MUMBAI:
Like many other consumer goods categories, the premium segment is clearly driving the growth of the Indian tea and coffee market as well. According to market research agency IMRB, the premium segment in tea grew faster in terms of reach and volume compared to non-premium tea this year even as instant coffee pushed the growth in the coffee market. Considering a category like tea, which has almost a hundred per cent penetration in India, consumers are now increasingly opting for value-added, flavoured offerings.

The IMRB data said premium tea grew 11% in terms of volume as opposed to a 4% growth clocked by the nonpremium segment during the January-October period this year compared to the corresponding period last year. On the other hand, instant coffee which is higher priced compared to conventional coffee, grew its volume by 9%. And as consumers upgraded, the volume of unbranded tea declined by 2% while the strong hold of regional players only increased.

“We are seeing that consumers are looking to experiment more with their daily cup of tea. This is where the value-added offerings are being lapped up by people. Tea bags have become commonplace today and niche brands are gaining traction. Expansion in the tea category is clearly coming from this segment,” said Damodar Mall, director, food strategy at Future Group, which runs the Big Bazaar stores. The growth in the tea market is being led by the bigger pack sizes unlike the instant coffee space which is largely dominated by the low unit packs. Premium tea penetration is still at 20% currently in India of an estimated Rs 8,000 crore market.

In the tea category, local brands have continued to rule the roost as they cornered another percentage point and stood at 38% of the overall market. “Regional brands are competing well as their overheads/expenses are less compared to the national brands,” said Piyush Desai, chairman & MD of Wagh Bakri, a strong regional player in the Indian tea market. Hindustan Unilever (HUL) and Tata Global Beverages (TGB), which are the two national players in the tea market, are losing ground to regional players like Wagh Bakri.

According to a recent research report by SBICAP Securities, “Local tea manufacturers like Wagh Bakri and Warren Tea in the hinterlands of India are better able to gauge the demand and cater to the regional taste more effectively than national players like TBG and HUL. Increasing distribution reach in the rural markets is becoming more expensive than in urban markets due to accessibility. Over the past two years, TGB and HUL have both lost 0.5% market share to smaller regional players.”

HUL’s Bru emerged as the single largest penetrated brand in the instant coffee market with a 10% reach driven by its growth in the household reach. Nescafe had a reach of 5% with its volumes growing at 14% during this year, according to IMRB. “The volumes in the premium segment are going up in both tea and coffee as consumers are not restraining from upgrading despite the talk of the slowdown. Instant coffee is growing very well as the in-home consumption reach has now gone up to 16% with a healthy growth rate of 7%,” said Manoj Menon, group business director at IMRB International.

HUL and TGB comprise 40% of the total consumption in India, while they handle 20% of the total tea volumes from the plantations. They sell at higher prices compared to bulk tea sold at auctions due to branding, packaging and distribution. While HUL has premium brands like Brooke Bond Lipton, TGB, an integrated beverage company, has evolved from a tea plantations company to marketing and brand focused organisation. The company has a strong portfolio of global and regional consumer brands like Tata Tea, Tetley, Eight O’Clock Coffee (EOC), Good Earth, Jemca, Grand, Vitax and Himalayan.

GROWTH SIP TEA (ALL INDIA URBAN + RURAL) Tea volume grows by 5% Premium segment grew its reach by 8% Growth driven by large packs Local brands have the highest share in the category at 38% (share grows by 1%) Unbranded tea has 33% volume share-down 2%

COFFEE (ALL INDIA URBAN + RURAL) Instant coffee driving the growth for coffee category Instant coffee has an in-home reach of 16% – growing by 7% Conventional (ground) coffee is stagnant in terms of reach For Bru, growth is coming from smaller packs but for Nescafe large packs are driving the growth Almost 87% of instant coffee volumes are from South alone

Period: Jan-Oct ’11 vs Jan-Oct ’10 Source: IMRB

source: http://www.timesofindia.indiatimes.com / Home> Business> India Business / by Samidha Sharma & Namrata Singh / TNN / December 08th, 2011