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Demand
drivers key to tea sector growth: Study
Our
Commodities Bureau in Mumbai
Demand drivers in the domestic food sector are changing fast
over the past couple of years, and more so in the Rs 16,000-crore
beverage industry of which the tea sector has a component of
over 55 per cent.
The proper use of these drivers to create more demand from emerging
quarters could help the industry grow from the current levels,
says a study on the tea sector conducted by Rabobank India.
Global consumption trends in tea will influence the demand patterns
in India, the report said. It also stressed the need for players
in the sector to have a dynamic approach to address the challenges
of increased competition from other beverages and the current
demand slowdown.
The emerging demand drivers for the beverage industry are economic
growth, convenience, lifestyle and health.
To grow out of the current relative stagnancy, the players in
the Rs 7,000-crore Indian tea sector should relook their marketing
plans, said Rabobank India Finance’s Sonal Shah, senior manager
strategic advisory M&A.
“There are a lot of talk about the slowdown in the tea sector
but the situation is not that bad. Improvement is possible with
concentration and use of the emerging drivers in the industry,”
Ms Shah said.
According to the Rabobank study, global tea production in 2000
grew by 1.8 per cent to 2.9 million tonne, compared with a 3.7
per cent decline in 1999. In India, the production in 2000 was
placed at 823 million tonne, up 2.2 per cent from the previous
year. However, the average annual growth in over the past decade
is just around 1.5 per cent.
Growth in population and increase in disposable income have
been the key factors that have been driving demand for the beverages
in particular and so also for tea. “The Indian consumer is increasingly
exposed to overseas trends in food and beverage consumption
and these are influencing his preferences,” the report said.
Further, the domestic consumers too are experiencing a paucity
of time and is drawn towards convenience foods and beverages.
This will see a shift in favour of value-added forms of tea,
health will also emerge as a key driver of demand.
In addition, strategic positioning of leading players in the
Indian tea industry too is important. The domestic tea industry
is categorised as producers, marketeers and integrated tea companies.
However, there needs to be some backward integration which becomes
relevant if the aim is to market high-end origin-specific varieties
in which case control over raw material is the key factor in
determining success.
Addressing the challenges of increased competition require repositioning
of tea, enhancing both the variety and the overall availability
of tea, innovative packaging and also the strategic alliance
for marketing and distribution.
Meanwhile, the demand for black tea is forecast to grow at about
two per cent per annum over the next five years. India will
continue to be the single largest consumer, accounting for about
25 per cent of the global black tea consumption.
Also, there would be a strong growth in demand mainly from Europe
and the US for speciality tea. This include fruit and herbal
varieties and organic tea. The surge in demand comes piggybacking
the increased demand of healthy beverages and lifestyle products.
The domestic manufacturers need to move up the value chain in
order to maximise the profitability of exports, the report said.
Currently, over 70 per cent of Indian exports are in bulk form.
Producers need to reposition themselves keeping in view the
target market and enhance the perceived value of their product.
Shifting the production mix and strategic alliances for marketing
and distribution will help the repositioning.
The producers should take steps for cutting costs to become
more competitive. For this, initiative should be taken to enhance
productivity and quality and to reduce overheads. |
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