Plantation Industry - Tea & Coffee

 

Overview

Tea and coffee are one of the oldest organized industries in India. With total global production of tea surpassing the 4 billion kg mark, India has contributed 1 billion kg of tea. Black tea production registered a CAGR of 1.6% and its consumption at 2.3%. Indian tea exports have not progressed much due to increase in global competition and deteriorating quality of Indian tea. Nevertheless, tea has continued to bring in foreign exchange to the country and generate employment owing to its labor-intensive operations, especially for women since tea leaves are plucked by women only. India, contributing about 30% to the global tea production, stands to be the second largest producer of tea with a market size of over INR 100 billion and the fourth largest exporter of tea with almost over 75% of its production from the organized sector.

There are two major types of coffee – Arabica and Robusta. Over 170,000 coffee farms mostly spread over the states of Karnataka, Tamil Nadu and Kerala produce over 90% of total coffee in India. Although the past decades saw majority of resources in Arabica, Robusta has taken over coffee producers’ interest due to higher yield and better usage. Arabica is a milder blend of coffee, grown in higher altitudes as compared to Robusta that is suited to warmer climates in the range of 20 to 30 degrees Celsius. Coffee is predominantly an export-oriented commodity unlike tea that is mostly consumed domestically.

The major producers of tea and coffee are Tata Global Beverages, Dhunseri Petro and McLeod and together they capture a little over 50 % of total market share of sale of tea and coffee.

 

Outlook

India takes pride in the variety of tea offered – Green Tea, Darjeeling Tea, Assamese Tea, CTC (Crush, Tear and Curl) and the like with most of it being manufactured in Darjeeling, Assam and Nilgiri. Exports would remain flat since most of the tea produced is consumed domestically. More than 90% of Indian households are regular tea drinkers. The 12th Five Year Plan has allotted INR 2 billion to promote small scale tea growing sector. Subsidies are introduced by the Tea Board to encourage micro and mini tea factories, subsidize transportation of products and rejuvenation efforts for orthodox tea. India sells its tea through an auction between brokers and buyers. The chart below illustrates the entire process. In 2015, due to heavy rains and late arrival of product, tea prices at auctions decreased which was favorable to customers.

 

Buy Industry Analysis

 
The Coffee Research Institute of India controls the application of research on coffee production and small farmers produce marketing since most of the coffee. The top brands of coffee in India are Nescafe, which controls more than half of the total market share, Tata Coffee that is well known for its coffee beans and BRU that is the biggest rival of Nescafe. Primarily an export-oriented commodity, the largest importer of Indian coffee is Italy. The following chart indicates country wise share of exports of Indian coffee.
 
 

Future Potential

Given that a majority of Indian population is between 18 – 46 years of age, the rising per capita incomes and the inherent characteristics of these beverages being addictive in nature, demand remains inelastic and will increase with a rise in tea and coffee drinkers in the country.  With the growing awareness of health benefits of tea, variants of the traditional tea are growing in consumption. Tea producers have started focusing on value added formats in tea. Just like Nescafe’s introduction of coffee machines, the same can be applied to tea, which would result in a multifold increase in turnover. Moreover, BRU has to keep up with strong advertising campaigns of its rivals. The reason why tea is seeing a downturn in production and supply is due to the erratic weather conditions. This calls for a well-established irrigational facility to aid tea production. India has to invest at ground level structure to support tea production whereas coffee producing companies need to channelize their products through better marketing efforts.

 

What this report contains:

  • A detailed overview of the industry

  • Structure of the industry from both, domestic and international perspectives

  • Related industries that this industry has inter-dependencies with and their understanding

  • Detailed analysis of industry segments in terms of the value and depth of corresponding market

  • Analysis & insights about the elements and critical success factors of this industry using strategic models

  • A forecast on the state of this industry in 2020, predicting the growth and movement patterns for 2016 - 2020

  • Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants

  • Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models

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