A quiet revolution has been brewing in the tea gardens of Darjeeling and Assam. A labelling revolution. Majuli Mist, Kashir, Teas from India – these are tea brands emerging out of the estates of Amalgamated Plantations, an associate company of Tata Consumer Products.
Or take the Aideobari Tea Estates in Assam that now sells the beautifully packaged Rujani tea through its own website. Or look how from a 120-year-old tea trading company has emerged Octavius tea, a brand created in 2016, that has been gaining in strength.
Podcast | Brewing a package tea revolution
Turning a new leaf
Change is sweeping through the tea industry as a host of pure play plantation companies and tea traders are jumping headlong into the business of branding and packaging tea, for long the preserve of the big two — Tatas and HUL — and a couple of regional firms. Several of these new labels are going the D2C route to capture the imagination of tea lovers.
Goodricke Group, a part of UK-based Camellia Plc, for instance has been steadily scaling up the share of packet tea to its total sales over the last few years. Symphony, Castleton and Khaass are some of the brands of Goodricke that have been built up. Atul Asthana, MD & CEO, Goodricke Group said diversification into packet and value-added teas help give better margins.
Talking about the need for diversifying into packet tea, Kaushik Das, Vice President and Sector Head, Corporate Sector Ratings, ICRA, says, producers take the highest amount of risk in the entire value chain, but are the least compensated. Packet tea, on the other hand, poses least risk and offers much better margins.
But the driving force behind the transition can be linked to consumers preferring packet tea because of its perceived quality (adulteration free) and better storage options.
However, branding and selling packet teas is not easy, as it calls for setting up a separate unit for managing business and investments. According to Azam Monem, wholetime director of McLeod Russel, bulk tea sells fast on auctions, but branding and marketing requires a critical mass and that would require producers to participate as traders.
“You cannot just rely on your own produce, you need to open up and participate as a trader because if you market your own produce you may get limited,” he said.
McLeod is currently involved in the niche packet tea segment through online channels. It would look at scaling up the category moving forward, he added.
Changing blend
The packet tea market, estimated to be around ₹20,000 crore, accounts for roughly 55 per cent of the country’s total tea consumption, pegged at little over 1 billion kg. India produces around 1,300 million kg (1.3 billion kg) of tea annually.
According to a study conducted by Tea Board of India, nearly 80 per cent of the households in urban India and around 75 per cent of the households in rural India have shifted to packet tea. The proportion of loose tea is comparatively higher in the eastern and central States compared to the rest of the country.
“Favorable demographic factors such as increase in disposable income, aspiration levels, more participation in workforce (both male and female), and increasing health consciousness have by and large contributed to the shift from loose tea to packet. With increasing demand, there has also been a marked improvement in rural penetration and a significant number of wholesalers are diversifying from low margin high volume wholesaling to high margin retail business,” the last study on tea consumption conducted by the Tea Board in 2007, said.
Given the way the domestic tea industry has been reeling under the pressure of high costs, tea plantations don't have the wherewithal to invest more in crop quality, which again leads to lower price realisation, thereby forming a vicious cycle.
Vikram Singh Gulia, MD & CEO, Amalgamated Plantations, says, “There is volatility in the bulk tea market, while retail gives better margins. However, retail also entails more cost as it calls for a separate infrastructure to be put in place. But in the long run if you are in the consumer market, it helps.”
He says an increased awareness and qualitative investment of 50 paisa per cup by a consumer can help revive the industry. As he explains, “The average household consumption in a month is approximately 250 cups and the monthly household spend on tea is roughly ₹180 for half a kg of loose tea at two grams per cup, which roughly translates into 72 paisa per cup. Just by paying a humble 50 paisa extra for each cup, a customer can drink a cup of tea which is satisfying, fulfilling and does not require garnishing of spices to make it palatable.”
The need for branding
Brand guru Harish Bijoor, and founder Harish Bijoor Consults, gives a compelling reason for the tea producers to start labelling their own brews. As he says, “The world is moving from mass consumption formats to niche! Indian tea is a mass offering in the world today. It is largely a commodity offering that goes as a part of a global blend. It is time to brand estate specific single origin offerings. It is time to brand the niche with a David versus Goliath brand feel. The world of high end tea consumption is ready for it. Sri Lanka has done it successfully. So can we.”
As he points out, “MNCs have tried the branding game for decades. Today it's the time of individual estates or small groups of producers to grab the baton and run. The Tea Board of India must be the catalyst of such action. I would advise brand incubation programs to be run for estate owners. It is a must!”
A start has been made. Watch out for more tea labels to grace the shelves, each telling the distinctive story of their origin.