Indian Tea : Product Market Analysis

Tea Industry
TEA is best had, not written about

Classifications and Grades of Tea

Tea differentiated on:
Processing Leaf size Grade

Classification:
Black and Green tea
Black tea further classified into CTC (cut, tear and curl) and Orthodox tea.
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Indian Scenario
India has long held the title of being the largest tea producer and consumer in the world.

It is the only country, which produces both CTC and orthodox teas in sizeable quantities.
It has a share of 15% of the worlds tea exports.

The tea market has declined by 9% in 2002.

Discounts and freebies push the volumes. Hindustan Lever Ltd with a market share of 45% is the leading player in the packet tea business. Regional players enjoy the advantage of price differences, because the procurement cost is low when tea prices are depressed.

Indian Scenario
Darjeeling's exclusive taste and quality, as well as the fact that it cannot be replicated anywhere else in the world, makes it one of the most sought after teas in the world. The Assam region produces more tea than any other region in India. Assam teas are known for their strong, full, rich, full-bodied, pungent and sometimes malty bright liquor flavour. Branded packaged teas account for 33-35% by volume. Hindustan Lever (HLL) leads with around 43-45% market share of the packaged tea market, while Tata Tea is No. 2 with around 17-18% market share. Collapse of Soviet market reduced exports.
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Plantations
Northeast
Upper Assam largest production Northern West Bengal (Darjeeling)

South
Nilgiri

What is the Future?

The Government has decided to fully open the tea industry to foreign investment.
The FDI limit has been raised from 26% to 100%. This is hardly any incentive for foreigners to pump money into an ailing industry beset with high costs and low realizations.

Key Drivers
Value-additions through changes in the product forms:
packaging innovations; delivery systems, promotional policies and marketing tieups

Tea bags, the most common form of value-addition, dominates the world market With tea marketing becoming increasingly diffused as compared to other beverages like wine or soft drinks There have been corporate alliances in the form of co-branding, joint ventures (JVs) and partnerships to draw synergistic benefits

Key Drivers (Contd.)

Value additions across the spectrum Product modifications
Hot > Cold Conservative > Flavoured Cuppage > Convenience

Tea bags Instant tea Iced tea Speciality tea Gourmet tea
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Pepsi and Lipton JV

Pepsi manufactures and distributes Liptons iced tea in glass through its C&G (convenience-stores and gas stations) distribution channel Revenue Drivers Packaging, branding, marketing, valueadded products, etc. Cost Drivers Fixed costs in plantations, processing and distribution expenses, advertising, etc. Growth Drivers Marketing of tea as beyond the usual cup to whole new beverage experience with herbal and exotic teas, ice teas, etc. Profit Pools Tea accessories, high quality tea, etc. Value Addition Occurs mainly in the processing and packaging of raw tea to a packaged good i.e. conversion of a commodity into a product.
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Porters Five-Force Analysis

Threat of suppliers:
Tea plantations
Machinery Transporters

Labour

Threat of buyers:
Initial buyers Final buyers Nature of product
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Porters Five-Force Analysis

(Contd.)
Threat of substitutes:
Beverages
Others The biggest threat to the packaged tea industry is the loose tea industry.

Entry and exit barriers:

Barriers for plantations Barriers for tea factories Barriers for distributors and packagers Barriers for consumers
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Major Indian Tea Companies

Hindustan Lever Limited Brands:
Brooke Bond Taj Mahal Tea

Brooke Bond Red Label

Brooke Bond 3 Roses Brooke Bond Taaza

Lipton Yellow Label

Tata Tetley

Eveready Industries (Mcleod Russell)

Harrisons Malayalam
Assam Company (Assam Gold) Goodricke Group Limited
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Outlook of Tea Industry for the Future

New areas for tea cultivation are being sought New markets are being sought in Iraq, Pakistan and Afghanistan following the end of war conditions and embargoes The industry is likely to witness a major consolidation with leading players looking to acquire smaller and marginal players Most analysts predict a decline in overall tea sales, the more optimistic ones peg a growth at around 1-2% this year Major concerns for the industry remain rising costs 14 of production and value-addition