Tea

Average Prices of Tea at different centres, international and India

Production of Tea in India by Different Method of Manufactures

Prices of Tea Sold at Auctions in India

Leading Indian Brands & Market Share

An Overview of the Indian Tea Industry (September 2001, 10 Pages)

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