India Tea Market Outlook to 2028

India Tea Market Overview

The India Tea Market is valued at USD 10.5 billion, driven primarily by high domestic consumption and growing exports. With India being one of the largest tea producers globally, the market is supported by robust agricultural practices and government initiatives. Key drivers include the increasing demand for premium teas, such as green and organic varieties, which appeal to health-conscious consumers. Additionally, the shift towards wellness products, as seen in the popularity of herbal teas, is adding further momentum to the market.

The most dominant regions in India for tea production are Assam, West Bengal, and Tamil Nadu, due to favorable climatic conditions, abundant rainfall, and rich soil, which are essential for tea cultivation. Assam is renowned for its black tea, while Darjeeling in West Bengal produces highly valued aromatic teas. These regions have well-established tea industries with access to skilled labor and strong distribution networks, giving them a competitive edge in the market.

The Indian government has implemented a minimum support price (MSP) scheme for tea farmers to ensure fair compensation for their produce. In 2023, the MSP was set at INR 23 per kilogram for green leaf tea in Assam, ensuring that smallholders receive adequate returns despite market fluctuations. This policy aims to protect tea farmers from exploitation by intermediaries and stabilize incomes, particularly in regions affected by climate change. The scheme is overseen by the Tea Board of India in collaboration with state governments.

India Tea Market Segmentation

By Product Type: The market is segmented by product type into Black Tea, Green Tea, Herbal Tea, and Specialty Teas. Black Tea remains the dominant segment due to its deep-rooted cultural significance and widespread consumption across the country. The affordable price and strong taste preference have made black tea the most preferred choice for households and commercial establishments. Additionally, its longer shelf life compared to other teas and its use in various tea blends have strengthened its position in the market.

By Distribution Channel: The market is also segmented by distribution channel into Supermarkets/Hypermarkets, Specialty Stores, E-Commerce, and Direct-to-Consumer. Supermarkets/Hypermarkets dominate this segment due to their extensive presence across both urban and rural areas, providing easy access to consumers. The convenience of purchasing multiple brands and varieties of tea under one roof has made this channel a popular choice for consumers. Additionally, attractive in-store promotions and discounts have fueled its growth in recent years.

India Tea Market Competitive Landscape

The India Tea Market is dominated by several established players who have built strong brand equity over decades. Companies like Tata Consumer Products and Hindustan Unilever have solidified their leadership positions through extensive distribution networks, product innovations, and a focus on quality. The market also sees competition from smaller regional players who cater to niche segments, including organic and herbal teas. There is a growing trend of premiumization as consumers shift towards high-quality and specialty teas.

Company Name

Establishment Year

Headquarters

Tata Consumer Products

1962

Mumbai

Hindustan Unilever (Brooke Bond)

1933

Mumbai

Wagh Bakri Tea Group

1892

Ahmedabad

Mc Leod Russel India Limited

1869

Kolkata

Organic India

1997

Lucknow

India Tea Industry Analysis

Growth Drivers

Increasing Domestic Consumption: India is the largest producer and consumer of tea globally, with annual tea production reaching 1.2 billion kilograms (1,200 million kilograms) reported for the financial year 2022. Domestic consumption accounts for nearly 80% of this production, fueled by the widespread cultural significance of tea across rural and urban India. Government data from the Ministry of Commerce shows that tea consumption is particularly high in states like Assam and West Bengal, where tea is a daily staple for millions.

Growing Export Demand: India exported 231.69 million kilograms of tea in 2023, primarily to countries like Russia, the United Arab Emirates, and the United States. The growing demand for Indian tea, especially Assam and Darjeeling varieties, continues to drive this sector's growth. Exporters benefit from robust governmental incentives, such as duty-free access to several countries through trade agreements. Indias tea exports earned USD 687 million in 2023, according to data from the Tea Board of India. The Middle Eastern market has also seen a 15% increase in demand for specialty Indian teas.

Rising Demand for Specialty Teas: Specialty teas such as herbal, green, and organic varieties are experiencing a surge in demand, particularly among health-conscious consumers. In 2023, the production of green tea reached 170 million kilograms, with domestic consumption seeing a significant increase of 10 million kilograms over the previous year. Organic tea is also growing, supported by the Indian governments push for organic farming. Data from the Tea Board shows that over 50,000 hectares are now dedicated to organic tea cultivation, addressing both domestic consumption and export needs.

Market Challenges

Fluctuating Raw Material Prices: The price of raw tea leaves has shown significant volatility in recent years, primarily due to fluctuations in supply caused by erratic weather patterns and labor shortages. Prices reaching around INR 217.53 per kg by mid-2024, representing a substantial burden for smaller producers. The situation worsened with the rising cost of agricultural inputs, including fertilizers and labor, which increased by 8% year-on-year. The Reserve Bank of India attributes this price instability to both domestic inflationary pressures and global commodity price fluctuations.

Climate Change Impact: Tea plantations are highly sensitive to changes in temperature and rainfall, with the Indian Meteorological Department (IMD) reporting a 1.5-degree Celsius rise in average temperatures in Assam and West Bengal over the last decade. Erratic rainfall and prolonged droughts have reduced yields, with some tea estates reporting a 20% drop in production during the 2023 harvesting season. The Tea Board of India has emphasized the urgent need for climate-resilient cultivation practices, but small farmers, who account for a major part of the total production, often lack the resources for such measures.

India Tea Market Future Outlook

Over the next five years, the India Tea Market is expected to experience strong growth due to increasing demand for premium and specialty teas, particularly in urban markets. As consumers become more health-conscious, green tea and herbal teas are likely to witness significant growth. Furthermore, e-commerce platforms will continue to play a critical role in driving sales, especially in Tier II and Tier III cities, where internet penetration is rising. The growing interest in sustainable and ethically sourced tea will also shape the future landscape, as both consumers and brands focus on environmental impact and quality standards.

Future Market Opportunities

Growth in Premium Tea Segment: Indias premium tea segment is growing rapidly, with an increasing number of consumers willing to pay a premium for higher-quality, specialty teas. Premium teas, including single-estate and artisanal varieties, have grown in popularity, particularly in urban centers. In 2023, sales of premium tea products reached 15,000 metric tons, reflecting a shift in consumer preference. The Tea Board of India reports that domestic brands are capitalizing on this trend by expanding their product portfolios, including premium offerings from Assam and Darjeeling, further supported by e-commerce.

Increasing Health Awareness: Health-conscious consumers are driving demand for organic and wellness teas, such as detox and herbal blends. The Organic Farming India report shows that in 2023, organic tea production reached 1,375,000 metric tons. This segment is seeing growth due to rising awareness of the health benefits of tea, including antioxidants and anti-inflammatory properties. The Ministry of AYUSH has promoted tea as part of traditional Indian medicine, further boosting demand for organic and herbal blends. Domestic consumption of wellness teas increased by 10% from the previous year.
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