Tata Tea Ltd
Tata Tea Ltd - Hot Drinks - India
Strategic Direction
·
Tata Tea is actively pursuing
diversification of its product portfolio to include green tea, rooibos, fruit
and herbal products to reduce its dependence on black tea and to develop into a
beverage company. In the forecast period, the company is expected to look out
for acquisitions and launch new products in bottled water and RTD tea. In the
forecast period, Tata Tea is expected to strengthen its presence in premium tea
by launching wellness products such as Tetley green tea, speciality estate teas
as well as flavoured tea, targeting high-end consumers. Simultaneously, the
company is predicted to continue pushing for higher volumes in rural areas
through its regional brands, by focusing on low prices and widening its
distribution.
Key Facts
|
Full name
of company:
|
Tata Tea
Ltd
|
|
Address:
|
1 Bishop
Lefroy Road, Kolkata - 700 020, India
|
|
Tel:
|
+91-33-22813891
|
|
Fax:
|
+91-33-22811199
|
|
www:
|
www.tatatea.com
|
|
Activities:
|
Tea,
bottled water
|
Source: Company website
|
|
2006
|
2007
|
2008
|
|
Net sales
|
Rs9, 682
million
|
Rs10,545
million
|
Rs11,347
million
|
|
Net profit
|
Rs1,869
million
|
Rs3,066
million
|
Rs3,129
million
|
Source: Company reports
Note: Year end March
Company Background
·
Tata Tea and the UK-based
Tetley Group are subsidiaries of the Tata Tea Group.
·
In 2006, Tata Tea started to
diversify beyond tea by purchasing Glacéau, a maker of vitamin water. However,
within a few months of the purchase, the company was forced to sell out to The
Coca-Cola Co. Undeterred, Tata Tea went on to take the majority stake in Mount
Everest Mineral Water in 2007, which is the biggest player in packaged mineral
water in the country.
·
The company has a nationwide
presence with tea cultivation and packaging activities in east and South India
and a nationwide marketing and distribution presence.
·
It is a publically traded
company and it is not known to be looking for funding to achieve its strategic
goals.
·
In 2007, the company set up a
joint venture with Zhejiang Tea Import & Export to set up a green tea
extracts and a polyphenol extraction unit in China. The company holds a 70%
stake in this joint venture.
Production
·
Tata Tea has tea estates in
East and South India, and is known for its vertically integrated structure,
using the slogan “garden fresh”. Tata Tea is making a conscious move away from
plantations into bought tea and branding. Many of the company’s tea estates in
Munnar, in the southern Indian state of Kerala, have already been sold to local
operators, which in turn sell their production to Tata Tea. With this strategy,
Tata Tea avoids many labour issues and can, if needed, source at standard
prices, many times lower than Tata Tea would pay for tea from its own estates.
·
In addition to its tea
cultivation and production facilities spread over 53 estates in south and East
India, the company has a strong retail distribution network covering over 1.7
million outlets.
·
The company exports products
from its Tata Tea and Tetley portfolios to Australia, the Middle East, West
Asia, North Africa, Poland, Russia and Kazakhstan. The company’s total exports
in 2007-2008 were valued at Rs1440 million.
·
The company is not known to
undertake third party manufacturing.
|
Location
|
Brand
|
Annual
production
|
|
All
|
Tea-All
Brands
|
78.6
million kg
|
Source: company reports
Note: Year end March
Competitive Positioning
·
Tata Tea is the third largest
player in hot drinks in India with a 14% share of the value sales of hot drinks
in 2008. With a 24% share in 2008, Tata Tea was second behind Hindustan
Unilever in tea with multiple brands such as Tata Tea, Agni Dust, Kanan Devan
and Tetley. The company also faces competition from a number of regional and
local players as well as unpackaged tea sales in rural areas.
·
The company’s share has
gradually inched upwards over the review period. In 2007-2008 the company
initiated a reduction in prices across pack sizes, led by its economy brand
Agni. In addition to dropping prices in order to compete effectively with
regional brands, Tata Tea also reformulated its tea portfolio to give the
brands a stronger brew. Tata Tea also introduced better packaging for its
existing brands, introduced new tea products and rolled out new brand
communication, mainly through television advertisements, in order to increase
its visibility.
·
Tata Tea is only present in the
mature tea category with its product portfolio dominated by black standard tea.
Due to the high penetration of black tea in India, this category does not
achieve high volume growth. Nonetheless, tea has been relatively dynamic due to
new product launches, new communication messages and aggressive moves to
capture market share by regional companies. Tata Tea has a stake in coffee
through its subsidiary Tata Coffee Ltd.
·
The company has a wide brand
portfolio in tea.
·
Tata Tea straddles the economy,
mid-priced and premium segments in tea with specific brands targeted at
different consumer segments.
·
The company has undertaken
innovative product launches such as functional/flavoured teas. It is also
credited with the introduction of a highly successful creative communication
campaign with a social message.
|
Product
type
|
Value share
|
Rank
|
|
Tea
|
24%
|
2
|
Source: Euromonitor International
