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THE FUTURE OF THE TEA INDUSTRY

Tea, as a beverage, is enjoyed by more than half of the world's population. The tea market is highly vibrant and full of challenges. The consumption of tea worldwide is growing at 3% per annum, whereas the production of tea had been static since the last decade.

From year 1997 to year 2010, tea prices were almost stagnant and the production of tea was adversely affected as the tea garden owners suffered huge loss due to poor tea prices in the market. There was a negligible increase in the price of tea in comparison to inflation. New tea estates were hardly developed and all this resulted in migration of farmers from tea cultivation to other crops.

The global tea industry is largely dominated by India - the largest producer and consumer of tea. India is followed by China, Sri Lanka, Kenya and Indonesia in the production hierarchy of countries. Tea continues to be the common man's drink throughout the country. “After water, tea is the second most consumed beverage in India, so with the increase in its consumption, tea prices are likely to increase in the next five years which may go up to 1000 Rs. Per kg”, says Mr. Vijay Kedia- Director Kedia Securities.
Accounting for over 30% of the global production, India is a world leader in all aspects of tea production, consumption as well as export. It offers a variety of products, from original Orthodox to CTC and now green tea, Darjeeling tea, Assam tea and Nilgiri tea. No other country has so many popular varieties of tea. Hindustan Unilever is the current market leader in terms of sales value with over 20 per cent market share; while Tata Tea is the leader in terms of sales volume with nearly 20 per cent market share.

Mr. Kedia also stated, “Price has shot up like anything in the new season which has just started.  Due to less carry forward from last year there is shortage of tea especially quality Tea. Tea prices are likely to be firm this year benefiting tea companies. Market price of Tea in this month is harder around 20% compared to last year in March.”

Thus with the increase in demand of tea worldwide, it is highly expected that the tea prices will soar up in the next five years as the production is still very limited. But despite this price hike, it is anticipated that tea will still have its own consumer segment and enjoy the standing in the market.

PS: Written on 4th April 2012

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