Cup of life: Tea consumption grows despite cola charge

Written by RajeshRavi | Updated: Jun 9 2012, 09:56am hrs
More and more Indians are waking up to the reality that drinking tea is not pass. It is healthy, stylish and full of energy for many a tired souls, irrespective of age, sex and income. In fact, domestic consumption of tea is seen growing rapidly with economic growth and is not threatened by the cola and packed juice industry.

In the last decade, domestic tea consumption has grown 3-3.5 % per annum. This is obviously a reflection of the economic growth and tea, being an income-elastic product, has benefited by the growth, said R Sanjith, head (commodities), United Planters Association of South India (UPASI).

Domestic consumption during 2011 is estimated around 856 million kg, or a per capita consumption of 720 gm. The most interesting aspect is the growth in rural consumption. The penetration level of the drink is almost 96-97% in both the urban and rural markets, he added. Reports suggest that India consumes about 25% of the total tea production in the world, and over 75-80% of its own production. It is called a common mans drink and used in majority of the households in the country. Tea consumption is very high in North Indian states. The growth in tea consumption in South has also increased among the younger generation as it is considered a health drink, said Ambalavanan R, executive director, Tea Board.

The shift from loose tea to packet tea has resulted in increased per capita consumption, feels Contemporary Tea Auctioneers CEO N Sriram. Moreover, awareness regarding health benefits of tea is increasing rapidly, especially among the younger generation. Quality of tea in the domestic market has improved substantially due to packet form. Identity of the supplier is known and reputation is at stake if the quality is inferior, he added.

Industry body Assocham reports that the total turnover of the tea industry in India is likely to reach R33,000 crore by 2015 from the current level of about R19,500 crore. Nearly 6 lakh hectares is under tea cultivation and the report says that the domestic tea industry is growing at a CAGR of about 15%. India is the worlds largest consumer, second largest producer and the fourth largest exporter of tea after China and accounts for nearly 30% of global output. Branded market accounts for nearly 55 % of the total market and is growing at about 20%, while the unbranded market is growing at 10% annually.

But if you ever had the misconception that India leads in per capita tea consumption, think again. India falls behind many nations, including its immediate neighbours like Pakistan and Bangladesh in gulping the ubiquitous concoction of chai. According to a survey done by Org-Marg for the Tea Board, the per capita consumption of tea in India is far below the record of the UK, with 2.5 kg and Ireland with 1.5 kg. Tea Board sources point out that Pakistan (0.95 kg), Bangladesh and Sri Lanka (1.2 kg) are above the Indian per capita consumption.

The share of tea in the total beverage industry is around 52%, but I feel there is enough potential for growth. A small increase in per capita consumption of even 50 gm could make a lot of difference to the industry, R Sanjith said. The Tea Boards domestic promotion in organising tea carnivals and conventions help the penetration of high quality tea in niche markets in India and promotes tea as a health drink. As black tea and green tea are considered healthy, momentum in the consumption among the younger generation is picking up, said Ambalavanan R.

Tea Board and trade associations are also concentrating on the health and lifestyle platform to increase consumption among the younger crowd. 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, reports Assocham.

Ice tea currently accounts for over 5% of the entire non-alcoholic beverage market in India. The importance of increasing tea consumption can be summarised by an IIM study, which points out that if Indians could drink half a cup more per day, the problem of surpluses will disappear and that could make buffers history. Such is the power of even a small increase in consumption for a large population base.