Smallholders Gain Ground in Specialty Tea Segment

Tea Smallholders Assam India Jungpana Estate

In August tea auctioneers celebrated a specialty golden tea grown in Assam that sold for a record $537 per kilogram. Perhaps more impressive is that the tea, produced by Manohari Tea Estate in the Dibrugarh District, was purchased by Guwahati-based Saurabh Tea Traders for local tea retailers in New Delhi and Ahmedabad.

Tea accounts for 79 percent of India’s non-alcoholic beverage market by volume, generating an estimated $30 billion annually in sales (mainly in-home but with a growing amount consumed away from home). While India produces a remarkable amount of tea, the wholesale price is low, averaging INRs132.7 ($1.83) per kilogram. Market research firm Euromonitor estimates that branded, packaged tea generated $1.8 billion in sales in India last year, up from $1.69 billion in 2016 but well below much smaller volume markets like the United States where branded teas (including RTD) generate $10 billion in sales.

Small growers have a definite advantage over the big gardens in producing specialty tea for the domestic consumption according to Pradip Baruah, chief advisory officer at the Tocklai Tea Research Institute.

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He told that “specialty tea requires much more attention, and with their smaller holdings, the small growers are at an advantage to give the required attention, which is not possible for big gardens. The small growers are developing expertise in this field and we (Tocklai) have been helping them in this regard.”

Smallholders, Big Players

Tea Smallholders in Indonesia

Small growers are becoming big players in specialty. In the past the best tea was produced on large-scale plantations in India, Sri Lanka, Kenya, Indonesia, and Nepal. This was the tea made available for export.

Retailers worldwide should take note that in future years smallholders are likely to be the best source for specialty teas.

Approximately 90.1 percent of India’s tea leaves are crushed by machine, torn, and curled (CTC) resulting in small particles used to fill teabags and sold in bulk. Green tea comprises about 1.5 percent of Indian production.

Specialty loose leaf teas, known as orthodox, made up 8.4 percent of the total 1.325 million metric tons (billion kilograms) grown in 2017-18. These teas remain in demand in Germany, the UK, Iran, the US and Japan. Venerated retailers like Fortnum & Mason in London, founded in 1707 and Mariage Freres in Paris, France, have imported fine teas since 1854. These are acquired in private sales at prices much higher than public auctions. Darjeeling first flush, for example, sells for a minimum INRs1500 ($20-25) per kilogram at auction but brings $400 and more per kilogram (INRs29000) in private sales.

There are 800 tea plantations in Assam and 100,000 smallholders growing tea Plantations process 52 percent of Assam’s output, 80 percent of which is sold in the domestic market.

Only 1 percent of the tea in Assam is processed as orthodox but smallholders currently manufacture 60-70 percent of that tea. There are 150 estates and perhaps 200 small tea gardens that cultivate teas that at auction bring somewhere between INRs250-500 ($3.50-$7) per kilogram. Quantities are small. Year-to-date only 300 kilograms of specialty tea grown in Northeast India has been auctioned, a quantity that grew by 100 kilograms over the same period last year.

In Southern India, where smallholders constitute the majority of growers, orthodox production has gained traction. The southern region produces only 18 percent of India’s total, but gardens like Avataa Tea and the new in Kerala are versatile, producing a variety of styles including white, oolong, and specialty green teas. Donyi Polo Tea Estate in Arunachal Pradesh sold a lot that brought INRs18801 ($259) per kilogram in 2017. Gardens in Assam, that adopt hand plucking and expend greater care in processing, are now getting attention for quality production and compensation. In August a golden tips Assam tea, produced at Dikom Tea Estate by Rossell Tea, and auctioned in Calcutta bought INRs12000 ($165) per kilogram for a 36-kilogram lot. This tea, produced in small quantities, is destined for retailers in Japan and Germany.

Domestic Preference

Euromonitor calculates that sales of the two largest suppliers of packaged tea are flat. Tata Global Beverages (TGB) with 29 percent share and Hindustan Unilever (HUL), with 27 percent market share, showed little growth during the period 2012-16 while agile regional brands such as Wagh Bakri, Girnar, and Amar Tea report gains that total 10 percent of the market. Wagh Bakri, with 8 percent, invested heavily in tea lounges, regional blends, and marketing to become the country’s third largest packaged brand, according to executive director Parag Desai who was quoted in the .

Global Gains

Tea exports were tallied at $7.8 billion in 2017 with Asia contributing 60 percent of the global total. China, which grows about half of the world’s tea, is once again the world’s largest tea exporter with sales last year of $1.6 billion. Long the top producer of green tea, it is expected to surpass Kenya as the world’s largest exporter of quality black tea.

India ranked 4^th at $591.2 million, accounting for 7.5 percent of total sales.

“Tea consumption has grown particularly rapidly in China, India, and other emerging economies, driven by a combination of higher incomes and efforts to diversify production to include specialty items such as herbal teas, fruit fusions and flavored gourmet teas,” according a report by the UN’s Food and Agricultural Organization (FAO).

The amount of black tea is expected to increase by 2.2 percent over the next decade to reach 4.4 million metric tons in 2027. Green tea production is expected to double from 1.5 million metric tons in 2015-2017 to 3.3 million metric tons during that same period. Meanwhile per capita consumption is likely to decline in the UK and traditional importing European markets, except Germany, predicts FAO.

Increasingly it looks as though it will be smallholders that bring these teas to market.

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