Business

Top 4 Tea And Coffee Stocks To Add To Your Watchlist -By ASC


The decline in Sri Lankan tea exports may help Indian exporters expand their shipments

Do you have an addiction to tea or coffee?

If there is a list of products that pass the immortality test, then tea and coffee will both appear at the top.

We don’t know exactly how many people in the world consume tea and coffee. But both are the most popular drinks in the world.

Whenever there is a demand-supply mismatch, tea and coffee prices soar. This affects the companies involved in this space.

This time, the Russo-Ukrainian war and Sri Lanka’s economic crisis caused tea and coffee stocks to be the focus.

Here are the top four companies in the tea and coffee space that you should keep on your watchlist in these turbulent times.

#1 Tata User

With its presence spanning several decades, Tata Consumer is the second largest tea company in the world. It has a leading position in the global tea market.

The company’s Tata Tea brand is the second largest tea brand in India while Tetley is the fourth largest tea brand in the UK and largest in Canada.

What are its USPs and how do Tata group companies stay ahead of their competitors?

The company’s brand strength and well -established distribution network do most of the work. Along with that, Tata’s ever -expanding Consumer reach, marketing initiatives and focus on premium segment product launches worked wonders for it.

Tata Consumer has a diverse portfolio of brand offerings across packaged tea categories, namely economy, popular and premium.

If the company has all these things, it can easily succeed in the tea business in India given India’s continuous increase in tea consumption.

For fiscal 2021, the branded tea business accounts for more than 50% of its revenue.

Tata Consumer also has a JV with Tata Starbucks and we all know the brand’s footprint in India.

To learn more, see Tata Consumer’s quarterly results and its financial fact sheet.

#2 CCL Products

Next on our list, we have CCL Products, the world’s largest private label instant coffee producer with a capacity of more than 35,000 tons.

The company is dependent on exports. Exports account for over 90 percent of the company’s sales.

It has factories manufacturing sites in India (Andhra Pradesh), Vietnam and Switzerland.

While the company’s global operations in Vietnam did not face major obstacles during the outbreak, domestic business was partially affected due to late shipments and the absence of containers.

Despite the problems, the company managed to close financial 2021 with a strong operating profit. This is because it adds new customers in the United States and increases its capacity utilization.

CCL products are likely to report good growth in fiscal 2022 following increases in product volume and mix.

Note that raw material prices fluctuate widely in the coffee industry. In commodities such as coffee, CCL Products has been able to maintain stable margins due to its standard process of procuring raw materials only after it has received an order.

CCL Product Financial Picture

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So far it has minimal debt on its books throughout history.

What allows the company to operate this way is its strong decades -long relationships with coffee bean producers and suppliers.

To learn more, see CCL Products ’financial fact sheet and its latest quarterly results.

#3 Rossell India

Rossell India is engaged in the business of cultivating, manufacturing and selling black tea. The company cultivates tea in seven tea estates and operates seven factories, one associated with each tea estate.

Although the company is primarily a tea company, it has entered several divisions in the past to reduce its reliance on the tea business. For example it has an Aerotech Services support services division which management decided to close.

The other unit, a division of Rossell Techsys, is involved in the engineering of wire harness, custom embedded systems, as well as the design and development of test solutions for aerospace and defense customers.

Rossell also ventured into the hospitality business about eight years ago but closed it in 2019.

Currently, the company is involved in two main divisions, Tea and Techsys.

As a well-established player in the market, the company accounts for about 0.5 per cent of Indian tea production. The organizers of the company have about three decades of experience in the tea industry.

The superior quality of tea in the domestic market results in a premium for its yield compared to the industry average. The weighted average realization of tea produced by the company is around Rs 287 per kilogram as compared to the North Indian auction average of around Rs 229 per kilogram.

Over the past year, the company’s shares have gained over 90% with most of the profits coming in the past two months.

Rossell India’s 1 Year Performance

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#4 Tea & Industry Jay Shree

Founded in October 1945, Jay Shree Tea & Industries is part of the diversified conglomerate BK Birla Group. The company is engaged in the manufacture of tea and chemicals & fertilizers.

It is the third largest tea producer in the world and ranks second in India. The company has been operating in the bulk tea industry for almost 75 years and now accounts for about 2 per cent of Indian tea production.

The tea produced by Jayshree estates consistently earns a premium over the county average because of its quality.

To reduce its dependence on tea, the company is also involved in the chemical and fertilizer, sugar, real estate and education sectors through its subsidiaries.

The company recently merged with its wholly-owned subsidiary to streamline its business activities into one joint venture.

To learn more, check out Jay Shree Tea’s quarterly results and its financial fact sheet.

Opportunities in crisis for Indian tea exporters

Note that Russia is among the top two buyers of Indian tea. So when the Russo-Ukrainian war broke out, it was implied that tea exports might be affected.

As a result, there are delays in shipments and containers are being unloaded at different shipping ports.

According to industry experts, the domestic tea market may be affected in the short term.

McLeod Russel, one of the largest tea companies in India, said domestic demand is expected to remain high in the next few months as negligible shifts and the impact of falling exports to Russia will not be felt immediately.

This is also not the first time something like this has happened. The Indian tea and coffee industry is often marred by geopolitical tensions. The Gulf War, the split of the USSR, and more …

Thankfully, the situation this time around is under control and Indian tea exporters have resumed tea supplies as usual.

Another opportunity for Indian tea companies and exporters is that they can cover the shortfall as Sri Lanka goes through an economic recession.

Sri Lanka is a major player in the global tea market. With Sri Lanka’s growing economic crisis, tea factories are struggling to run their operations, facing hours of power outages and not having enough fuel.

The decline in Sri Lankan tea exports may help Indian exporters expand their shipments.

We will keep you informed of the latest developments from this space. Stay tuned.

(This article is syndicated from Equitymaster.com)

(This story has not been edited by AGRASMARTCITY staff and is automatically generated from a syndicated feed.)

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