In the world of tea, gardens have been bought, sold, and traded through history. These acquisitions have largely impacted the volume of production. Like the recent acquisition of Goodricke estates by UK-based Camellia that has nudged McLeod Russel from the top spot as the world’s largest privately held tea producer. Goodricke itself had acquired two gardens in Assam this year, taking their total production to 36 million kilograms in India. Camellia’s total production now stands at 105.5 million kilograms of tea per annum.
McLeod Russel, now at No. 2, has been cutting back on debt and selling gardens. Over the last year, they sold 21 gardens in India (almost 32 million kilograms in production), exited Rwanda (5 million kilograms), reducing production from 118 million kilograms of tea in 2017-18 to 80 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 Beverages Limited (TGBL) that owns 41 percent in Amalgamated Plantations, producing 42 million kilograms per year. TGBL –formerly Tata Tea—owns five tea brands in India: Tata Tea, Tetley, Kannan Devan, Chakra Gold and Gemini. What’s new is TGBL’s recent acquisition of Dhunseri’s branded tea business, that comes with the Assam CTC brand, Lal Ghora and Orthodox brand, Kala Ghoda. These two brands own the largest market share in Rajasthan state. It seems to be a mutually beneficial sale—with Dhunseri tea estates, production and expansion becoming the brand’s focus while the two tea brands benefit from the marketing backing of a conglomerate.
The Domestic Market
In 2017, Euromonitor data showed that TGBL and Hindustan Unilever Ltd. (HUL) that owns Lipton, Brooke Bond, Red Label and Taaza brands – controlled a little more than 50 percent of the country’s packaged tea market, but had stagnated at 29 percent (TGBL) and 27 percent (HUL) between 2012 and 2016. This was attributed to regional and smaller brands doing well.
While HUL’s brands include a range of teas to address every market – premium leaf, premium dust, dust, herbal and TGBL has a portfolio of tea brands that each have their own regional market share – Kannan Devan and Chakra Gold (the southern states), and Gemini (Andhra Pradesh and Telangana).
Palates and preferences across the country vary and brands must constantly innovate and customize. The acquisition of Dhunseri’s brands seems to be more cost effective that launching a new product for a niche market. The Dhunseri acquisition is for a reported $15 million with the two brands themselves projected to bring in a threefold revenue.
Unpackaged vs Packet tea
For the longest time, much of India, in the rural areas – and interestingly in the plantations itself – the tea of choice was unpackaged tea or loose, non-branded tea. A 2018 Tea Board of India survey showed that this has been changing – all the marketing efforts were beginning to pay off. The survey reported that nearly 80 percent of urban households and 75 percent of rural households had switched to packet tea, defined by them as tea from national brands, established regional brands as well as local players who have forayed into packaging and selling under their own labels.
The reasons given were perceived quality and better storage options besides socioeconomic factors like better income, aspiration levels, and health consciousness.
It was interesting also that around 21 percent of the households surveyed said they had made the switch from unpackaged to packet tea over the past five years, attributed to the availability of regional brands and the addition of several new ones.
The top two purchase points are the neighborhood kirana (70 percent) similar to mom-and-pop stores; and modern retail – which is proliferating in Tier2 and Tier 3 cities. Combined, they offer regional brands room to promote their teas and gaining customers. As with spices, tea also has regional players that have a loyal customer base. If Dhunseri’s Lal and Kala Ghoda own Rajasthan, in Maharashtra, it is Amar Tea that owns the Society brand, owning 40 percent market share. According to the Hindu Business Line, In Gujarat, it’s Wagh Bakri that owns a 45 percent market share, with its Good Morning brand pitted against HUL’s Yellow Label and Taj Mahal brands, and Mili that competes with HUL’s Red Label.
TGBL’s Global Head of Strategy, Rakesh Sony was quoted in local media as saying, “ One thing TGBL has not consciously done in the last 3-4 years is to aggressively invest behind our brands, which we have now decided to do…Our brands will continue to perform very well in India and overseas too in the next few quarters. We see India margins returning to 14-15 percent.”
The rise 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 adventurous consumer, one who may explore beyond their cup of chai, to herbal teas, fruity infusions, and perhaps even the premium, single estate orthodox teas that have so far remained for export only!