Pandemic Widens Gap Between Large And Small Tea Producers

HUL, Tata Consumer and Tata Global Beverages-Dhunseri have seen their market share increase during the pandemic.

A woman pours freshly brewed tea into a cup. (Photographer: Taylor Weidman/Bloomberg)
A woman pours freshly brewed tea into a cup. (Photographer: Taylor Weidman/Bloomberg)

Large tea producers increased their dominance during the pandemic as a wave of consolidation and formalisation helped them gain at the expense of regional and smaller peers.

The combined market share of the top three producers in the world’s second-biggest market for the commodity—Hindustan Unilever Ltd., Tata Consumer Products Ltd. and Tata Global Beverages-Dhunseri Ltd.—rose by nearly four percentage points to over 67% in the year through June. Till about 2018, according to Nielsen India data sourced from the industry, the three controlled 62.2%.

  • HUL’s market share, according to Nielsen data, rose to 24.6% in June from 23.5% a year earlier.

  • Tata Consumer’s share increased 149 basis points to 21.37%.

  • Tata Global Beverages-Dhunseri’s market share registered a 128-basis-point jump to 21.39%.

"These companies have seen their market share increase as supply lines of smaller companies were disrupted by the pandemic,” PK Bezbaruah, chairman of Tea Board India and Tea Research Association, told BloombergQuint over the phone. “During the first and second wave, smaller companies witnessed an impact as sales force and workers didn’t show up at factories and tea plantations.”

Queries emailed to Nielsen India and Hindustan Unilever remain unanswered. Tata Consumer and Tata Global Beverages didn’t respond to BloombergQuint, citing the silent period ahead of their quarterly earnings.

Lockdown restrictions in the key producing states of West Bengal and Assam led to temporary disruption of supplies, increasing tea auction prices. Average prices of the commodity rose nearly 43% over a year earlier to Rs 196.97 per kg in FY21, according to Tea Board of India data. The price rise was coupled with a fall in consumption.

Bezbaruah said tea consumption has taken a hit as nearly 15% of tea in India is consumed outside the house—offices or street corner shops. That proportion disappeared since March last year as most public places have either remained shut or operate under restrictions.

Gains made by bigger brands during the pandemic, he said, will stay with them. “Smaller players pack and sell lower quality tea while bigger brands provide a better quality at similar prices as they have better sourcing capabilities,” he said. Smaller firms selling good quality tea aren’t impacted, he said.

The increase in share of larger tea producers comes even as they increased prices to offset rising commodity costs.

“We have gained market share, our strategy was always to drive competitive growth as you saw a pretty steep inflation of the commodity which happened last year and it remains elevated even now,” Sanjiv Mehta, chairman and managing director at HUL, said at a post-earnings conference call.

“Our strategy was to ensure that we drive competitive volume growth which also then translated into value market share as well.”