Tea holds a significant place in the daily routines of most Indians, with approximately 78 percent of the population being avid tea drinkers. While traditional hot tea remains the most popular choice, consumed by 62 percent of Indians, the landscape is evolving. Specialty teas, including green, botanical, and fruit teas, are gaining traction, with green tea leading this emerging category.

The Ready-to-Drink (RTD) tea segment remains a niche market, capturing just 2 percent of consumers. Consumers of specialty teas are particularly drawn to wellness trends and exhibit a strong interest in diverse flavours. This presents a unique opportunity to enhance the sensory appeal of specialty teas by capitalising on their preference for fruit and floral notes. However, it's noteworthy that new tea brands are increasingly focusing on niche markets rather than targeting the broader consumer base.

In 2021, the Indian hot drinks market was valued at a substantial USD 10.7 billion, with expectations of a compound annual growth rate (CAGR) exceeding 9 percent. Projections suggest that by 2024, the market will reach a revenue of $15.1 billion, with an anticipated annual growth rate of 6.10 percent from 2024 to 2028.

Health Trends and Market Expansion

Looking ahead, the Indian tea market is expected to reach a volume of 1.82 million tonnes by 2032. However, despite its prevalence, tea is the slowest-growing category by volume within the hot beverages market. On a national level, tea dominates with a 45 percent share in the urban market, with the western and southern regions showing similar market shares and monthly per capita consumption figures of approximately Rs. 177.

The Indian tea market is vast and diverse, with a growing number of both national and local brands entering the fray each year. These brands have carved out specific niches by targeting distinct consumer segments, offering a wide array of tea varieties that cater to every palate. This expansion includes the rise of specialty teas, such as green and organic teas, which are bringing a sense of novelty and health-conscious benefits to the traditional tea segment.

“There is a growing emphasis on the origin and authenticity of food and beverage products. Consumers are drawn to teas sourced directly from renowned gardens and regions known for their exceptional quality and distinct flavour profiles," Bala Sarda, founder and CEO, Vahdam India said in an interview.

Increasing consumer awareness about the health and medicinal benefits of tea, particularly in relation to green and organic variants, is a major driving force behind the tea market's growth in India. As consumers become more health-conscious, there is a noticeable shift towards these healthier tea options, which is positively influencing market trends.

"Indian tea brands are increasingly concentrating on specialised, organic, and premium blends rather than mass-market options to reach niche markets. Given the shifting interests of consumers and the increasing disposable incomes in metropolitan regions, this move may prove to be a profitable business strategy. Due to health-conscious customers' desire for distinctive flavours and premium goods, the market for speciality and organic teas is expanding on a global scale. Brands of Indian tea that serve these specialised markets can set themselves apart from rivals and charge more, which can result in higher profit margins. Additionally, by concentrating on specialised markets, companies can develop a devoted following of consumers who respect genuineness and are prepared to shell out more money for unique tea experiences,” Jyoti Bharadwaj, Founder of TeaFit commented.

The Indian middle class, known for its evolving tastes and willingness to explore new flavours, is also contributing to the growth of specialty teas. This segment's openness to experimenting with herbal and flavoured blends is providing a significant boost to categories like herbal teas and other specialty variants.

Diversifying business model

Moreover, leading tea brands are capitalising on this trend by introducing new flavours enriched with healthy ingredients such as ginger, lemon, hibiscus, turmeric, and peppermint. This focus on innovation is fostering a positive market outlook, appealing to health-conscious consumers across the country.

The expansion of organised retail channels, including hypermarkets, supermarkets, convenience stores, and department stores, along with the rise of online retail platforms, is further driving the growth of the tea market. These channels are making it easier for consumers to access a wider variety of tea products, contributing to the market's overall expansion.

"It's essential that these businesses strike a balance between catering to a specific niche and being accessible to a larger market. Aiming only for a particular market niche could restrict development potential, but focusing just on that niche might help you stand out from the competition and tell a captivating story. By using creative marketing and distribution techniques, it is possible to develop a strong brand identity that appeals to specialised markets and is nonetheless widely accessible. If Indian tea companies keep a balance and continue to be responsive to consumer trends, concentrating on niche markets can prove to be a profitable approach. This strategy helps them to meet the changing needs and tastes of Indian customers while simultaneously establishing them as premium players in the international market,” Bharadwaj further added.

With busier lifestyles and a rapidly growing workforce, the demand for herbal tea is expected to rise as consumers increasingly seek healthier alternatives to carbonated beverages. Currently, the urban sector is the primary consumer of herbal tea, reflecting a broader trend towards health and wellness in India's metropolitan areas.

Consumers are not only seeking quality but also value the luxury of choice. Our brand in particular innovates and introduces new tea blends infused with botanicals, superfoods, and herbs to cater to diverse preferences. The expanding palate of Indian consumers beyond the milk and sugar chai, coupled with a growing appreciation for speciality teas, signifies the enduring appeal and longevity of luxury tea culture in the country,” Rudra Chatterjee, managing director, Luxmi Tea Group commented. 

Indian tea brands are increasingly focusing on niche markets, prioritising specialty and organic teas to cater to health-conscious consumers. This strategic shift allows them to differentiate, build loyalty, and command higher prices, while still appealing to a growing segment of discerning customers. Balancing this niche focus with broader accessibility could ensure continued success both in India and globally.