The brew is hot these days. Insufficient rains, low arrivals at auctions against good demand and an expected 90-100 million kg global shortfall of the tea crop have seen prices spike by Rs 50 or 65%, the highest in a decade.
India registered a production decline of nearly 8 million kg in the first three months of calendar 2009. Global shortage during this period has been around 55 million kg. Leading tea producing countries in the world such as Kenya and Sri Lanka have suffered major crop loss.
Prices, say tea analysts, are expected to remain firm for a while until weather conditions improve globally. Moreover, with the second flush season (the best teas are produced during this season) starting in June — when maximum teas get exported — tea prices may go up a little and then stabilise at the increased levels.
Aditya Khaitan, managing director, McLeod Russel and chairman of the Indian Tea Association, said, “The shortage till April is likely to be in the region of Rs 90-100 million kg, which has pushed up prices. Prices may settle between July and October if tea production picks up in these months.”
CK Dhanuka, chairman, Dhunseri Group — a tea producer and packeteer — said, “The price rise should be seen in perspective. In the last 10 years, prices of tea have gone up by 60-65%. This is the best period for tea and prices, which I think, should be 75-80% higher in a 10-year time span. From the year 2000-2007, the tea industry witnessed its worst period.”
Piyush Desai, president, Western Indian Tea Dealers Association and CMD, Wagh Bakri Tea Group, the largest branded player in Gujarat, said, “We are concerned over rise in procurement in tea prices. Procurement prices have gone up by Rs 40-50
per kg. However, reports suggest that there has been substantial rainfall in the tea producing areas of West Bengal and Assam. Also, with the increase in arrival of tea from Kolkata and Guwahati auction centres, the tea producers would be compelled to loosen their grip on the stock.”
In line with the price rise, branded teas are also beginning to get costlier, with companies reviewing their packet tea prices.
Dhunseri, which is also the largest packeteer of tea in Rajasthan, has effected price increases on its brands. “My procurement price has gone up by Rs 40. We have just increased prices by Rs 30 per kg on both Lal Ghora and Kala Ghora brands. We may increase prices by another Rs 8-10 per kg next month,” Dhanuka said.
Wagh Bakri is weighing a 15-20% increase in the price of its tea packets.
Eveready Industries has effected a increase in its tea prices by Rs 40 per kg and may review further increases across its brands Jaago, Tez, Premium Gold and Classic. Duncan is likely to increase its packet tea prices in June.
Some tea companies such as Goodricke plan to review marketing. “We are not increasing prices immediately but will do away with most of the incentives offered to consumers,” a Goodricke official said.
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