You may have to shell out more for your favourite cuppa as retailers are apprehending tea prices to go up by Rs 15-20 a kg by the end of this month. This might also lead to a down-trading in the tea segment as consumers could shift loyalty towards cheaper tea brands.

Leading premium tea retailers such as Tata Global Beverage, Hindustan Unilever, Society Tea, Girnar, Wagh Bakri among other brands, are set to witness a decline in sales as consumers might go for un-packaged tea or cheaper brands for their regular use, said Harendra Shah, Managing Director, Girnar.

“Domestic tea prices were higher by 21.7 per cent year-on-year and are a negative for companies such as HUL and Tata Global Beverages (TGBL),” said research firm Angel Broking in its latest earnings report.

Tea prices have gone up substantially in the last few years following a continued demand-supply gap. Last year around the same time, prices went up by Rs 10-15 on back of rising consumption at 3.5-4 per cent year on year.

However, this year, the increase in prices is being attributed to a 1.7 per cent decline in production during the January-October period coupled with a rise in demand of the soft commodity, said Bhupad Shah, President, Retail Tea Merchant Association.

“It is an agricultural crop and weather is the main reason for the shortfall in production. Labour is also a major issue involved with tea plantation that is widening the demand and supply gap for tea,” Shah added. This year, prices have shot up on account of the dry weather conditions during the early part of the year followed by the floods in Assam and West Bengal. According to the latest Tea Board report, North India (West Bengal and Assam) saw the sharpest decline in production at 12.31 million kg while South India recorded a 3.70 mkg drop in the output. Overall production during the period stood at 902.27 mkg, against 918.28 mkg in the corresponding period last year. In 2011, India’s tea production stood at 988 mkg.

The annual rise in tea consumption in India is about three per cent and the cumulative deficit at the beginning of the next season is estimated at about 150 mkg.

Priyanka.pani@thehindu.co.in

(This article was published on January 4, 2013)
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