Branded tea market to double in 5 years

Rapid change in consumer behaviour is likely to support branded tea market more than its unbranded segment. Consequently, the branded tea market is expected to double in the next five years on consumers’ preferences over branded packet of tea over the open weight dominated unbranded products.

With 20% compounded annual growth rate (CAGR), the branded tea market is contributes nearly 55% of the market size with around 980 million kgs of India’s overall output. A recent, Assocham study forecast India’s tea market to touch Rs 33,000 crore by 2015 from the current level of Rs 19,500 (in 2011).

“The total branded tea segment in India is currently valued at Rs 6000 crore and is expected to double in the next 5 years. The domestic coffee consumption too has been continuously growing at annual average rate of 6% and is largely on account of a thriving independent upscale café culture,” Priti Kapadia, Director, Sentinel Exhibitions Asia the organizer of World Tea & Coffee Expo (WTCE) scheduled to be held between February 15 and 17, 2013 in Mumbai.

Domestic coffee outlets which have a lot of appeal for the new generation, are set to double within next three years fuelled by the foray of global players such Starbucks and Dunkin’ Donuts in India. WTCE is India’s only trade show dedicated to the hot beverage sector.

Companies in the last decade have positioned tea and coffee as recreational products, which have proved beneficial in attracting younger population. Furthermore, the focus on high-protein, low-sugar diets is stimulating demand for green tea, ground coffee and artificial sweeteners, which have shown strong signs of promise over the past three years, Priti added.

Meanwhile, the Assocham study further said that with nearly six lakh hectares area under tea cultivation, the domestic tea industry is growing at a compound annual growth rate (CAGR) of about 15%. India is world’s largest consumer, second largest producer and fourth largest exporter of tea after China and accounts for nearly 30% of global output and nearly 25% of tea produced worldwide is consumed in India, said the study.

With the display of new technologies at the WTCE, Indian companies will be able to fulfill their need of investing in modernization and improving quality so as to consolidate gains and improve their global competitiveness, Priti added.

In spite of the deteriorating global economic climate in the last few years, the hot beverage sector has remained resilient as improvements in transportation and the extension of the shelf life of products backed by continued product innovation and aggressive marketing initiatives is contributing to the growth of this industry. Some segments like premium and organic coffee and green/herbal tea have created an entirely new market.” Adds Kapadia, “Rising consumer awareness about the health hazards of carbonated drinks is leading to a shift towards tea and coffee. Another major driver is surge in the health conscious population who prefer antioxidant property of tea or the instant energy of coffee.”

 
The top two tea producing nations – China and India, collectively produce about 60% of total global tea output. India is the second-largest tea producer and consumer after China and fourth largest tea exporter after Kenya, China, and Sri Lanka. The key coffee producing and exporting nations are Brazil, Vietnam, Columbia, Indonesia, Ethiopia, and India, among others. Brazil is the world’s largest producer, exporter and consumer of coffee

Nearly 35 lakh workers are employed in over 1,500 tea estates across India and about 65% of these are employed indirectly.

Historically regarded as a hot beverage, the penetration of tea in the non-alcoholic cold beverage segment is another driving force for this industry owing to the rising affinity towards ice-tea which currently accounts for over five% of entire non-alcoholic beverage market in India.

There is not much product differentiation at rural and urban levels and thus key industry players are coming out with value added products but with rapidly changing market scenario and technological advancement in agri-business, there is tremendous scope and potential for growth and development of domestic tea industry.

Internationally, the market for branded tea and coffee in terms of revenue is expected to reach $125 billion by 2017 as against $69 billion in 2011 (estimated) signaling an annual growth of 10.9 % between 2012 and 2017.