Tea producers reinvent business, adapt online blend for consumer connect

Heritage  plantations are reinventing their business model in the digital era and reaching out to consumers directly to offer a fresh cuppa.

The plantation owners are bulk  players that rely on auctions, private sales, exports and even modern retail in a limited way. But with the e-commerce space hotting up post-Covid pandemic, bulk  players are viewing D2C as an effective way to sell premium tea and connect with the consumers.

“Less than 50 per cent of tea sales are routed through auctions. But for the balance 50 per cent, online retailing is likely to help producers get a better average realization per kilogram on a weighted average basis vis-à-vis the auctions,” Kaushik Das, vice president, ICRA, said.

Data available on the  website showed that India’s production in 2020-2021 had stood at 1,283.03 million kg and volumes at the auctions were around 547 mkg. But that’s B2B; to service the consumer, producers are now increasingly trying to engage directly through online platforms.

The country’s largest tea producer, McLeod Russel India, dipped into online retailing with specialty teas towards the end of 2020.

“As a value addition, packet tea has always been on our mind. So we wanted to test with high value teas and the online platform is a great way to do market research,” said Azam Monem, director, McLeod Russel.

The next step for the company will be to expand into modern retail formats. “Right now, our  is value-driven and aimed at establishing the brand,” Monem explained.

McLeod has 36 or 40 SKUs – the Assam tea component in the teas is from its own estates. But there are different models at play here – some are selling teas from their own estates while some are including other teas.

The sourcing for Amalgamated Plantations Private Ltd (APPL) – carved out of erstwhile Tata Tea to run plantations in North India – is not restricted from its own estates, but handpicked from different tea growing regions in India.

“We did a soft launch of our D2C operation last November with our website, Teas from India. There are about 52 SKUs in tea bags and loose tea form and it’s high-end,” Vikram Singh Gulia, managing director, APPL, said.

Gulia explained, apart from the fact that margins are better, consumers will be getting a product that’s different and much superior compared to what is available in retail. “For us producers, it’s important that consumers start getting used to better quality tea and start demanding the same from retail brands, which will push the demand for better quality and impact the per capita consumption positively.”

Quality is fetching a premium even at the auctions. In CY2021, according to an ICRA report, the price premium for the CTC teas produced by the top 50 tea estates in North India widened to Rs 122 per kg from Rs 84 per kg in CY2020.

The pitch by producers is a mix of quality and freshness though. As Vikash Kandoi, director, Jay Shree Tea & Industries, explained, tea being a perishable product, a lot of value is attached to fragrance, taste and flavor, which gets diminished over time. “The fresher the tea reaches the palate, the more it’s appreciated and transforms into an experiential product.”

Jay Shree, part of the B K Birla group, stepped up its online play in the last one and half years.