In the world of tea, gardens have been bought,sold, and traded through history. These acquisitions have largely impacted thevolume of production. Like the recent acquisition of Goodricke estates byUK-based Camellia that has nudged McLeod Russel from the top spot as theworld’s largest privately held tea producer. Goodricke itself had acquired twogardens in Assam this year, taking their total production to 36 million kilogramsin India. Camellia’s total production now stands at 105.5 million kilograms oftea per annum.
McLeod Russel, now at No. 2, has been cuttingback on debt and selling gardens. Over the last year, they sold 21 gardens inIndia (almost 32 million kilograms in production), exited Rwanda (5 millionkilograms), reducing production from 118 million kilograms of tea in 2017-18 to80 million. However, they still retain the top spot as tea producer in India,at 55-60 million kilograms per annum.
Occupying second place is Tata Global BeveragesLimited (TGBL) that owns 41 percent in Amalgamated Plantations, producing 42 millionkilograms per year. TGBL –formerly Tata Tea—owns five tea brands in India: TataTea, Tetley, Kannan Devan, Chakra Gold and Gemini. What’s new is TGBL’s recentacquisition of Dhunseri’s branded tea business, that comes with the Assam CTCbrand, Lal Ghora and Orthodox brand, Kala Ghoda. These two brands own thelargest market share in Rajasthan state. It seems to be a mutually beneficialsale—with Dhunseri tea estates, production and expansion becoming the brand’sfocus while the two tea brands benefit from the marketing backing of aconglomerate.
TheDomestic Market
In 2017, Euromonitor data showed that TGBL andHindustan Unilever Ltd. (HUL) that owns Lipton, Brooke Bond, Red Label andTaaza brands - controlled a little more than 50 percent of the country’spackaged tea market, but had stagnated at 29 percent (TGBL) and 27 percent(HUL) between 2012 and 2016. This was attributed to regional and smaller brandsdoing well.
While HUL’s brands include a range of teas toaddress every market - premium leaf, premium dust, dust, herbal and TGBL has aportfolio of tea brands that each have their own regional market share - KannanDevan and Chakra Gold (the southern states), and Gemini (Andhra Pradesh andTelangana).
Palates and preferences across the countryvary and brands must constantly innovate and customize. The acquisition ofDhunseri’s brands seems to be more cost effective that launching a new productfor a niche market. The Dhunseri acquisition is for a reported $15 million withthe two brands themselves projected to bring in a threefold revenue.
Unpackagedvs Packet tea
For the longest time, much of India, in therural areas - and interestingly in the plantations itself - the tea of choicewas unpackaged tea or loose, non-branded tea. A 2018 Tea Board of India survey showed that this has beenchanging - all the marketing efforts were beginning to pay off. The surveyreported that nearly 80 percent of urban households and 75 percent of ruralhouseholds had switched to packet tea, defined by them as tea from national brands,established regional brands as well as local players who have forayed intopackaging and selling under their own labels.
The reasons given were perceived quality andbetter storage options besides socioeconomic factors like better income,aspiration levels, and health consciousness.
It was interesting also that around 21 percentof the households surveyed said they had made the switch from unpackaged topacket tea over the past five years, attributed to the availability of regionalbrands and the addition of several new ones.
The top two purchase points are theneighborhood kirana (70 percent)similar to mom-and-pop stores; and modern retail - which is proliferating inTier2 and Tier 3 cities. Combined, they offer regional brands room to promotetheir teas and gaining customers. As with spices, tea also has regional playersthat have a loyal customer base. If Dhunseri’s Lal and Kala Ghoda ownRajasthan, in Maharashtra, it is Amar Tea that owns the Society brand, owning40 percent market share. According to the HinduBusiness Line, In Gujarat, it’s Wagh Bakri that owns a 45 percentmarket share, with its Good Morning brand pitted against HUL’s Yellow Label andTaj Mahal brands, and Mili that competes with HUL’s Red Label.
TGBL’sGlobal Head of Strategy, Rakesh Sony was quoted in local media as saying, “ One thing TGBL has notconsciously done in the last 3-4 years is to aggressively invest behind ourbrands, which we have now decided to do...Our brands will continue to performvery well in India and overseas too in the next few quarters. We see India marginsreturning to 14-15 percent.”
Therise of the green tea drinkers
Wagh Bakri, number 3 at 8 percent pan-India market share attributes its domestic reach to its marketing efforts, in particular the introduction of a new range of green tea. In 2016, green tea saw a reported 16 percent retail volume growth. The market drivers are its popularity as a healthy drink. It’s not just the big three cashing in on the popularity; Tetley, Lipton and Taj Mahal all cater to the segment but there are plenty of other brands with more being added every quarter. Brands offer an entire range of green tea, to suit palates across the country, from ginger and lemon to chamomile and turmeric.
This seems to be the beginning of a more adventurousconsumer, one who may explore beyond their cup of chai, to herbal teas, fruityinfusions, and perhaps even the premium, single estate orthodox teas that haveso far remained for export only!
Sources: HinduBusiness Line, Economic Times