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Informist, Tuesday, Nov. 11, 2025

 

By Avishek Rakshit

 

KOLKATA – Major tea retailers in the country are expected to focus on increasing their market share as production costs are poised to stabilise at lower levels, effectively translating into stable retail prices, and companies continue to enjoy stable margins. For the past few quarters, companies in the tea retailing industry have been focused on gaining market share, especially from local competitors.

 

Hindustan Unilever Ltd. unseated Tata Consumer Products Ltd. as the country's largest tea retailer by both value and volume in 2019. Both companies have been making strides to further their market share by introducing new brands, deeper distribution, and price play. However, in 2024-25 (Apr-Mar), as tea buying costs shot up significantly, both felt pressure on their margins and took corrective measures like price hikes and grammage changes to protect margins in some instances and hold on to their market share in others.

 

Although Tata Consumer's domestic tea sales volume in the September quarter rose 5% and revenue shot up 12%, the company's market share declined by 80 basis points. On the other hand, HUL reported high single-digit growth in its tea business, driven both by price and volume.

 

Since then, tea procurement costs have normalised and both companies have passed on the benefit of lower costs to consumers. While both the companies regained their normal margins from the tea business in the September quarter, they are now expected to focus on market share gains. While none of the two companies declare their market share, tea industry officials estimate that HUL holds 23% share and Tata Consumer has market share of 21%.

 

Tata Consumer, which tries to maintain gross margins of 34-36% from its tea business in India, has already reached the target in the September quarter, and HUL registered high single-digit underlying sales growth in the quarter, owing to both increased sales volume and pricing.

 

"We strive to be between the 34-36% gross margin, at which point we know that we will continue to gain market share with execution," Tata Consumer Managing Director and Chief Executive Officer Sunil D'Souza said in an analyst call.

 

Sector analysts estimate that since Tata Consumer has traversed to its comfortable margin zone and HUL registered optimal growth in tea sales, both companies are now expected to hold on to their existing prices but diversify their portfolio further and try to increase market share.

 

Industry officials are of the view that since the tea industry in India, valued at over $11.5 billion, is extremely price-sensitive and retail prices are closely tied to procurement costs, price changes may lead to consumers jumping off one ship to another over a period of time.

 

In fact, in the analyst call after announcing its September quarter earnings, HUL said that when retail tea prices rose towards the middle of the last financial year, it hit the company's category volume growth.

 

"We saw a pretty high amount of inflation at a point in time, we saw that consumers downgraded, not only down-traded, but also downgrade rate and they went to a lower price point for consumption," Ritesh Tiwari, chief financial officer and executive director of finance and information technology at HUL, told sector analysts in a post-earnings call last month.

 

However, tea procurement costs have eased for both HUL and Tata Consumer. Prices fell nearly 9% on year to nearly INR 245 a kg in the Kolkata auction centre and over 10% on year to INR 223 a kg in Guwahati in the latest tea auction concluded last month. Even south India, which was witnessing stable prices, saw a decline at the auction as prices fell over 34% on year to INR 97.5.

 

As such, it is unlikely that either HUL or Tata Consumer will try to increase retail prices given the fact that tea costs have normalised and there was no change in tax rates on tea in the latest Goods and Services Tax cuts.

 

When prices were higher, both Tata Consumer and HUL had increased prices and later passed on the price benefits to consumers. However, both did not pass on the increased costs fully, fearing loss in market share and consumers downgrading their purchase further, which would hit the top line.

 

"Now that tea costs are on the lower side and both HUL and Tata Consumer are witnessing growth in their tea business, it is likely that they will strive for market share gains," a sector analyst with an Indian brokerage firm said.

 

Not only do HUL and Tata Consumer face competition from each other, but a third player – Wagh Bakri, which has a strong hold in western markets – and local brands also pose substantial competition, sector analysts said. For instance, the Goodricke Group – whose parent Camellia Plc is the largest tea plantation company in the world, also retails specialty tea at high price points. Others like Girnar Tea also have substantial presence. In fact, despite registering 5% volume growth in its Indian tea business, Tata Consumer lost market share by 80 basis points on year in the September quarter.

 

As both HUL and Tata Consumer are expected to remain upbeat about lower procurement costs, they are also expected to roll out new products, formats, packages, and increase their spends on advertisements to garner higher market share. After all, in D'Souza's words, it is easier for a company to recover margins rather than market share. Expectedly, both HUL and Tata Consumer may not leave any stone unturned to expand market share and lock horns with competition.

 

At 1228 IST, shares of HUL traded at INR 2,412.70, up 0.2%, and shares of Tata Consumer were at INR 1,149.00, up 0.6% on the National Stock Exchange.  End

 

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

 

Edited by Avishek Dutta

 

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