India’s Major Brands Hike Domestic Tea Prices

MUMBAI, India

Rising production expenses led several of India’s largest brands to increase prices.

Duncan’s Tea, the latest of several major producers reacting to higher commodity prices, increased its price 11 to 15 cents per kilogram. Tata Global Beverages is expected to institute a similar price hike. Hindustan Unilever Ltd. (HUL), Royal Girnar and Society Tea advised retailers of increases. Wagh Bakri Group will hold steady on price of its chai.

Indians drink 802 million kilos of tea annually, more than any other country. Consumption is rising and there is greater interest in value-added teas. The country supports 300 branded lines but most of the tea Indians drink (64% by volume) is unbranded, leading some to speculate consumers will switch back.

Duncan’s Chief Operating Officer MC Appaiah told the Financial Expressof India to expect a second round of increases in July.

“Prices for teas from Assam to Bengal are up by about R15 to 20 (33 to 45 cents) per kg for the new season. "Consumption of tea has been growing by 3 percent annually but production is not keeping pace with consumption, thereby creating a large gap in demand-supply," he said.

Domestic production has declined in recent years as 30 percent of the nation’s tea trees are beyond their peak. Top prices on the export market encourage many producers to sell overseas. Drought in Africa has cut back tea production by 39 million kgs.

The Tea Board of India estimates a drop in production from 981 million kgs in 2008 to 979 million kgs in 2009 to 966 million kgs last year. Yields from the 2011 harvest appear good but production costs for labor have increased following negotiations in Assam, Darjeeling and southern Indian estates. Production costs are among the highest globally and productivity is low, falling from 1,844 kgs per hectare in 1998 to 1,655 kgs/ha.

Source: Financial Express