MARKET DEVELOPMENTS IN SELECTED COUNTRIES – INDIA

New Delhi, India, 12 – 14 May 2010

NINETEENTH SESSION

INTERGOVERNMENTAL GROUP ON TEA

COMMITTEE ON COMMODITY PROBLEMS

CCP:TE 10/CRS 19

May 2010

E

Indian Tea-

Market Developments

FAO IGG Meet

Tea Market Construct

With 95% penetration, tea is perhaps

the most penetrated beverage in India

Tea penetration

in India

95%

Branded Tea penetration

in India

85%

Unbranded Tea penetration

in India

50%

Penetration figures for FY 09

Source: IMRB Household Panel

Domestic tea market size817 Mil Kgs

Branded tea

market size380 Mil Kgs

Volumes in Mil Kgs

190

112

78

Economy (MRP below Rs 200) Popular (MRP Rs 200 to 280)

Premium (MRP Rs 280+)

The landscape…Unbranded tea still command more than half of the Indian tea market

Economy segment is the largest within branded tea segments

Source: Nielsen retail audit, IMRB HHP and Tata tea internal estimates

Volumes in Mil Kgs

380

437

Branded Tea Unbranded Tea

Category Dynamics

Branded tea is witnessing decline in growth rates; Unbranded tea has seen volume de growth in current FY

Packet Tea Volume Growth Rate (%)

5.7

1.4

3.4

10.7

5

0.7

FY 07 Vs 06 FY 08 Vs 07 FY 09 Vs 08

IMRB Household Panel Nielsen Retail Audit

Unbranded Tea Volume Growth Rate (%)

-1.2

2

-1

FY 07 Vs 06 FY 08 Vs 07 FY 09 Vs 08

IMRB Household Panel

Both branded and unbranded tea are under pressure on volume front

Decrease in average household tea consumption is

emerging as primary cause of declining growth rates

Both branded and unbranded tea are

witnessing decline in average monthly

household consumption.

Branded tea continues to gain

from loose tea conversions

Average household tea consumption

186

182

194

198

186

196

FY 07 Vs 06 FY 08 Vs 07 FY 09 Vs 08

Unbranded Tea Branded Tea

Unit – per household per month in grams

Loose tea conversion gains for branded tea

2614

3309

1142

FY 07 Vs 06 FY 08 Vs 07 FY 09 Vs 08

Gains in tons

Local players have increased their value shares considerably in the current FY.

Source: Nielsen retail audit

42%

32%

26%

44%

31%

25%

45%

30%

25%

43%

33%

24%

Mar'07 Mar'08 Mar'09 Mar'10

Moving Annual Value Shares (%)

National players Local Players Regional Players

What is causing the recent pressure on tea

consumption… General inflationary situation?

8.0258.9436.345.62-14.694.8315.09Sugar

7.3613.998.937.878.174.480.73Milk group

7.8619.4212.907.875.605.092.97Food commodities

Average 2006-092010 January20092008200720062005Item

Sources: Office of Economic Adviser, Ministry of Commerce and Industry, GOI, New Delhi .

Inflation (based on WPI with base 1993-94) and growth rate in food output (%)

Average Price/Kg in INR

213206

198195

182174170169169

Oct-

Dec'07

Jan-

Mar'08

Apr-

Jun'08

Jul-

Sept'08

Oct-

Dec'08

Jan-

Mar'09

Apr-

Jun'09

Jul-

Sept'09

Oct-

Dec'09

PACKAGED TEASource: Nielsen retail Audit

Tea and complimentary industries are witnessing steep

inflationary pressure

Market Expansion Strategies

Potential Growth Drivers

for Tea

Cascade of wellness

messaging

Increase appeal

among youth

Growing Rural

Opportunity

Value added variants/exciting

offeringsGrowing middle class

Robust GDP growth

Robust GDP growth

With GDP growth rates back on track, Indian consumers is likely

to have more spending power with him now.

Source: CSO

Per capita indicators in INR

29745

3201234533 37328

3869540745

20168

1762018909

2184123012 23626

2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10

Annual Per Capita Income

Annual Per Capita Consumption

GDP growth rates (%)

7.26.7

9.29.7

9.5

2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10

The rise and rise of Indian middle (consuming) class

Source: MGI

The Rural Opportunity

More than 6 lakhvillages

145 million households

72% of total Indian

population

Nearly half of India's middle-class

More than 60 % of the

total disposable

income

Rural market for FMCG products is growing much faster than the

urban counterpart

Source – IRS 2009 R1, NCAER Research Data

Indian population is becoming younger over the decades.Young India provides immense growth opportunity for the category

Source: Nielsen India

Changes in Population Pyramid-India (2001-2016)

Increase Appeal Among Youth

Need to make tea connect better with youth

(as coffee is doing… driven by its imagery/coffee cafes)

Advertising of tea brands largely in the space of family, in home, serious….

…..whereas coffee connects better with youth / fun.

Cascade of wellness benefit of tea

• Increasing trend of adoption of healthier foods and beverages by consumers

• Awareness of wellness benefit of tea largely confined to

educated urban consumers

• Cascade of this messaging to masses / rural consumers

will drive consumption

Value added variants/exciting offerings

• Tea in value added formats and new exciting variants will increase its appeal as well as consumption

occasions

Changes in regulatory framework can facilitate tapping of such opportunities even more.

Lets Make Tea everybody's cuppa…

Thank you for your attention..