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“Green tea continues to grow at 50-60%”
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Monday, 06 February, 2017, 08 : 00 AM [IST]
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 Madhu Jayanti International Ltd (Jay Tea) is known for expertise in sourcing, blending and packaging teas. After about seven decades in the tea industry, today it has one of the largest tea bag manufacturing capacities in India and is amongst the top five exporters of value-added teas from India. Incorporated in 1950, it caters to different tea palates of over 42 consuming countries. With in-depth reach and acceptance by consumers, the company has its sales of over 11,000 tonne of tea per year which adds up to 10 million cups a day. Operating its business under two models, one with company-owned brands (contributing Rs 200 crore) and other one is private labelling (contributing Rs 150 crore) supplying to over 80 international brands several of which are multinational retail chains.
Sumit Shah, executive director, Madhu Jayanti International Ltd, in an email interaction with Harcha Bhaskar talks about the company’s presence in Indian market, emergence of private labelling and current trends in the sector. Excerpts:
How has the tea market evolved over the last five years?
Te-A-Me, the brand of premium teas by Madhu Jayanti International, is about 3 years old. This October, as we celebrate the third anniversary of our brand, we’ve made several observations of the tea market in India. Firstly, green tea continues to grow at 50-60% YOY, with the consumer preference moving from plain green tea onto flavoured teas. We’ve witnessed a disproportionate rise in consumer preference for flavoured green teas, with honey lemon green tea leading the category. Today, 35% consumers aged 16-17 years consumed tea daily, which rises to 54% when people from the age group of 23-24 were considered. With over 9% of the total population in the 15-24 age group in 2015, new tea adopters from this age group have been the biggest growth drivers in the category.
For Te-A-Me, there has been a significant rise in herbal infusion sales as well, with Te-A-Me Cranberry Apple and Te-A-Me Strawberry Cream as the leading SKUs. Our overall observation is that the tea market is moving from a general hot beverage directed purchase into a purchase led by functionality and wellness benefits in products.
How much share does the company hold in India’s tea market and specifically for which products?
At the end of three years, Te-A-Me’s market share in India will most likely stand at about 4% in the tea bag category. However, given we play more in the value-added segment (green tea & herbal infusions), we are likely to be pegged higher within those sub-categories. Our leading products are the honey lemon green tea and the Kashmiri kahwa (green tea with natural Indian spices).
How big is tea market in India (volume & value)? Tell us about the imports and exports.
The tea market (domestic consumption) in India is at about 940 million kg. The average selling price per kg would be between Rs 120-140. Bulk of the Indian tea market is in loose tea, while the value-added category (tea bags / green & flavoured teas) has about 3% share.
Globally, India is fourth in terms of tea exports, achieving 250 million kg of exports in 2015-2016 with a valuation of US$686 million.
With packaged/carbonated tea flooding the market where do you see the competition going?
The market for packaged & carbonated tea is substantially different than that for hot tea. Packaged & carbonated teas fall under the cold beverage category, which is geared to take market share away from soft drinks & other cold beverage products such as Rasna and Tang. Our opinion is that the packaged & carbonated tea products will help in the overall growth of the tea market and help position the drink as something that is appalling to the youth as well.
Brief us on private labelling. How and why companies under you go for private labelling?
Private labelling entails us offering our full manufacturing infrastructure and R&D processes to retailers and tea/coffee chains who want to market their tea around the world. During the process, we offer a full end-to-end solution, beginning from consumer research, blend and packaging development until post-production & sales support. Our private label division, essentially works closely with customers to develop a long-term product and production strategy to grab market share. Today, we work with all the large retailers and coffee/tea houses in India. Our notable clients are Café Coffee Day, Future Group, Fresh & Honest, VLCC.
Currently how many branded tea variants are made available by your company to clients? Which is the major selling product among it?
Today, Madhu Jayanti runs eight brands of teas. Each brand is geared to address a particular segment of the market in terms of quality, price and product mix. Our brands are Old England, Golden Victoria, Indus, Gold Bond, Te-A-Me, Lalpan and Saraswati.
In which states are these products available and where?
Our brands run in India, Israel, Russia and West Africa.
Old England, Gold Bond, Indus and Golden Victoria run in Russia and West Africa. Te-A-Me is marketed nationwide in India, while Lalpan and Saraswati are distributed primarily in Maharashtra and Karnataka.
Is your company into exports? If, yes, to which country and for what products?
A large part of Madhu Jayanti’s revenue comes from exports. Currently, we export to over 42 countries. We export our own brands to Russia and West Africa, while a large part of our private label products are shipped to Europe, the UK and Australia. Given that our customers are largely in developed countries (as far as tea taste is concerned), we mostly ship herbal and flavoured teas in various packaging formats.
Are you into private labelling in Gulf countries? Give details.
As of now, we do not engage in private labelling to the Gulf.
Statistically, how big is the tea bag industry in India in volume and value, at what rate is it growing? How is the retail demand for tea bag in India?
In India, the tea bag industry is at about 3% by value growing at about 50-60%. While the retail aisle is flooded with a number of tea products, there is significant demand for innovating exotic flavours, which are not yet seen in the Indian market.
What are the expansion plans in India? Is their a new variant / product to be launched in the next 2-3 years?
The next few years are very exciting for us. We have a wide pipeline of premium products, specifically targeted to the health and wellness category.
How much is the expected turnover of the company for the year 2015-16?
We expect Rs 400 crore.
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