Wagh Bakri Tea looks to expand footprint; launch more variants in health segment

Ahmedabad-based packaged tea maker Wagh Bakri Tea Group is looking to strengthen its distribution footprint and roll out more variants under the health and wellness segment to grow its sales. The company is also looking to set up tea lounges across the country to increase out-of-home tea consumption.

According to Parag Desai, Executive Director, Wagh Bakri Tea, 2020 was a rather “challenging” year as there was a mismatch between demand and supply and that pushed up tea prices. Out-of-home consumption of tea was also impacted on the back of the Covid-19 pandemic.

“Our sales were almost stagnant due to lack of availability of good quality tea and the lockdown. So, we are expecting to end the current fiscal more or less flat. But things are bouncing back, and if Covid-19 does not play out then we are looking to grow by around 20 per cent in 2021-22,” Desai told BusinessLine .

As per production estimates available on the Tea Board of India website, tea production in North India in 2020, which includes the gardens in Assam and Bengal, was down by nearly 137.18 million kg (mkg) at 1,033.73 mkg, compared with 1,170.91 mkg in 2019. Since North India accounts for nearly 84 per cent of the country’s total production, any drop in production in the region adversely affects the supply of tea in the system.

The drop in production pushed up prices. However, it was not possible to pass on the entire cost to consumers.

“As an industry, prices went up by nearly 50 per cent but we were able to pass on only around 30 per cent; the rest we had to absorb. But prices at the current level are fairly stable,” he said.

With demand reviving and with improved traction on the ground, the tea industry should be able to perform better during FY22.

Packet tea industry

Wagh

Bakri Tea, which has an estimated turnover of around ₹1,500 crore, is considered to be the third-largest packaged tea company in the country with over 40 million kg of tea distribution.

The ₹10,000-crore packet tea market accounts for roughly 50 per cent of the country’s total tea consumption of one billion kg. The segment is currently dominated by brands such as Tata Tea, Brooke Bond and Wagh Bakri.

Packet tea, which is essentially considered to be value-added tea, ensures higher margins compared to bulk tea.

According to a study conducted by the Tea Board of India, the demand for packet tea is on the rise — it is preferred by close to 80 per cent of urban and around 75 per cent of rural households. The perception that packet tea is adulteration-free and has better storage options are the key factors driving its growth.

Favourable demographic factors such as an increase in disposable incomes and aspiration levels and rising health consciousness have contributed to the shift from loose tea to packet tea, the study said.

Wagh Bakri, which currently has 15 tea lounges, is looking to add 50 more lounges in the next 15 months. These would be in the major metro cities.

“We are trying to bring tea back in fashion. People have upgraded to higher quality tea and are looking for more value-added offerings. We are planning to add more products in our wellness range,” he said.

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