Firms see potential in tea bags, instant mix in urban areas

Written by Rohit Khanna | ROHIT KHANNA | Kolkata | Updated: Nov 24 2012, 04:32am hrs
Tea retailers are betting big on tea bags and instant mixes to boost growth in the urban markets as packed tea is gradually replacing lose tea.

While the Rs 3,200-crore tea market in India is largely controlled by traditional retail formats, hypermarkets are increasing their shares, feels industry insiders.

Consumers have shifted gradually from loose tea to packed tea in last five decades and share of packed tea in the total domestic consumption has increased from 20% in 1960 to 50% at present. While Tata Global Beverages and Hindustan Unilever sell around 80 million kg each, over 320 mkg is contributed by regional players in the packet tea segment.

Hindustan Unilever general manager, beverages excellence centre (south Asia), Sanjeev Chatterjee said, We have witnessed a buffet phenomenon (Where the shopper picks up a bouquet of products) at the modern retail formats.

Teabag and tea powder or instant tea seem to be the product for the future. Convenience drives the consumers to tea bags or instant tea. Apart from that, new flavours and value added tea are instrumental in attracting modern customers, he said.

While sales per point of distribution are growing at the rate of 16% in Tier I & II towns and cities, they are a little lower at 11% in the metros.

According to industry estimates, modern trade formats-largely selling packet tea, contribute to around 6% of the tea sales in the country.

Industry estimates show 10% sale of packet tea comes from 1 kg, 2 kg and 5 kg packs, 25% sale comes from 500 gm packs. Almost 40% sale in the packed tea segment is contributed by 250 gm packs.

Industry experts feel private labels will play a big role in driving growth of packed tea in the modern retail formats. According to Marcus Banfield, adviser to the UK-based Camellia Plc, private labels are an essential part for any big retailers globally and it contributes up to 40% sale in certain categories.

Wagh Bakri Group executive director, sales & marketing, Parag Desai said, Modern retail will go through consolidation phases where the competitive advantage will come through customising private label products to meet complex demands of the consumers.