1. To study the market scenario and structure of Indian Tea Industry for last 10 years. 2. To study the economic condition of Tata Tea and its market share for past 10 years. 3. To analyse the changes in market shares of Tata Tea and HUL and study the various factors behind the changes. 4. Study the various strategies opted by HUL and Tata Tea for the war of market leadership.

Indian Tea Industry:
The tea industry in India is about 170 years old. It occupies an important place and plays a very useful part in the national economy. India produces 30% of the total tea supply of world. The total turnover of Indian tea industry is around 8000 crores. India produced around 945 Kilo tonnes of tea in 2008 rising from 850 kilo tonnes in 1999 as shown in Figure 1. In 2001-02, exports by Indian Tea Industry fell drastically due to rise of low cost exporters mainly from China, Kenya, Sri Lanka and Indonesia. Domestically, the retail price of tea was depressed by oversupply few years back. This problem was due to an increase in cheap, low-quality tea from neighbouring countries such as Nepal, Vietnam and Indonesia. But since last two years the industry has shown great improvement with around 10% rise in market size in value. (Figure 2)

Herfindahl index of Indian tea industry is 0.07. This value is very small and it shows a highly competitive monopolistic competitive market. The competition in the industry is mainly based on product differentiation. Each company tries to differentiate its product to cater different customers. Eg. Masala tea, leaf tea, dust tea, etc.There are a large number of companies in the market. Infact there are more than 2000 companies operating in the Indian tea market which makes the market a highly competitive one. The major players in the Indian tea industry are HUL, Tata Tea, Mcleod Russel, etc.

Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop valueadded tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley Group, today represent the world's second largest global branded tea operation with product and brand

presence in 40 countries. Among India's first multinational companies, the operations of Tata Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in plantation activity in India and Sri Lanka. It is also the largest manufacturer of branded tea in India on volume basis with producing around 20% of total tea production in India.

Economic Analysis of Tata Tea
Tata Tea has a market share of around 15% and it lies at second place in the market in terms of value. HUL is the market leader with 20.2% market share while Mcleod Russel lies at 8%. (Figure 3) Tata Tea also suffered in the period 2000-03 due to slowdown in the Indian Tea Industry. Its sales went down and profit became negligent. But Tata Tea came back strongly in 2004 while still other companies were fighting to survive. Tata Tea realised it needs to understand the needs of the customers and brought in new varieties to fulfil their needs. It brought Agni, an economy segment product into the market. It also realised that it needs to cut its labour costs and use the savings in raw materials cost to expand its market. It reduced its cost on compensation to employees from Rs. 250 crores in 2004 to 100 crores in 2009. Since 2004, Tata Tea has seen sharp and continuous increase in sales. It saw sales worth 1358 crores in 2008-09 and produced 84 kilo tonnes which takes out the average price of Tata Tea to be about Rs. 162/kg. (Figure 4) Tata Tea after the slump period has seen continuous rise in its profits except for last year i.e. 2008-09. The profits last year fell from Rs. 320 crores in 2007-08 to Rs. 160 crores. This fall in profit is not due to reduction in demand but due to rise in cost of raw materials mainly. Expense of Tata Tea on raw materials has increased from Rs. 520 crores to around Rs. 750 crores. (Figure 5)

HUL is the market leader in the industry with 20.2% of market share (value). It operates under its two brands, Lipton and Brooke Bond under which it has several sub-brands like Taaza, TajMahal, Green Label, etc. Apart from producing tea from its own estates, HUL also purchases finished goods from third party vendors at cheap rates. The average price at which HUL sells its products is Rs. 170/kg which is around Rs. 8 higher than that of Tata Tea which is one of the reasons why HUL has greater revenue than Tata Tea. Tata Tea and HUL are fighting with each other over the market leadership. Tata Tea attacked the brands of HUL by bringing new varieties of tea under its flagship brand, Tata Tea. It also started aggressive advertising campaign like “Jaago Re”. It also increased its production by 10% to increase its products in the market. The result of all this moves was increase in market share of Tata Tea by

4%. It rose from 11% in 2002 to around 15% in 2008 while market share of HUL fell from around 24.5% to 20.2%. (Figure 6) HUL realising that Tata Tea is slowly eating its market share, prepared a counter strategy to handle Tata Tea. It increased its production by 25% in 2008-09 from 64 kilo tonnes to 80 kilo tonnes. It also brought in new varieties of tea in the market, most important of them being its economy segment product “Sehatmand” launched against Tata Tea Agni. It increased its advertising campaign significantly in the same period. As a result, sales of HUL jumped by 25 %, thus outperforming Tata Tea and maintaining the gap between the two. (Figure 7)

Indian Tea Industry is a growth industry and its domestic demand/consumption is increasing. India is consuming 75% of its total production in domestic market. Although the exports are on the lower side, but they are showing signs of improvement. (Figure 8) The war between both tea giants will continue to be there with both companies making strategies to be the market leader. HUL has entered into low end segment with its new product “Sehatmand” thus covering whole of tea market. It has also started aggressive counter advertisement. Tata Tea is planning to keep working on its “Jaago Re” campaign. It is targeting rural markets where there is large scope of growth as none of the brands is a lot penetrated in the rural market. Tata Tea is also working to control its costs and so far it has succeeded to some extent. Another move is that it is planning to integrate its coffee and bottling business with tea business to achieve economies of scale. We have to wait and watch who wins this war for market leadership in tea industry.


Figure 1 – Tea Production by India (Source : CMIE)

Figure 2 – Market Size of Indian Tea Industry: turnover value (Source : CMIE)

Figure 3 – Market share of different companies in Indian Tea Industry (Source: CMIE)

Figure 4 – Sales of Tata Tea for last 10 years (Source: CMIE)

Figure 5: Profit of Tata Tea for last 5 years (Source: CMIE)

Figure 6: Change in market share of Tata Tea and HUL over past 6 years (Source: CMIE)

Figure 7: Comparison of sales of HUL and Tata Tea for last 10 years (Source: CMIE)

Figure 8: Trends in consumption of Tea (Source: CMIE)

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