India is one of the top producers and exporters of tea in the world. According to the Directorate General of Foreign Trade (DGFT), India exported nearly US $872 Mn worth of tea in FY2019 with black tea contributing 91% and green tea comprising merely 2% of the total exports. However, India’s tea exports started declining at a CAGR of -1% during FY 2011-2020, even before covid-19 added to its misery. When the pandemic hit the nation, India’s tea exports fell by 14%. Moreover, the numerous lockdowns led to a fall of 69% in the overall exports of tea Y-o-Y in April 2020 which is when the first flush (harvest) is ready for export.
Our research suggests that one of the main factors for the dip in the overall tea exports of the country can be attributed to the scarcity of variety in India’s product mix and the failure to tap into the increasingly popular green tea market.
Statewise, West Bengal and Assam contribute around 60% of the country's total output. However, interestingly, according to S&P Global Portal, Gujarat-- a semi-arid state where there are no tea plantations exported US $24 million worth of tea in FY 2019-20. Top brands along with several small and medium manufacturers process and export tea from Gujarat, thus helping this western state garner popularity in the tea sector and potentially become a tea export destination.
In terms of the export market, Iran is India’s largest market by a margin of 26%. In 2019, India exported US$ 227 Mn worth of tea to Iran despite the rising geopolitical tensions in the regions. With Sri Lanka giving India a close competition to acquire a significant share in Iran, we believe it is time for exporters to further leverage this market. Russia, US, UK, and the UAE are also major buyers of Indian tea.
Another interesting trend we observed is the upcoming market for Ready-to-Drink tea and the shift towards the easier and convenient to use smaller packages. Drip’s study revealed that India’s black tea exports in bulk packings have declined by 9% (annual rate) over the last decade, whereas the same exported in three to 20 kgs small packings has witnessed a 46% annual growth rate. This is something the Indian tea exporters should consider going forward.
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