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MARKETING EFFORTS To understand Tata Tea's current marketing efforts a peek into its past efforts must be made.

In its days as Tata Finlay its thrust was on the production of-instant/blended/packaged tea.

Historically tea companies have been weak in marketing Tata Tea being an e!ception. The only e!ceptions were marketing oriented companies like "ipton and #rook #ond who filled the vacuum that e!isted in the industry. Tata Tea' marketing orientation started with its decision to launch in the mid $%'s poly packs. Tata Tea's integration of tea production with marketing was a pioneering effort in the tea industry. &n the strength of its 53 tea estates and 57 tea factories it started a claim to offer 'garden fresh' tea to the consumers as a value addition. The boast was not empty as the time between packaging and selling the tea was appro!imately two months as against ' months for the marketing companies. Tata Tea also believes that they incur some of the lowest marketing costs in the industry. In (arch )**' TT" ventured into coffee and launched a national coffee brand Tata Caf )%%+ pure instant coffee to directly compete with ,estle's ,escafe. -ircumstances helped the brand as coffee prices spiraled .ust before the launch making it a cheaper yet comparable product to ,escafe and it helped Tata -af/ garner )0+ of the instant coffee market in its first year of

operations. Tata Tea made its initial forays into coffee in )*$* with its 53 % takeo er of Conso!idated Coffee "td# which in later years was followed by its ac1uisition of Asian Coffee$ t%e !ar&est coffee 'rod(cin& co)'an* in India. These

movements have given TT" a )%+share of the ).$-lakh annual coffee productions in the country. 2ith Tata -af/'s emergence they are also ma.or buyers in the coffee market. The company has been very active in the coffee market-onsolidated coffee launched +Coor&+,a -..% '(re fi!ter coffee in )**3 for the 4outhern market. The positioning was at the high premium end in competition to ,estle and Hindustan "ever with their chicory blends. #ut the intense competition in the coffee market prompted TT" to launch a chicory-blended coffee themselves. In the present day scenario 5sian -offee India's only )%%+ 6&7 for coffee has hit an all time in sales. It produces ).8 million kgs of coffee marked and sold under the brand name M/SORE GO"0. The company's marketing efforts are totally devoted to e!ports to countries like 9ussia 745 and 6urope. Interestingly 5sian -offee's e!ports now accounts for ::+ of all instant coffee e!ports from India. In addition in )**' out of TT"'s e!port earnings of 9s )%' crore international coffee trades accounted for chunk of 9s8%cr. Its other coffee subsidiary Consolidated Coffee head1uartered in the pictures1ue -oorg highlands is Asia+s !ar&est coffee co)'an* producing one of the best coffees in the world. Its range of products include Coor& Fi!ter Coffee 1a&s and specialty coffees like Monsoon Coffee, M*sore N(&&et E2tra 3o!d and Ro1(s t Ka''i Ro*a!e all

aimed at the higher end of the market. -onsolidated -offee has merged with 5sian -offee "td.to integrate TT"s coffee operations. In the words of present (; 4aeed <idwai he sees the entire coffe operations merged with Tata Tea. Its vision for the future is to be an integrated beverages company and ultimately an F(-= company. To achieve this end Tata Tea has placed a bid for 7< giant Tetley which we deal with later on in the report. >rior to its earth shattering bid for Tetley it had already entered into a strategic .oint venture with Tetley ? the famous tea blenders. #oth are leaders in their respective fields in the international arena and are market heavyweights. 5n 6&7 was set up at 2illingdon Island -ochin to produce 9and tea bags and 4trong and Tata Tea bags blending best 5ssam teas in high 1uality packing materials. Initially the thrust was to e!port to >oland and the (iddle 6ast and the product was pretty successful in these markets. It was initially launched in the domestic market but was stopped due to poor response. It was relaunched in )**8 and its progress can be illustrated as below@

TATA TETLEY'S SHARE


350 300 250 200 150 100 50 0 320

180 107.5 40 1997 1998 1999 2000

Sales in Million gs

Tea !ags Ma"#e$


4000 3000 Tea bag sales in million gs 2000 1000 0 1997 1998
EST%MATE& SALES

4000 3000 2500 2000

1999

2000

The chart reveals a growing tea bags market with Tata Tetley increasing market share by a 1uantum leap of 7..% in its 4 *ears of o'erations. It has made ma.or inroads into the institutional users like hospitals railways airlines and hotels and is slowly eating into the market share of the category leader H""'s Ta.mahal Tea #ags. The pie of the market was originally divided between Ta.mahal Twinnings Tata Tetley and the local players but with Tata Tetley's creation of brand value through an increased media presence and product 1uality the market has shaken up with two ma.or players Ta.mahal and Tata Tetley's emerging. Its initial promotional techni1ues were centered on point of sales tools like free samples demos wet sales etc but in recent years there is a commitment to stronger print magaAine and TB presence. Tata Tetley seeks to create a perception of a premium 1uality product aimed at the upper segments of the society and hence has structured their strategy accordingly. It seeks to sponsor musical entertainment events and participate in trade fairs and e!hibitions to increase visibility among its target customers. It en.oys the wide distribution reach of theTata Tea network and has aggressive placement techni1ues. In ;elhi alone it has a network of about )%%%-):%% retailers out of a total of )$%%% retailers for F(-= products that are available. &ur ne!t area of focus will be the 'acka&ed tea se&)ent 5%ic% for)s Tata Tea "td#6s core stren&t% . In the packaged tea segment Tata Tea's sales are at 80 million kg ne!t only to Hindustan "ever's sales of )C% million kg and it is currently pursuing a vigorous market share e!pansion program. Its

portfolio includes the flagship Tata Tea <annan ;evan -hakra =old =emini ;ust 5gni "ucky -up #rahamputra etc. #rands like <annan ;evan -hakra=old and =emini ;ust are very strong in the southern market as they cater to the peculiarities of tastes in that region. 5ccordingly apart from the flagship brands the rest en.oy region wise loyalties. Tata Teas commitment to packet tea can be illustrated as below@

CHART B

80 '0 40 20 0
1994(95

'' 54 39 31

'5 30

58 31

'8

70

23

20

1995(9'

199'(97

1997(98

1998(99 1999(2000

) o* +"o,-.$ion going in$o /a.#e$s ) o* o0 n $ea in a-.$ions

700 '00 500 400 300 200 100 0 393 230

/a.#e$e, $ea !-l# $ea 455 478 500

700 588

1'3

152

19' 115 95 1999( 2000

1994(95 1995(9' 199'(97 1997(98 1998(99

Tea 4ales chart DrightE reveals the proportion of packet tea sales to bulk tea sales F reinforces Tata Teas core strength. -hart # reveals the importance of Tata Tea of sourcing from auctions to supplement garden production to e!pand its market shares. Its strategy to penetrate the market underwent a shift after the option of e!pansion of production capacity derived up in the mid *%s. 5c1uisition of gardens become a non option after the huge increase in prices F non availability of gardens for sale which led Tata Tea to increase itGs sourcing from auctions F purchasing estates abroad. In the meantime productivity improvements

have increased yield in the estates which have prompted Tata Tea to predict a sales level of )%% million kgs in the ne!t : years of operations out of which 8% million will be produced in their own gardens.

DISTRIBUTION NETWORK The growth strategy of the company warrants a siAeable e!pansion of the distribution network. The distribution network is as follows@ F5-T&9H

-599HI,= F F&9259;I,= 5=6,T4

;I4T9I#7T&94

4T&-<I4T4

96T5I"694

-&,47(69 The chart e!plains the distribution from bush to crop. 7ard%)an C%e)ica!s "td# are the distributors for Tata Teas products like >remium Dboth leaf F dustE and 5gni dust. The rest of its products are handled through direct se!!in& tec%ni8(es. In

some areas the company even uses Tata 4alt distributors to sell tea. The domestic tea market being fiercely competitive there is a heavy discount given to dealers F distributors. In its direct selling endeavors Tata Tea en.oys an e!tensive distribution network which is constantly being e!panded. Its distributors

determine its entire marketing strategy F direct selling efforts which emphasiAes on the availability of the products on the shelves. The company planned to sell about 0% %%% kgs of tea at concessional prices in <erala F <arnataka. In <erala. The ,eethi stores F <erala civil supply corporation. In <arnataka the

company planned to sell :% %%% kgs of tea through government or 1uasi-government channels. The government would sell )%% grams of tea packs priced at 9s. *.0% in these states. The company would be doing this on the basis of the decision taken by the -onsultative committee of >lantations and 7nited >lanters of 4outh India to protect the common man from any adverse effect due to any hike in tea prices. 5ccording to the decision tea companies would be re1uired to offer %.:+ of their three-year average crop in )**C )**0 and )**'. 3RAN0 STRATEG/ Tata tea according to past (; <rishna <umar seeks to 1e 'resent in e er* co(ntr* where tea is grown and marketed and have already e!plored 4ri lanka -I4 9ussia <enya

Iimbabwe 7ganda TanAania (alawi 4outh 5frica 6urope 7< and the 74 for its production and marketing facilities. To

establish

the

brand

abroad

tie-ups

with

local

marketing

companies to push the brand have been made. It's association with Tetley will strengthen its global position by giving them control over global brands with Tetley to leverage its own brand. These efforts are motivated by the belief that the battle is between brands and +'ercei ed a!(e+ . on the domestic front

TT" has focused on launching region specific brands. For instance for the now traditional southern tea market they have <annan ;evan -hakra =old and =emini ;ust and Tata Tea for the rest of India. Its introduction of polypacks revolutioniAed the industry by departing from traditional channels of sale of tea. >olypacks communicated "fres%ness'' which TT" used as its 74> and it gave rise to the fastest growing segment in t%e do)estic tea )arket. This forced e!isting rival brands like the market leader 9ed "abel Ta. (ahal and Taster's -hoice to change to

polypacks. 5 point to be noted here is that the competition was faced not only from #rooke #ond "ipton's brands but also from loose teas. TT"'s focus is to create a nationwide presence for its brands. =u.arat and (aharashtra Dthe biggest tea markets in the countryE have already been tapped though their strongest presence is 7> >un.ab and Haryana. Co))(nication Tata Tea is a very strong advertising company. It was the -5t% !ar&est ad ertise)ent s'ender for t%e *ear -999. Tata Tea to capture the attention of the largest market has a heavy presence on national television D;;E. It also undertakes

sponsorship of various serials and programmes. To push its

brands Tata Tea has gone in for celebrity endorsements and s'onsored t%e MO:;N 3AGAN foot1a!! tea). MARKET EN7IRONMENT< COM=ETITION Historically the -ompanies have not emphasiAed much on (arketing. This is the main reason for the share of "oose Tea being '3+ of the domestic Tea market. 5 large proportion of the market is still unorganiAed. 5ll the competition has been in the packed Tea segment the market share of which has remained stagnant or has increased slowly over the years. 4o in effect the competition that the tea company faces is not only from the other packed tea sellers but also from the loose tea market. There is a lot of scope for tea manufacturers to enlarge the branded tea market segment by aggressive marketing and e!panding their distribution network. The packet tea market which was of :3% million <gs in )**$ witnessed fierce competition. T%e )a>or '!a*ers in t%is se&)ent are Tata Tea, :"", 0(ncans, Godfre* =%i!i's, Goodricke, etc. This segment has been dominated by :"" 5it% o er 45% )arket s%are fo!!o5ed 1* Tata tea# 5%ic% %as an esti)ated )arket s%are of ?@%# The rest of the market is highly fragmented#

MAR ET SHARE
1$2e"s 18)

&-n.ans 9)

HLL 45)

Ta$a TEA 28)

GO7ERNMENT =O"ICIES# The tea market is politically very sensitive. 5t present the tea companies are heavily ta!ed. Income ta! liability is calculated differently for the tea companies. It is deemed that '%+ of the pre ta! profit is agricultural income which is ta!able by the states. The remaining C%+ is ta!able as corporate income by the center. Tea marketing control order re1uires all the manufacturers to sell 80+ of the Tea De!cluding e!ports and >acket salesE through auction houses. -urrently e!ports are not allowed for domestic consumption. 6arlier -T- e!ports were banned for a brief period in )*88-$C. Imposition of $+ 6!cise ;uty in )**$ had made packet tea uncompetitive vis-J-vis loose tea resulting in loss of market STRENGT:S The most obvious and inherent strength that TataTea en.oys is its strong production infrastructure. 2ith its 03 tea gardens and production of '%-'0 million <gs D)C+ of India's productionE it is not overtly dependent on the auctions for teas for its products. Tata tea retains control over the 1uality and the availability. >resently it purchases )C (illion <gs from the auction houses and this might have

to be increased keeping in view its intention to increase packet tea sales. Its estate holdings in 4ri "anka D2atawalla >lantationE and 5frica also provide Tata Tea with more options for sourcing tea. Tata Tea also remains relatively insensitive to the price fluctuations of the auction market and is able to reduce costs. It spends )+ of their profits on 9esearch F ;evelopment which is the highest in the industry. The benefits of this characteristics have been Instant Teas #etter blends. The 9 F ; team is constantly working on the blending to improve taste and 1uality. #oilable Tea pouches- it was one of the first to launch boilable tea pouches. "and 2ater >lant (anagement and energy

conservation. >oly->acksit created a breakthrough by

introducing poly-packs

which gave rise to a

completely new segment. >oly-packs help reduce lead-time from gardens to improve and retain freshness.

Hield enhancement >rocess and product development.

The strength of the Tata brand is something which gives Tata Tea a competitive edge in the market. The Tata name is synonymous with 1uality reliability and assurance that the ta Tea brand seeks to capitaliAe.

Its strate&ic Ac8(isitions and Mer&ers@ Tata Tet!e*- its Tata tetley tea bags is consently behind Ta.(ahal Tea bags in the industry and is consistently e!panding their market share. Conso!idated CoffeeA Asian Coffeeits

ac1uisition of the -offee companies gives TT" a diverse product portfolio. 5lso the e!port earnings are very high at about 9s. 8% crores. Tata :itac%i$ to tap the high 1uality Kapanese tea and coffee market a .oint venture set up with Hitachi to provide a foothold in the world market. Tata N/K$ a strategic alliance which acts as a cost cutting tool on transportation. ,ippon Husen <aisha D,H<E is one of the largest shipping lines of the world. Immense value to Tata Tea in areas like Transportation &perations and (anagement of seaports Inland -ontainer depots and

-ontainer Freight stations. This Koint Benture

opens

up

wide

range

of

possibilities/opportunities in the transportation sector post-liberaliAation. BEAKNESSES Tata Tea ltd. has not been able to associate its #rand name with an image of high 1uality tea. It has only been concentrating on providing tea for the masses. Through Tata Tea "td has an e!tensive distribution network there is still much scope for improvement. Its main competition H"" has a better reach and has successfully penetrated the rural market . H"" also has a more organiAed distribution channel. O==ORT;NITIES 5s of now loose tea has a ma.or share of the tea market. There is a scope for Tata Tea "td. to convert these consumers into packet tea consumers. Tata tea "td. can organiAe benefits by aggressively promoting its brand backed up by a better distribution network. 2ith the ac1uisition of Tetley Tata Tea "td. would at once be in the global competition with leaders like 7nilever's. T:REATS 5s of now the Indian tea industry is protected but in the near future it is e!pected that tea import will be permitted

for domestic consumption. In such a scenario there would be a large inflow of tea from countries such as 4ri lanka these countries have low cost of

<enya and (alawi

production as labour is cheaper productivity is higher due to younger tea bushes and as the state is more supportive. 5t present India and -hina account for about 0% +of world's production. <enya (alawi and Indonesia have

increased tea production significantly and have emerged as leading e!porters as their domestic markets are very small. 5s a result Tata tea will face a greater competition in the international market. 5s Tata tea plans to ac1uire Tetley and if it does so it could face the danger of a flight of top talent at Tetley. ,ow does Tatas have talented enough managers to step into their shoes. Then Tata Tea may have to fight a two pronged battle@ - it will have to grapple with the issue of paying off its substantial 7< loans and simultaneously fight a battle with 7nilever in the market.