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Informist, Tuesday, Sept. 9, 2025

 

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--Sources: HUL tea buying costs decline 11% per kg on year in Jan-Aug
--Sources: Tata Consumer auction tea costs fall 28% per kg YoY in Jan-Aug
--Sources: HUL tea buying volume up 36% on year in Jan-Aug at 21.8 mln kg
--Sources: Tata Consumer's auction tea buying volume falls 11% YoY Jan-Aug
--Sources: Tata Consumer buys 8.4 mln kg tea in Jan-Aug, down 11% on year
--Sources: HUL, Tata Consumer margins may improve from tea sales going ahead

 

By Avishek Rakshit

 

KOLKATA – Tea procurement cost for the country's two largest tea retailers-- Hindustan Unilever Ltd. and Tata Consumer Products Ltd.--came down substantially during Jan-Aug, triggering hope that their margins may get a boost going ahead. These companies may still see margins improving even after reducing retail prices to increase sales.

 

Average tea procurement costs per kg for HUL--the market leader in terms of volume and value--reduced over 11% on year to INR 249.23 a kg for tea from West Bengal and Assam and the same for Tata Consumer--the second-largest player in terms of sales volume and value--reduced sharply by nearly 28% to INR 163.14 a kg for tea from these states, according to tea brokers.

 

Asked if HUL will consider lowering retail tea prices for consumers since its costs declined, an HUL spokesperson told Informist, "Our priority has always been to provide a competitive price-value equation to our consumers. For tea, a commodity-linked category, our pricing strategy is based on replacement cost rather than consumption cost, ensuring we continue to deliver superior value."

 

For instance, HUL had procured a substantial portion of its tea between June and September last year, when commodity prices were elevated. However, in the December to March period, tea prices softened. Typically, the tea procurement season starts from June and lasts till September. Thus, the tea which HUL sold in the latest June quarter was procured at higher costs and HUL decided not to reduce the retail price.

 

While Tata Consumer did not comment citing unavailability of spokesperson, industry officials in the retail tea industry said that any further reduction in tea costs could lead to lowering of prices for consumers.

 

"If prices continue to decline further or remain muted, then tea retailers are most likely to pass on some benefits to consumers which will drive sales volume further," an industry official with a tea retailing company said.

 

The HUL spokesperson added that the company actively monitors pricing across its portfolio and takes calibrated actions to maintain its competitiveness across the price pyramid.

 

Industry officials are of the view that if HUL and Tata Consumer lower retail prices, even then they may see an improvement in their margins going ahead given the reduction in procurement costs these companies currently have. While HUL does not specifically declare its margins from the tea business, which, together with its sales of food products account for around 25% of its annual revenues, Tata Consumer's margins from its tea sales typically range between 34% and 37%. The tea business, which is part of the beverages portfolio, accounts for 55% of Tata Consumer's annual global sales.

 

The decline in the procurement costs for HUL and Tata Consumer is mainly on account of optimal tea supplies in West Bengal and Assam which led to lower prices in the auctions. According to the latest available data from Tea Board India, auction prices in Guwahati--the world's largest tea auction centre--crashed 26% on year to INR 196.44 a kg and it tanked 20% on year in Kolkata at INR 225.51 a kg. In Siliguri, auction prices fell sharply by 28% on year to INR 156.41 a kg.

 

Although HUL stepped up its procurement mainly on account of lower tea prices in the auction centres in Kolkata, Guwahati, and Siliguri, Tata Consumer increased its sourcing of tea from private sales. Such a sale refers to the process when a buyer directly purchases tea from the producer at negotiated prices which are not market driven.

 

While HUL bought 21.78 million kg tea from the three auction centres in east India, which is an increase of around 36% on year, Tata Consumer's purchases from the auctions fell by around 11% on year to 8.42 million kg.

 

"Tata Consumer is increasingly buying more tea directly from producers which is affecting the demand from buyers in the auction centres; on the other hand, HUL mostly buys tea from the auctions," a tea broker from Kolkata said.

 

Senior officials in large tea estates reasoned that a private sale, on one hand allows Tata Consumer to buy tea from the gardens at lower than market prices and to choose a particular variety of tea at pre-determined prices which are often lower than prevalent market prices. On other hand, it also benefits the seller to clear bulk tea sales and avoid listing the tea in the auctions.

 

At 1428 IST, shares of HUL traded 0.46% higher at INR 2,636.20 and shares of Tata Consumer traded 0.65% up at INR 1,081.30 on the National Stock Exchange. End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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