India's Tea Industry Faces Crisis Amidst Cheap Imports and Weather Challenges

Rising Competition from Cheaper Alternatives Disrupts India's Tea Industry

India’s tea giants are grappling with a challenging market environment, marked by falling prices, cheap imports, and adverse weather conditions. Over the past four to five quarters, these factors have significantly impacted the performance of leading tea companies, including Tata Consumer Products and Hindustan Unilever Ltd (HUL). The situation has forced them to explore premiumisation and diversify into other product categories to mitigate losses.

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Weak Performance Hits Major Players

The April-June quarter brought little relief to listed tea companies. Tata Consumer Products reported only 2% volume growth in its tea and coffee segment, with revenues declining by 4%. While coffee grew by 24%, the tea segment weighed heavily on overall performance due to lower costs being passed on to consumers.

Similarly, HUL’s premium tea brands, such as Brooke Bond, saw low single-digit volume growth, while mass-market brands like Red Label and Taaza struggled. Kolkata-based Goodricke, which has yet to disclose its Q1 earnings, faced a 14% revenue drop in 2025-26 due to higher operating costs and an overall market downturn.

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Cheap Imports and Weather Woes

The tea market’s deflationary phase stems from multiple factors. Heatwaves and erratic rainfall over recent monsoons have disrupted tea cultivation, reducing yields and quality. Landslides in hilly tea-growing regions further exacerbated the situation.

Meanwhile, cheaper imports from countries like Nepal and Kenya have flooded the market, driving down prices. As tea is a commodity business with low brand loyalty, falling prices have boosted the unorganised sector, forcing larger companies to cut prices to stay competitive.

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Premiumisation: A Long-Term Gamble

In response, major players are doubling down on premiumisation. Tata Consumer Products has introduced premium offerings like Tetley Premium and Tata Tea Gold, spanning price points from ₹250/kg to ₹3,000/kg. HUL has also seen increased contributions from its premium brands, although mass-market products continue to dominate.

However, experts caution that premiumisation in the tea segment is an uphill battle. Tea consumers are often reluctant to trade up due to entrenched habits and cost considerations. “It’s much easier for consumers to shift to a lower grade of tea than to shift up the ladder,” noted an analyst.

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Diversification and Inflationary Trends

To offset challenges in the tea segment, companies are diversifying into other categories. Tata Consumer’s revenue from growth businesses, including Tata Sampann and Soulful, surpassed tea and coffee revenues for the first time in Q1. Goodricke is also exploring ventures in dairy, alternative crops, solar energy, and hospitality.

Tea prices have seen some recovery since late June, with inflation estimated at 7-10%. Tata Consumer implemented a modest 1-2% price hike in June, with more increases likely if inflation persists. However, analysts remain cautious, noting that local players holding low-cost tea stocks could limit the ability to pass on higher prices to consumers.

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Outlook

While tea prices are showing signs of recovery, the industry remains vulnerable to external factors such as adverse weather conditions linked to El Niño, expected in late 2026 and 2027. For now, India’s tea giants face an uphill battle to regain momentum amid rising competition and shifting consumer preferences.

Source: Indian Express