Tata eyes pole position in packaged tea market

Tata eyes pole position in packaged tea market

New Delhi: Tata Tea aims to be the market leader in the Rs6,500 crore packaged tea market. The company is working on a comprehensive growth plan that involves acquisitions, introducing niche products in various segments and focusing on value-added higher margin products in a highly commoditized tea market.

“We have to be better than the best in our competitive endeavor to get into a leadership position. Our appetite for growth is definitely far stronger. We will pursue growth through all means, be it strategic alliances or mergers or acquisitions," said Percy Siganporia, managing director of Tata Tea.

Adding cold beverages to product portfolio

The company is planning to add cold beverages to its product portfolio. "We are looking at segments such as ice-tea to lure younger consumers into turning tea drinkers." said Sangeeta Talwar, executive director, marketing, Tata Tea, adding that the idea was to go up the value chain and expand consumer base for tea consumption.

In terms of volume, Tata Tea is the current market leader but in terms of value, it lags behind market leader Hindustan Unilever Ltd. In the quarter ended June 2007, HUL had a share of 24.3% while Tata Tea had 20.07% share in value terms, according to a retail audit by ACNielsen.

As against the same quarter last year, HUL seems to have lost market share, while Tata Tea seems to have gained marginally. Since the same quarter last year, HUL lost market share by around 4.9 percentage points while Tata Tea managed to garner 0.3 percentage points.

Regional players gaining stronger foothold

To boost its share further in a market that is increasingly getting dominated by regional players, Tata Tea is focusing on its high-end offerings such as flavored or green tea.

“We will focus on higher margin products where we can drive substantial revenues from them. So far, Indian consumers have not shown much inclination towards flavored tea or green tea but we are testing waters for such products now," said Siganporia.

Tea vending machines

Also, in an effort to increase home consumption, the company is looking at setting up vending machines for tea, the way it was done in the case of its subsidiary Tata Coffee Ltd.

The latter has around 7000 vending machines presently. “Tata Tea is looking at the vending machines segment and so is Tetley. It is a huge opportunity but we need to find differentiation and a relative advantage," added Siganporia. The company said that its return on investment for stockists, retailers and C&F (Clearing & Forwarding) agents is better than competitors and it gives an extra edge over them.

Glaceau sale strengthens cash reserves

The company admits that selling Energy Brands Inc. (Glaceau) to Coca-Cola Co. for $1.2 billion (Rs 4,920 crore) was a setback for its growth strategy but it has brought them the wherewithal for speedy future expansion. “It was a setback to lose Glaceau from our growth strategy but it enabled us to build huge cash reserves to achieve milestones much earlier than envisaged," said Siganporia.

Tata Tea and Tata Sons made a combined profit of $523 million (around Rs2,144 crore) on the deal; they had acquired their stake in Glaceau for $677 million in August 2006. “Now we have to find alternate opportunities for growth although not necessarily in that space.

The company is also keen to get a strong foothold in the US market for tea, coffee and water businesses while planning to launch their own products there or acquire US-based companies itself.

Along with value-added products, they are looking at tapping growing opportunities in growing rural market as well. The company is increasing its capacity in low-penetration regions up north and is working on an aggressive marketing strategy for rural markets.