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Download this Document for Free presence in 40 countries. Among India's first multinational companies, the opera tions 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 Tat a Tea Tata Tea has a market share of around 15% and it lies at second place in t he market in terms of value. HUL is the market leader with 20.2% market share wh ile Mcleod Russel lies at 8%. (Figure 3) Tata Tea also suffered in the period 20 00-03 due to slowdown in the Indian Tea Industry. Its sales went down and profit became negligent. But Tata Tea came back strongly in 2004 w hile 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, a n 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 empl oyees 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 sal es 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. 2 008-09. 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. Expe nse of Tata Tea on raw materials has increased from Rs. 520 crores to around Rs. 750 crores. (Figur e 5) COMPARISON OF TATA TEA WITH HUL 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 Ta aza, TajMahal, Green Label, etc. Apart from producing tea from its own estates, HUL also purcha ses finished goods from third party vendors at cheap rates. The average price at which HUL sells it s products is Rs. 170/kg which is around Rs. 8 higher than that of Tata Tea which is one of the re asons why HUL has greater revenue than Tata Tea. Tata Tea and HUL are fighting with each other over the market leadership. Tata T ea attacked the brands of HUL by bringing new varieties of tea under its flagship brand, Tata Te a. 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 fel

l from around 24.5% to 20.2%. (Figure 6) HUL realising that Tata Tea is slowly e ating 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 8 0 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 cam paign 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) CONCLUSION Indian Tea Industry is a growth industry and its domestic demand/cons umption is increasing. India is consuming 75% of its total production in domesti c 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 “Seha tmand” thus covering whole of tea market. It has also started aggressive counter advertiseme nt. Tata Tea is planning to keep working on its “Jaago Re” campaign. It is targeting rur al markets where there is large scope of growth as none of the brands is a lot p enetrated 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 economie s of scale. We have to wait and watch who wins this war for market leadership in tea industry. ANNEXURE 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: CMI E) 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: CMI E) Figure 8: Trends in consumption of Tea (Source: CMIE) Managerial Economics Project Report Download this Document for FreePrintMobileCollectionsReport Document Info and Rating chandanjee Share & Embed Related Documents PreviousNext p. p. p. p. p. p. p. p. p. p.

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