With tea production in the country declining and input costs rising over the last few years, a fresh round of price hike has begun in the R6,900-crore branded tea segment in India. To offset the rising input costs, major tea companies are raising prices by R 5-7 per kg. For instance, Duncan’s Tea has hiked prices by R7 a kg for all its brands, while Tata Global Beverages (TGBL) has also raised prices of its select tea brands this month. Like Duncan’s Tea, Royal Girnar and Society Tea have also raised prices to combat rise in commodity prices. Tea production in India fell to 966 million kgs in 2010 from 979 million kgs in 2009 and 981 million kgs in 2008. Production in Africa is also down by 39 million kgs, thus creating a global pressure on tea prices.
On the company’s revised pricing strategy, MC Appaiah, COO, Duncan’s Tea, said, ?We have hiked prices by R7 per kg in June and will follow it with another price hike in July, depending on the price trends of tea in the auctions.? According to Appaiah, the tea market is on fire and the prices for teas from Assam to Bengal are up by about R15 to 20 per kg for the new season. “The consumption of tea has been growing by 3% annually but production is not keeping pace with consumption, thereby creating a large gap in demand-supply,? he said.
Tata Global Beverages is in the process of raising prices of its select brands ranging from R5 to 7 a kg, said a leading retailer in Mumbai. ?We expect other major players to raise prices in the next few days. Last month, HUL hiked prices for its select tea brands,? he added. In the midst of recent price hikes, Wagh Bakri Chai, a brand that was largely restricted to Gujarat, but is available nationally now, has no plans to increase prices of its brands. “We have to give resistance to higher input costs. We have to pay attention to consumers,? said Piyush Desai, chairman of Wagh Bakri Group.
Meanwhile, other players in the branded tea segment are in a wait-and-watch mode before taking a final call on price hikes. With increasing prices in this segment, many consumers will now switch over to loose tea or regional brands, predict industry analysts.