Mumbai: Hindustan Lever (HLL) and Tata Tea have been slugging it out for the No 1 position in the tea market for the last couple of years. Now the action is hotting up with Godrej poised to join the fray next year.
In the past one year, the war between HLL, the fast-moving consumer goods (FMCG) giant, and Tata group company Tata Tea had both players using every weapon in their armoury - freebies like gold coins hidden in tea packets, other free gifts and discount coupons, accompanied by some slick advertising.
HLL recently rolled out a campaign to promote its flagship Brooke Bond Taj Mahal brand, which embellishes the erstwhile brand proposition 'Wah Taj' with a new ad line -Sabse Khaas Taj Ehsas - stressing its premium quality.
The company also launched Taj Mahal in a new premium pack. Says an HLL spokesperson: ''The new tin pack delivers a great ehsaas to the consumer. The tea is sealed inside the tin with a tamper-proof aluminum tagger, which keeps it fresh. It is priced at Rs 60.'' A pack of tea bags sells for Rs 23.
Tata Tea hit back on the price front. The company relaunched its flagship brand Tata Tea, stressing its quality, packaging and communication, and at the same time reducing the price. A 250-gm pack is now available for Rs 46 instead of Rs 49 and the 500-gm pack for Rs 90 (Rs 96 previously).
HLL leads the market in the packet tea segment (estimated at 2,20,000 tonnes by ORG) with a market-share of 30 per cent, followed by Tata Tea with 16 per cent. Duncans Tea and Goodricke Tea have 4 per cent each.
HLL has about 22 tea brands, covering virtually every segment. Tata Tea has been keeping pace by launching products in all segments in which HLL is present:
The brand war
| || |
|Premium leaf tea market |
(Rs 200-220/ kg)
|Taj Mahal, Yellow Label and |
|Premium dust category |
(Rs 180-200 per kg)
|Three Roses and Top Star ||Chakra Gold|
|Medium leaf sector |
(Rs 140-180 per kg
|Red Label and Taaza ||Tata Tea Premium|
|Medium dust category |
(Rs 130-180 per kg)
|Taaza, Super ||Tata Tea Premium, Kanan Devan and Gemini|
|Popular or economy category |
(Rs 120-140 per kg)
|A-1 and Tiger ||Agni Sholay|
|Economy dust teas |
(Rs 120-130 per kg)
|A-1 and Ruby ||Agni and Leo|
Tata Tea is targeting consumers across the market and competing with HLL at every level, especially in the crucial economy category, which may be poised for a complete makeover. In addition, the company is planning to launch iced tea under the premium Tetley brand soon, besides variations of existing hot tea brands in the next two years.
Tata Tea vice-president (marketing) Vivek Mathur says the company's product for the iced tea segment is ready and will be launched by early 2003 under the Tetley brand. ''We are also looking at introducing regional variations of hot tea brands in the next couple of years.''
Getting back to Godrej's plans to crash the tea party, the group has floated a new company called Godrej Tea Private Ltd, according to senior company officials. Pranab Barua, former managing director of Reckitt Benckiser has been roped in to take charge.
New marketing tactics
Barua says Godrej plans to offer highly specialised flavoured teas and will not compete with HLL or Tata Tea. This may not really work out as Tata Tea is also said to be planning to launch flavoured and herbal teas soon, according to company sources.
Godrej's plans apart, established giants HLL, Tata Tea, Duncan and Goodricke are facing stiff competition from the milling crowd of small players.
Unorganised players have been weaning customers away from loose tea, and local packaged tea is posing stiff competition for HLL and Tata Tea. Therefore, though margins are high, the organised companies have to spend more on advertising to grapple with the competition.
In recent years, the proliferation of bought leaf factories (units that produce cheap quality tea by buying and processing green leaf from small growers) has led to tea flooding the domestic market. Smaller players can offer this inferior quality of tea at cheaper rates.
By selling at lower prices, small regional players have raised their market share to 38 per cent from less than 20 per cent earlier. Bought leaf factories are mushrooming mostly in West Bengal and south India.
The production capacities of these unregistered bought leaf factories are mostly not known, skewing estimates of the total tea production in the country. While the Tea Board of India estimates production in the bought leaf factories at 80 million kgs, AF Ferguson consultants put the figure at 140 million kgs.
Quality takes a beating
Market analysts say the poor quality tea produced by these players not only affects domestic price levels, but also damages the quality perception of the Indian tea in export markets.
They say that the quality of tea sent by India into the international markets has declined in recent years, mainly due to the cheap quality tea produced by smaller units. The Tea Board also confirms this by saying more than half the amount sold as Darjeeling is actually poor quality leaf tea from small tea factories in West Bengal and the south.
Thus, about 60-70-million kg of tea traded is branded Darjeeling Tea, whereas the entire production in the Darjeeling tea gardens amounts to only 10-12 million kg. Lack of counter-initiatives and awareness in the foreign markets have proved detrimental to the Indian tea industry. ''Therefore, in many markets, Sri Lankan and Kenyan tea is considered qualitatively better than the Indian produce, thus affecting both the demand and prices of the Indian tea,'' sums up an analyst.
As the tussle progresses, tea is being transformed from a commodity to an FMCG. This is bound to raise the profile of the product and also the market perception of tea companies, which may be one reason why Godrej is entering the tea sector.