Missing link in the great Indian tea bazaar

First published on Money Control ; contributed by Madhav Sarda, Managing Director, Golden Tips Tea

Tea planters in picturesque Darjeeling say the biggest challenge for India tea lies in its packaging, because producers rarely package their products.

As a result, Indian planters rarely have control over the end product. If that is sorted out, Indian tea can create the perfect storm in the world market.

There is a big divide among Indian teas sold across the country and shipped abroad. As a result, the world’s second-largest producer does not have the largest slice of the global pie. It is currently ranked fourth. Kenya leads the pack with 28 percent export of its produce, followed by China, the world’s largest producer (19 percent), then Sri Lanka (14 percent) and India (11 percent).

What planters say in hushed tones is that Indian tea diplomacy has not achieved the desired results . The Kolkata-based Tea Board has not been able to push the Commerce Ministry to hold nation-to-nation talks to market Indian tea.

Planters across India are doing things mostly on their own, trying to keep up supplies for the domestic market, as well as international markets.

“Indian planters do not have the necessary cash to pack their own produce. Very few do. This needs to change, with some financial push from the government,” says Rudra Chatterjee, the big boss of Luxmi Tea, which — some years ago — bought out the iconic Makaibari Tea Estate in Kurseong.

Chatterjee is proud of the product he grows. He reminds me that Indian tea is no pushover; it’s a product that occupies centrestage in Indian culture and is produced by an estimated 1,600 tea gardens across India that employ a total workforce of a little over 1.1 million people.

In short, tea is not just a widely loved beverage, it is a state of mind for millions of Indians.

Calls for change

Chatterjee said things must start working for planters because the issue of packaging is often discussed at various forums. At a recent meeting in the Indian Capital, planters asked Commerce Minister Piyush Goyal if the government could help the planters do their own packaging by infusing cash. Goyal replied in the affirmative, but also directed the tea growers to look at the meteoric rise of the coffee industry and how coffee growers had a Rs 5,000 crore export tag as compared to the tea growers’ Rs 4,000 crore export tag.

India produced 1,145 million kg of tea in financial year 2021 (FY2021) but consumed 89 percent of the produce domestically. The rest was exported to Russia, Iran, UAE, the US and China. Indian tea exports in FY21 were worth $704.36 million (Rs 5,311.53 crore).

“And remember, we are not even the second-largest exporter. We are way down the ladder. All this needs a serious overhaul,” says Chatterjee, who has plantations in Africa as well.

“We need to change, we need to adapt modern techniques and do a lot more. People are drinking tea like never before. Planters need quick cash and more cash, they need efficient supply chains and they need modern technology to push their products across the world,” Chatterjee told Moneycontrol.

At Makaibari, Chatterjee does his own packaging but there are not too many like him in Darjeeling, or in Assam or the Nilgiris. And this is not good news because the Assam, Darjeeling and Nilgiri teas are considered to be among the finest in the world for their strong flavours and intense aromas.

Why maintaining standards is an imperative

Madhav Sarda, a top tea trader with operations across India and abroad, says India tea should have been given a place of pride long ago and the government should have played an important role to push a product as integral to India as tea, first introduced to the slopes of the Assam hills by British planters way back in 1830s.

“India tea is too, too scattered across the world. We do not know who is packing what, whether someone is pushing their own variety of tea along with Darjeeling, or whether someone is checking standards. And this is one product so close to our hearts,” Sarda, managing director, Golden Tips, said in an interview in Darjeeling.

Checking and maintaining standards is a big issue with some of the big tea gardens in India.

A month ago, international and domestic buyers rejected a series of tea consignments due to the presence of pesticides and chemicals beyond permissible limits.

Indian Tea Exporters Association (ITEA) chairman Anshuman Kanoria told Moneycontrol the matter was serious. It is reliably learnt that a large number of consignments from tea gardens in Assam had failed the test.

Kanoria said that post Covid, many nations have put in place very stringent conditions for tea. Many nations follow EU standards, which are more stringent than the FSSAI rules. “India should not send any wrong signals. Tea is not just an ordinary drink; it is considered a health beverage,” Kanoria added.

India exports its crush-tear-curl (CTC) grade mainly to Egypt and Britain, with the orthodox variety going to Iraq, Iran and Russia.

Chatterjee says it is high time all tea gardens — like Darjeeling — turn organic.

Big changes in the market

Back to business, Sarda says the tea business in India is undergoing a sea change. Branding and packaging are becoming increasingly important, along with online sales. “Loose tea is not being preferred anymore post Covid; people want packed tea because they consider it safer to drink.”

As a result, bulk tea sales, which once dominated the market, are now shrinking. For the record, almost 40 percent of Assam tea in the CTC dust category remained unsold in the Guwahati, Siliguri and Kolkata auction centres during the April-June period this year.

Throughout last year, the figure hovered around 28 percent. And packaged tea sales are growing. The packaged tea market is worth around Rs 24,000 crore, which is half of the 1.3 billion kg tea market in India.

And then there is a serious demand-supply mismatch, say planters in Darjeeling and Siliguri. Prices were Rs 188-190 per kilo in the Assam CTC and dust categories but are now hovering around Rs 168 per kilo, impacted by heavy rains in Assam this year and high coal prices. Assam, which accounts for over half of India’s production, also suffered because of labour movement restrictions to contain the coronavirus outbreak.

In comparison, Darjeeling teas, which fall in the estate-specific, single-origin category, were on a high. There was tourism to back the tea markets. “The crowds are mindboggling, our shops are full of customers. The influx of tourists has been huge after two long years,” says Sarda.

There’s more. Tea, blended with herbs and spices, works as an immunity booster. This, claim planters, is a rage with the new generation, which has already labelled tea as the best option in the $1.5 trillion wellness segment.

Planters in Darjeeling are lobbying hard to bring fusion tea under the Ministry of Ayush. If that happens, Darjeeling tea, which has a sizeable section of fusion tea, could get a slice of the Rs 3,000 crore-plus Ayush marketing budget. Wellness is big news in India, which has a 13.1 percent share of the global market, per a McKinsey study.

The Indian Tea Association (ITA) is also doing its bit to push tea, with the main focus revolving around increasing consumption across India, including pushing the beverage in Southern Indian states, where coffee rules the roost. Almost all tea gardens are being encouraged by the ITA to open up their bungalows for tourism. Tea planters and traders are being encouraged to push tea among the 20-25 age group through tea lounges. “The idea is to improve the value chain of tea,” says ITA head Nayantara Pal Choudhury, adding: “The goal is to push India to have the largest share of the global tea market by providing quality products.”

The Tea Board, which works directly under the Commerce Ministry, is also encouraging small planters to connect with high-end buyers in Australia and South America. “The direct link to the consumer is very important,” said a small planter in Darjeeling. “There is high demand for herbal and organic tea.”

An opportunity amid the Lanka void

There is one more region where Indian tea could make a market: the global markets of Sri Lankan tea. The mounting economic woes in Sri Lanka — a major player in the global tea market — could open up opportunities for Indian exporters.

Market experts claim that there could be a significant decline in production and shipments of tea from Sri Lanka, which produces around 300 million kg of tea annually, predominantly orthodox tea. Colombo exports 97-98 per cent of its annual output and accounts for almost 50 per cent of the total global trade in orthodox tea. It exports to Iraq, Iran, the UAE, and North African destinations such as Libya, along with Russia and Turkey.

Indian exporters can easily fill the void caused by the fall in Sri Lanka's tea production.