Why in news?

India's tea market has been in a deflationary phase for the past four to five quarters, driven by adverse weather, cheap imports, and a consumer shift toward lower-priced sub-brands and the unorganised sector — squeezing revenues of major listed players and forcing them to rethink strategy.

What’s in Today’s Article?

• India's Tea Sector: Production, Regional Concentration and Trade Performance
• Why the Tea Market Is Slowing Down?
• Strategic Response: Premiumisation

India's Tea Sector: Production, Regional Concentration and Trade Performance

• India's tea production has shown resilience with fluctuations, reflecting exposure to weather shocks, pest pressure, ageing tea bushes, and labour constraints.
• Production trajectory: 1,267.36 million kg (2016) → 1,390.08 million kg (2019) → dipped to 1,257.53 million kg (2020), the pandemic year → recovered to 1,393.66 million kg (2023) → moderated to 1,303.53 million kg (2024) → rose to 1,369.98 million kg (2025).
• Regional Concentration of Production
  • Tea production in India remains sharply concentrated in a handful of states, making national output highly sensitive to state-specific climatic and logistical conditions.
  • Assam and West Bengal together account for over 80% of national production — underscoring why disruptions in these two states (heatwaves, erratic monsoons, landslides) have an outsized impact on overall supply and prices.
• Trade Performance: Exports
  • Tea exports have shown an upward trajectory in both volume and value.
    • 2024-25: India exported 262.98 million kg of tea, worth Rs 7,817.58 crore (US$ 923.89 million).
    • April-December 2025-26: Exports reached 223.53 million kg, worth Rs 6,880.53 crore.
  • Rising export value reflects both quantity growth and improvements in product mix and pricing.
  • Global standing (2024): India's share in world tea exports was 13.13%, while its share in world tea production was 18.43% — indicating India produces more than its export share, pointing to scope for improving export competitiveness.
  • Key Export Destinations (April-December 2025-26) - Leading markets included the UAE, Iraq, Russia, China, the US, Iran, the UK, Germany, Saudi Arabia, and Turkey.
    • The top 20 markets accounted for 88.21% of total exports — highlighting significant market concentration and the importance of targeted trade diplomacy.
• Trade Performance: Imports
  • Tea imports remain limited, typically 2-3% of domestic production, used mainly for value addition and specific domestic requirements.
  • Import trend: 29.97 million kg (2022-23) → 25.21 million kg (2023-24) → 50.14 million kg (2024-25) → 30.47 million kg (April-December 2025-26).
  • The sharp rise in 2024-25 makes import management a matter of both market balance and quality protection for the domestic industry.

Why the Tea Market Is Slowing Down

• Adverse Weather
  • Summer heatwaves led to prolonged dry spells, causing higher pest infestations and affecting crop quality, while extreme heat also dampened consumer demand.
  • Erratic monsoon rainfall over recent years caused both shortages and landslides in hilly tea-growing regions, lowering yields of high-quality tea and affecting auction prices where companies like HUL and Tata Consumer source leaf.
• Cheaper Imports and Commodity Nature of Tea
  • A rise in cheaper tea imports from countries like Nepal and Kenya has pushed down domestic prices.
  • Since tea is largely a commodity business with relatively low brand loyalty, falling prices have fuelled growth in the unorganised sector, forcing larger companies to cut prices and accept lower realisations.
• LPG Shortage Impact
  • A temporary LPG (liquefied petroleum gas) shortage, linked to the West Asia conflict, led households to cut back on fuel use — and consequently, tea purchases, according to Tata Consumer's management.

Strategic Response: Premiumisation

• Companies like Tata Consumer and HUL are struggling because regular, everyday tea sales are weak.
• So instead of just competing on price, they're pushing their fancier, more expensive tea products — like Tetley Premium, Tata Tea Gold, and premium versions of Brooke Bond.
• The idea is: if cheap tea isn't making much money, sell more expensive tea instead.
• Challenge: Tea consumers have rigid taste habits, making it far easier for them to trade down to cheaper, unorganised alternatives than to trade up. Experts believe premiumisation may unlock value, but results could take considerable time.
• With limited scope in a commodity-linked segment, major players are diversifying:
  • Tata Consumer: revenue from "growth businesses" (Tata Sampann, Soulful, cold beverages) surpassed tea/coffee revenue for the first time in Q1, making it the fastest-growing segment.
  • Goodricke: expanding into dairy, alternative crops, solar energy, and select hospitality ventures.

Conclusion

India's tea industry is navigating a difficult phase shaped by climate volatility, rising cheap imports, and a structurally price-sensitive consumer base.

While premiumisation and diversification offer partial relief for major players, the commodity nature of tea and consumers' resistance to trading up mean recovery is likely to be gradual, with future shocks like El Niño posing continued risk to price stability.