☕ Understanding India's Chai-nomics!

As Indian tea production exploded in the late 1800s, only a minority of Indians consumed it. Instead, most Indian tea was sent abroad. The situation is very different today.

India is the second largest producer of tea globally, just after China.

In 2022, it produced 1.365 billion kgs of tea. Moreover, the country is also consuming most of the tea it produces. More than 80% of the tea produced in the country is consumed domestically. To give you some perspective, in 2022, 1.188 billion kgs of tea was consumed in India. That’s 87% of the total tea produced in the country during the year!

India's Tea Ecosystem

India’s tea ecosystem is filled with many companies vying for a larger share. For example, HUL, with brands such as Red Label, Taaza, Taj Mahal, Lipton, and Bru under its portfolio has a market share of around 23% in the Indian tea market.

At the same time, Tata Consumer Products has a 21% market share of India tea market – with famous tea brands ‘Tata tea’, and ‘Tetley’ in its portfolio.

This is followed by Wagh Bakri tea, with a market share of 9%, Amar Tea, with a market share of 2%, and Girnar tea, with a market share of 1% in the Indian tea market.

High demand for tea in India calls for rapid innovation. Hence many companies are brewing more of this success by investing in the tea market!

Tata Consumer Products launched a Tata Tea Premium brand called ‘Street Chais of India’ in 2023, with unique flavors inspired from the streets of India.

Dabur India Ltd. recently announced its entry in premium tea market with the launch of Dabur Vedic Tea. The famous beverage company, Coca Cola, also ventured into the ready to drink tea market last year.

This growth is also being reflected in the share prices of the tea companies. In the last one year, the shares of Bombay Burmah Trading Corp Ltd. have surged more than 90% to reach ₹1,774.30 (March 7). Another company, McLeod Russel India, saw its share price rise by over 75% during the same period to reach ₹31.85. Jayshree Tea also saw its share price rise by more than 20% in the last year to ₹113.45.

While the growth of the companies in the organised tea market is something to look forward to, a lot of the upcoming potential of the industry lies in the rise of chai cafes across the country.

Rise of Chai Cafes

For most of us, breakfasts are incomplete without a cup of chai. Same was the story for Nitin Saluja and his wife. Back in 2008, while living in Houston in the US, they were craving a cup of tea after breakfast, but they couldn’t find a place that served a freshly brewed cup of strong tea. But little did they know that this absence of a morning cup of tea would lead to a revolutionary business – Chaayos!

That is how Chaayos launched its first cafe in November 2012; since then, the chain has been adding outlets at a rapid pace. In 2015, Chaayos had a total of 15 cafés, and by 2022, the company has already crossed 200 cafes!

Moreover, the cafe reported an increase of 77% (y-o-y) in its total revenue in FY23, rising from ₹ 134.9 crore in FY22 to ₹ 233.6 crore in FY23.

But the success of Chaayos is just one example. There are many others that have been revolutionising the way Indians consume tea.

Take another example of Chai Sutta Bar. Founded in 2016, the tea-cafe chain started with just three outlets in Indore, and an initial capital of ₹ 3 lakh. And currently, the company operates over 500 outlets spread across 300 cities in India! Moreover, the chai chain is famous for its ‘kulhad’ chai, with a usage of 4.5 lakhs kulhad per day across the country! With such an aggressive expansion plan, the company clocked a revenue of ₹ 10 crore in FY22, while the franchises under its ambit reported a revenue of over Rs 150 crores during the same period.

MBA Chai Wala was established in 2017 by opening a small roadside tea stall with just ₹ 8,000! And currently, it has a network of around 100 outlets in the country!

‘India runs on Chai’ - that’s the motto of the famous chai cafe – Chai Point. And looking at its financials, it really seems that it does. Chai Point saw its revenue rise by 88.7% in FY23, to reach Rs 200 crore in FY23 from Rs 106 crore in FY22.

While these are just some of the names, people are readily embracing this new trend of chai cafes – giving the coffee joints a run for their money!

But if you thought that the tea frenzy of India ended here, you’re wrong.

Tea Tourism

The hotels in the tea estate areas such as Assam, offer experiences such as tea trails, leaf picking, personalised tastings!

In Darjeeling, an average package for two nights and three days begins at ₹10,000 per person but can go up to a lakh! The city has also seen interest from various big hospitality companies such as Taj Hotels!

The famous national park, Kaziranga, which houses the largest number of one-horned rhinos (1613), is now also offering tea tourism in its itinerary. Under the initiative, the park would allow the visitors to take a stroll in the tea garden around it, visit the tea factories to witness how Assam's tea is organically grown and prepared and then taste it afterwards!

Moreover, in its FY22-23 budget, the government of Assam allocated Rs 50 crore to build guest houses in tea gardens!