PROJECT REPORT

RUPESH,PIYUSH,SURYKANT
PRODUCT & BRAND MANAGEMENT PROJECT REPORT ABS, AUR, JAIPUR

INTRODUCTION:
HISTORY OF TEA:

 Little did Chinese Emperor Shen Nung realize that in 2737 B.C., when dried leaves
blew into his cup of hot water, the beverage he discovered would cause sensations
around the world. During this time, water was always boiled for hygienic reasons. The
pleasant aroma and refreshing taste enchanted him and soon everyone in the realm
was drinking tea.
 Japan was introduced to tea by Yensei, a returning Buddhist priest residing in China
at the creation of the intricate Japanese Tea Ceremony, elevating tea to an art form.
 Tea continued to travel throughout the Orient and it was during the time of the
European explorers tea made its cultural broad jump. The East India Tea Company
brought tea into Holland but its prohibitive cost of $100 per pound kept tea as a rich
man's beverage until so much was imported that tea prices fell and was sold in small
food shops.
 In 1650, Peter Stuyvesant brought tea to the American colonists in New Amsterdam,
later called New York. Soon the colonists were drinking more tea than all England.
 In England, tea gardens, ornate outdoor events with fancy food and tea, fireworks and
gambling, seemed to sprout up overnight as entertainment centers of the day and
many British enjoyed the festivities offered there.
 Russia discovered tea when ornate chests of the dried leaves were sent to Czar Alexis
by the Chinese Embassy in Moscow in 1618. It became Russian custom to sip heavily
sweetened tea from a glass in a silver holder. Russians also enjoyed honey or
strawberry jam stirred into tea as their ethnic contribution. Even today, vodka and tea
are the national beverages of Russia.
 To recover extensive expenses from the French and Indian War, England levied a
huge tax on tea imported to the colonies, mistakenly believing the colonists were so
hooked on it they'd pay anything to keep their supply coming in. One night the men of
Boston dressed as Indians, reminiscent of the French and Indian War stole aboard the
ships docked in the Boston harbor and threw the expensive tea cargo overboard and
into the harbor. England reacted by having a raging fit, closing Boston's port and
sending Royal troops into occupation of Boston. Because of this, colonists met to
discuss these events and declared a revolution.

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 At one point, England even gave The John Company the power to not only import tea
but to coin its own money, make peace, declare war and other privileges previously
only held by countries.
 In the 1880's, America came to the forefront as the biggest importer of tea due to
faster clipper ships and the ability to pay its debts in gold.
 A tea plantation owner introduced iced tea to the St. Louis World's Fair in 1904. It
was an extremely warm day and his hot tea booth was being passed up by the crowds
in favor of cold drinks. As desperate measure, since he was out time and money for
even coming to the Fair, he added ice to the vats of liquid hot tea and in the process
made it one of the highlights of the 1904 World's Fair.
 The tea bag came along as a surprise. Samples of tea at the turn of the twentieth century
were given out in small silk bags and instead of opening the bags, the tea bag in its
entirety was being dropped into hot water by consumers. Quickly, a tea company
sprang into action and patented the tea bag. Thomas J. Lipton was responsible for
designing a four-sided tea he dubbed the 'flo- thru' tea bag, which allowed tea to steep
more quickly in the cup than the customary two-sided bag.
 Today tea is grown on tea estates and70% of the tea we drink is grown in Sri Lanka,
India, Indonesia, Kenya, Argentina and China. The best climates for growing tea are
those that are tropical or semi-tropical and tea can be grown on soil that is not fit for
growing much of anything else. Today there are three basic types of tea: black, oolong
and green and from these three types spring over 3,000 cultivated varieties. The
leaves are picked at just the right moment designated by the tea estate manager, then
crushed to start the oxidation process

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PRODUCT & BRAND MANAGEMENT PROJECT REPORT ABS, AUR, JAIPUR

GLOBAL TEA INDUSTRY:

 The global tea industry is largely dominated by India ± the second largest producer
and the largest consumer of tea. India is succeeded China and followed by Kenya Sri
Lanka, Vietnam and Indonesia in the production hierarchy of countries.
 The tea industry is peculiar, the soil characteristics, the climate and the rainfall
determine the character of the tea and its taste. Tea affects the taste buds; therefore, it
is difficult to replace a particular variety with a substitute. This explains why certain
types are favoured by certain countries: for example, the CIS (commonwealth of
independent states i.e. Russia) countries favour Indian and Sri Lankan teas. UK and
Pakistan favour Kenyan teas.
 India accounts for 26 per cent of world's production. While Sri Lanka, Kenya and
Indonesia are the other leading producers; their combined production is lower than
that of India. What makes India an interesting object of study is that its size is no
millstone around its neck; its production growth between 1996 and 1998 at 5.63 per
cent was way ahead of the increase in world production of one per cent only.
 In 2008, world tea production reached over 4.73 million tonnes. Producing 1.16
billion kilos (2.56 billion pounds) of tea per year, China is the number one source for
tea on the planet. At 980 million kilos (2.16 billion pounds), India stands at number
two. Kenya and Sri Lanka follow.
 When it comes to exports, China ships out 297 million kilos (654.78 million pounds)
of all types of tea whereas India, with primarily black tea, moves 203 million kilos
(429.9 million pounds).

 This ranking is fairly recent. Prior to the 1960s, India was the top producer and
exporter. For example, in 1955, India shipped out 165 million kilos (363.77 million
pounds) of her total production of 301 million kilos (663.59 million pounds). The
fierce rivalry with Sri Lanka saw the two jockeying back and forth for top exporter
position from the 1960s through the ¶80s. But in 1991, Sri Lanka surpassed India for
good with 211 million kilos (465.12 million pounds). China caught up in 1993 with
201 million kilos (443.13 million pounds) to India’s 175 (385.81 million pounds).
Kenyans exports exceeded India’s that same year with 188 million kilos (414.47
million pounds). For total production, India has taken second place to China since
2006. (All figures come from respective countries' tea boards.)

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 So, while other sources are ever more aggressive in their outputs, India seems to be
lagging. It is no surprise that China has made fast gains on the rest of the pack, given
the increases the country has made in its other industries. But why is this happening in
tea, specifically? What is the fundamental reason, if there is one, for India’s slip in tea
supremacy? In my presentation and during the lively question-and-answer that
followed, I offered a few ideas that seemed to catch the audience’s attention.
 The follow table shows the amount of tea production (in tonnes) by leading countries
in recent years. Data is generated by the Food and Agriculture Organization (FAO) of
the United Nations as of January 2010

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INDIA TEA HISTORY:

 Tea is an agro-based commodity and is subjected to vagaries of nature. Despite

adverse agro climatic condition experienced in tea growing areas in many years,
Indian Tea Plantation Industry is able to maintain substantial growth in relation to
volume of Indian tea production during the last one decade.
 Tea is an essential item of domestic consumption and is the major beverage in India.
Tea is also considered as the cheapest beverage amongst the beverages available in
India. Tea Industry provides gainful direct employment to more than a million
workers mainly drawn from the backward and socially weaker section of the society.
It is also a substantial foreign exchange earner and provides sizeable amount of
revenue to the State and Central Exchequer. The total turnover of the Indian tea
industry is in the vicinity of Rs.9000 Cr. Presently, Indian tea industry is having (as
on 18.12.2009 )
 1692 registered Tea Manufacturers,
2200 registered Tea Exporters,
5848 number of registered tea buyers,
Nine tea Auction centres.
 The tea industry in India is about 172 years old. It occupies an important place and
plays a very useful part in the national economy. Robert Bruce in 1823 discovered tea
plants growing wild in upper Brahmaputra Valley. In 1838 the first Indian tea from
Assam was sent to United Kingdom for public sale. Thereafter, it was extended to
other parts of the country between 50's and 60's of the last century. However, owing
to certain specific soil and climatic requirements its cultivation was confined to only
certain parts of the country


1990-91 - 1996- 1.30%

97
1996-97 -2001-02 2.70%
2001-02- 2006-07 2.20%
2004-05- 2009-10 1.80%
2009-10 - 2014-15 2.00%

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PRODUCT & BRAND MANAGEMENT PROJECT REPORT ABS, AUR, JAIPUR

PRODUCT CLASSIFICATION:
TYPES OF TEAS:
 All true tea comes from the Camellia sine sis plant. But the different types of tea stem
from the processing. Main varieties: Black, Oolong, Green, White, Loose teas and
Tea Bags. Black teas are oxidized and fermented during processing, to give them their
distinctive flavours.
 Black tea:
has a full, rich taste. This particular variety of black tea is called Keemun

 Oolong Tea:
is tea that falls between a black and a green tea. It only undergoes a small amount of
fermentation during processing. The variety of oolong tea in this photo is infused with
jasmine Green teas have undergone less processing than black teas, and have a much
lighter flavour. The health benefits of green tea are seemingly endless. Since the
leaves are not fermented, the taste is pleasantly fresh and herbal.

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 White tea:
White Tea comes from the Camellia sinensis plant. But the leaves are picked and
harvested before the leaves open fully, when the buds are still covered by fine white
hair. Hence the name. White tea is scarcer than the other traditional teas, and quite a
bit more expensive. This variety of white tea is called Silver Needle

 Loose teas:
Loose teas are typically whole leaves or at least large pieces of leaves

 A tea bag:
A tea bag is a small, porous paper, silk or plastic sealed bag containing tea leaves for
brewing tea

PRESENT MARKET SCENARIO OF INDIAN TEA INDUSTRY:

 The tea industry occupies a place of considerable importance in the Indian economy,
producing a fourth of the world’s annual tea output²among them some gardens
producing high quality teas - and employing around 1.26 million people at tea
plantations and 10 million persons derive their livelihood from tea. In Northeast India
alone, the tea industry employs around 900,000 persons on permanent rolls.
 With domestic demand at an estimated825 million kg (MKg) as of 2009, India is one
of the largest consumers of tea globally. However, as domestic demand accounts for
over86% of the country’s tea output and since tea imports are permitted only for re-
export, India’s share of the global tea trade is on the lower side. Nevertheless, exports
have a critical role to play in maintaining the demand-supply balance in the domestic
market. Although tea is produced in 14 States in India, five of them²Assam and West
Bengal in North India, and Tamil Nadu, Kerala and Karnataka in South India account
for over 98% of India’s tea production. Within that, North India alone accounts for
around75% of India’s total tea production, of which85-90% is consumed in the
domestic market. The balance, much of it of high quality, is exported. Tea is among
the most labour-intensive of all plantation crops. On an average, around 65% of the
cost of production is incurred on labour.

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 The recent buoyancy in tea prices, which started from 2006, has come as a relief for
bulk tea players, who have had to cope with depressed prices for almost a decade
since 1999. Tea prices, after reaching a peak in 1998, went into a steady decline
thereafter, with average domestic prices dwindling from around Rs.76.43 per kg in
1998 to a low of around Rs. 58.05 per kg in 2005 (Refer Chart for trend in tea prices
over the period 1998-2008). Although global tea prices also declined 1999 onwards,
driven primarily by oversupply, the decline in average prices was sharper and of a
longer duration for Indian teas vis-à-vis the teas from Kenya and Sri Lanka, India’s
two main rivals in the exports market. This was on account of a number of factors:
lack of marketing initiative by the Indian players to look for export markets beyond
the CIS1 countries; proliferation of small growers and bought-out leaf factories
(which led to a decline in the quality of tea produced), and failure to check spurious
varieties of tea from being traded as premium tea (which affected the image of Indian
teas in the export market); higher cost of production of tea in India (as compared with
that in Sri Lanka and Kenya) on account of the higher social costs here; and existence
of certain non-tariff barriers like residual-pesticide (in tea) specifications imposed by
a number of importing countries. All these factors led to the loss of key export
markets, which in turn increased supplies in the domestic market, thereby bringing a
downward pressure on prices. This apart, tea prices also came to be affected by the
quality factor, which came into play during the early part of the current decade when
the delay of re- plantation activities in the latter half of the 1990s began to tell on
quality and hence on prices. Most players had deferred re-plantation during the latter
half of the 1990s to cash in on the buoyancy in tea prices during 1997-98, but when
the sharp price decline happened subsequently, their financial position got so
weakened that they were unable to make the required investments in their tea estates.

Trend in Domestic Tea Prices

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Source: ICRA research

Increasing domestic consumption, and exports to an extent, behind current buoyancy in

Prices
The gradual depletion in pipeline stock since 2003, following a secular increase in domestic
Consumption on the one hand and muted increase in production on the other, has been the
main

Factor supporting the increase in tea prices from 2006 onwards. According to ICRA¶s
estimates, while the average growth in production during the period 2003-08 was just 2.0% or
so, domestic consumption would have increased annually at around 3.5% during the same
period. The steady increase in domestic demand, range-bound export volumes and low
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2008 season. Chart presents the trend in India’s production,
consumption and export of tea over the period 2003-08.

Trend in India's Production, Consumption and Exports of Tea

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Source
: ICRA research
Climatic conditions taking their toll on Tea Industry

Unfavourable weather conditions for tea plantations coupled with global slowdown have
badly affected tea exports of Assam. Statistics say that India, the second-largest tea producer
in the world experienced a slump by 25 per cent in January 2009. The tea industry is going
through a rough patch for last three years due to rain deficiency’s a result. This along with
several other problems is the major reason why the Indian Tea industry is growing at a snails
place. Let us have a look at the various problems faced by the Industry in India.

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INDIA Vs OTHER TOP TEA PRODUCING COUNTRIES:

 Major tea exporting countries of the world are Kenya, Sri Lanka, China, India and
Indonesia. However, prior to evaluation of export performance of major tea exporting
countries of the world, it is necessary to analyze the production and domestic demand
of tea in these countries. On the production front India is the second major producer
of the tea in the world .Other major producing countries include China, Sri Lanka,
Kenya and Indonesia. During 1951-60, India was producing around 40 percent of
world production, declined to 26 per cent in [Link] declining trend can be observed
in case of Sri Lanka as well. Only China and Kenya are able to increase their share in
world production considerably. The share of China and Kenya during 1951-60 was
13.59 per cent and 2.67 per cent respectively, increased to 31 per cent and 9 per cent
in [Link] recent years China emerged as major tea producer in the world. Fig-1
shows, during 2004 and 2005, China became number one tea producer in the world
pushing India into number two position. India had doubted China’s emergence as a
top raking producer, citing limitations in field level statistics and under reporting of
the tea production in India. Tea board of India was then engaged in revising the
production.
 Since 1985, even though China’s area under tea cultivation is lower than earlier
period due to improvement in yield, production increased by 3.28 per cent per annum
during 1984-94, further increased by 4.13 per cent per annum during [Link] India
production increased by 1.83 per cent per annum and 1.07 per cent per annum
respectively during the same period. In Kenya, production increased by 5.53 per cent
per annum and 3.12 per cent per annum respectively during the same period.
Production in Sri Lanka and Indonesia also increased during this period with
improvement in supply conditions in Kenya, China and Indonesia, India’s share in
world production declined even though its total production increased.
 Domestic consumption is calculated by deducting export from production. In case of
India, there is continuous increase in share of domestic consumption in production, it
increased from 32.06 per cent during 1951-60 to 66.92 per cent in 1981-90, further
increased to78.26 per cent in 2001-04. We can observe that, whatever additional
production is taking place, it is almost entirely consumed internally leaving export surplus
to remain stagnant and sometimes export even shows declining trend. In contrast, Kenya’s

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domestic consumption share in production is very low and declined over a period of time
shows that except for a few years, the increase in production of tea in Kenya is almost entirely
used for export

 In Sri Lanka, domestic consumption in production is very low and is declining. In

2001-04, around 94 per cent of tea production in Sri Lanka is used for export. In
recent years, tea export and production are almost same in Sri Lanka .In china, share
of export in production of tea increased over a period of time. From Fig .1 one can
observe that in China, production, export and consumption shown increasing trend. In
Indonesia, share of consumption in production increased, but it is lower than India.

SWOT ANALYSIS OF TEA INDUSTRY OF INDIA:

Strength:
 Demand for tea has been growing at some 2% per annum and should
accelerate further
 Technical & Manpower Skill: Due to a huge population base in India
Technical & Manpower Skill is available in abundant.
 Good Research Support by tea growers has will help industry grow further.

Weaknesses:
 Labour intensive industry: The second generation labours are reluctant to join
this industry hence it could pose a problem of skilled labour in the near future.
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 No Effective Cost Management system adopted by companies and other

regulatory bodies.
 Supply from more efficient players like Kenya, China, Srilanka
 Declining Export of India over the years.

Opportunities:

 Export Potential if India can increase its production capacity

 To make tea more acceptable and fashionable like coffee
 To come up with new flavours/formulation of the tea, tea houses etc to
popularize the concept of tea in India.
 Large untapped rural market for branded tea companies like Hul and Tata Tea

Threats:
 Global competition
 Low Cost in some countries like China, Sri Lanka and Kenya.
 Import of Tea from other countries.
 Cost escalation on account of increase in the cost of production

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AREAS
OF CONCERN:
(PROBLEM IN MARKETING STRATEGYOF INDIAN TEA INDUSTRY)
 Despite India’s historical success with the tea industry, in recent years, the industry
has faced serious competition in the international and national market which has lead
to the present crisis.
 Many factors have been cited as causing the crisis in the Indian tea sector since the
late 1990’s. Analysts agree that the dramatic fall in prices is one of the most
significant causes of the crisis. The worst affected are plantation workers and small
growers; many estates failed to withstand the downward slide of price and hence
moved out of business leading to the closure of tea estates that employ thousands of
workers and of factories (BLF) to which small growers might sell their products. Tea
prices in India are being driven down by many factors:

a) Decline in demand for Indian tea in the global market

b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production

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a) Decline in demand for Indian tea in the global market:

 The decade of 90¶s has been quite depressing for the Tea Industry in India. The major
cause of depression in the industry was the decline in the international demand of
Indian tea. The traditional markets of Indian tea like USSR and UK have drastically
reduced the import of tea from India. Changed global situations like disintegration of
USSR, WTO agreement, globalization of markets across the nations, etc. have proved
to be adverse to India. In the year 2004, India lost its eminent position of the largest
producer of tea to China. Kenya has already taken over Sri Lanka in export pushing
India to third position (Table 1). There is a fierce competition abroad. Indian tea has
lost its competitive advantage to other countries on account of high cost and poor
quality. However, one new development, i.e., India becoming the largest consumer of
tea next to UK, has provided a lifeline to the tea industry. While tea production of
 India grew by about 250 percent since 1947 but the rate of growth of export remained
insignificant .It appears that, India grows tea mainly for Indians. However, the exports
of all other leading tea exporting countries have grown rapidly over the same period.
The fact remains that whatever the size of the domestic demand, there is still sizeable
surplus amounting between 180 and 200 million kg that needs to be sold.

(b) Defects in auction system:

 India’s tea market is facing yet another paradox which could be explained in terms of
glaring gulf between the price charged by dealers and retailers. A report for the
International Labour Organization (ILO) notes that the large tea companies are
benefiting from fall in auction prices and rise in retail prices for tea. This widening
gap between consumer and auction prices is cutting into the margins realized by the
tea producers but is not being passed on to the consumer in the form of lowered tea
prices. Similarly a report by the Government of Assam found it ³unfathomable that
the retail price of tea has not come down with the fall of auction price. Certainly, the
margins of intermediaries are far too high. Price paid to plantation and small tea
growers has fallen since 1998; retail prices for tea have increased . Average price for
medium quality tea sold in Indian market increased from Rs.85-90 per kg in 1999 to
Rs.123.05 in 2009. In 2008, a kg of tea used to fetch Rs 105.12 of tea and it continues
to rise.

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 In India, nearly 55 percent of total tea produce is sold through auction houses, with
the rest sold through private sales. Even after the abolition of compulsory auction in
2001, the auction houses are very important constituent of tea marketing structure.
The important feature of tea auction sale is that the producers/growers do not take part
in the selling process directly. The brokers in the market sell tea on behalf of
producers. Brokers generally do not accept bid from unknown buyers.
 The large buying companies use their market power (as they have their own network
of sales and marketing all over the country and export tea after blending) to push
down price and take the advantage of depressed market to pay low prices; they are
clearly benefiting from the current situation. Hindustan Lever, Tata Tea, Wagh Bakri
Chai, etc. are such powerful buyers having enormous influence on the market and
price of tea in India in general and Assam tea in particular.
 These big tea companies which are in monopolistic competition in consuming
countries always try to stabilize prices.
 The longer transaction time and higher transaction cost (like warehousing charges,
transportation cost, brokerage charges etc.) are some other problems with the auction
system. It takes about 35 days for the entire transaction processes to complete.

(c) Poor Price realizations

 The price of tea has been on long term decline while production costs have been
rising, putting pressure on tea growers and working condition of labourers. The
decline in prices has been primarily due to growth in production in the face of
sluggish demand. Low prices for tea are generally passed on to the plantation workers
in the form of low wages and withdrawal of basic facilities like food, health,
education, etc. given that it is easier to cut cost by reducing labour cost (as the labour
has weak bargaining power) than raising the price of tea (difficult in the competitive
market economy) and in most of the cases producers have to remain competitive by
lowering wages. Major causes of poor price realization are due to following reason:
Competition between producing countries for a share of the world market was one of
the major causes of falling price of Indian tea. World production of tea is fairly
diversified and not concentrated in a particular area. Presently 36 countries of the
world produce tea and many of them are big producers. They prevent the

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establishment of a monopolistic leader in the world tea market to ultimately allow fair
and free competition in the market.
 Demand for tea is rising very slowly (1.5-2 per cent), therefore the only way to
increase market share of export by a country is at the expense of the competitors
Because of the dominance of auction system as a day-to-day intermediary between
producers and buyers, the actual producers have been unable to maintain direct
contact with the ultimate customer of tea and thereby creating a long term
relationship.
 Tea is a perishable product. Its quality and flavour deteriorates very quickly.
Therefore it is frequently necessary to cut prices to clear stocks.
 Tea producers have to stay in market despite cut in prices of their produces as they
have invested a huge sum of money; many people are dependent on it and lack of
alternatives for them.
 It is forecasted that tea production will increase over next few years, despite a slower
growth in demand, a trend that can only undermine price of tea in the long run. The
present decline in prices was on the back of a 0.6 percent annual increase in
production during 1984±2008 is estimated at 2.8 percent.
 There is a major shift in the consumption and thereby composition of demand for tea
in the developed (importing) countries which has had unfavourable affect on
aggregate export earnings from tea. The increasing use of tea bags and soluble instant
tea effectively reduces the quantity of tea needed per cup and also raise the demand
for plain cheaper tea. The tea bags accounts for 10 percent of the volume of world
consumption and it is still increasing. Factors which help to motivate consumption of
instant tea include its ease of use as a cold drink and introduction of vending
machines. These changes in the consumption patterns of tea have also significantly
contributed to the decline in tea prices.

(d) Defective market structure:

 The tea value chain comprises all the stages from green leaf production from the
bushes to finished product and sale to the customers. Value is added to the tea leaves
at each stages of the supply chain, each with associated cost. This includes the cost of
plucking and sorting, factory

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 Packing, internal transportation, ware housing, sales changes (auction or direct sale),
freight, insurance, interest, blending, packaging and retailers sales cost etc. In general
most of the agricultural produces, value addition is done at the downstream in the
higher processing and retail stages of supply chain this is also true with tea. While tea
is ready to drink item, the downstream stages such as blending, packing and ultimate
marketing are the most profitable one. This part of the value chain is controlled by a
handful multinational tea packers and brokers. Concentration is extremely high in the
downstream of tea supply chain where 90 percent of western tea trade is controlled
by7 (seven) MNC’s, 85 percent of world production is sold by these MNC’s.
 As a result, these MNCs can considerably influence world retail price. These are the
indications that big companies have been influential in keeping world market price
low, which affect the sustainability of tea industry.

(e) Increase in cost of production:

 While market prices for tea have been falling, the cost of production has been on the
rise in India, putting downward pressure on profitability and income.
 One factor which is closely related to the cost of production is, of course, productivity
in terms of volume per hectare which is affected by change in climate, soil fertility,
age of the tea bush, high over-head cost, poor agricultural practices etc. The
stagnation in productivity in many big estates is compounded by high land labour
ratio. Productivity declined in India from 1996 to 2008 in the large garden.
 Labour cost accounts for around 60% of the unit cost of production and
approximately 55 to75 percent of that labour cost is on plucking. High fuel cost,
dilapidated infrastructure including transportation and unstable law and order
situation in and around garden area etc. result in high cost of production. Field and
factory workers productivity is also considered low in India. The impact of social cost
(health, food, housing, water etc.) in the large estates in percentage terms works out to
about 5-8 percent of the total costs. It implies an additional Rs.4.12 per kilo for
manufactured tea in NE Region of India and Rs. 3.44 per kilo in South India.
Therefore it is assumed that around80 percent of the cost of production goes towards
fixed expenses like fuel power and labour .Inflationary pressures are now pushing up
these fixed costs further. Labour unrest is another major problem faced by planter/estates.
Looking into the profitability of the industry at the current price, does not provide the way
to meet these costs. Rising costs and low productivity can have negative consequences on

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social and environmental aspects of production (sustainability problem), if these costs

cannot be passed on to the ultimate buyer.

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MARKETING STRATEGY BY MAJOR KEY PLAYERS:

Tata
Tea Limited owns approximately 51 tea estates in the states of Assam, West Bengal, and
Kerala in India. It also has operations in Australia, the Middle East, west Asia, North Africa,
Poland, Russia, and Kazakhstan. The company was founded in 1964 and is headquartered in
Kolkata, India.

Set up in 1964 as a joint venture with UK based James Finlay and Company to develop
value- added tea, the Tata Tea Group has now product and brand presence in 40 countries. It
is one of India's first multinational companies. The operations of Tata Tea and its subsidiaries

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focus on branded product offerings in tea, but with a significant presence in plantation
activity in India and Sri Lanka.

The consolidated worldwide branded tea business of the Tata Tea Group contributes to
around 86 per cent profit from branded tea sales while the remaining 14 per cent coming from
bulk tea, offee and investment income. Tata tea Brand is ranked the second most trusted
beverage brand in brand equity

SWOT Analysis Tata Tea:

Strengths:
 Market Leader: With a value share of 22.6% in November, Tata Tea is now
the market leader in the Rs7,000-crore branded teas market, having overtaken
peer Hindustan Unilever (HUL) which has a value share of 21.3% (Source: AC
Nielsen).
 Resources & Capabilities: Tata Tea Limited owns approximately 51 tea
estates in the states of Assam, West Bengal, and Kerala in India.. The crop at
each of these plantations imbibes the characteristics of the region where it
grows. In that respect, tea is much like wine. Having plantations in varied agro-
climatic zones enables Tata Tea to cultivate distinct tealeaves.
 Brand Name: Tata tea Brand is ranked the second most trusted beverage
brand in brand equity. The company's best-selling brand is Agni which caters
to the mass segment and other brands include Tata Tea Gold, Chakra, Gemini
and Kanan Devon.
 Experience: Tata Tea has been one of the oldest companies in India and has
the advantage of skill and experience on their side.

Weakness:

 No product differentiation: One of the major problems Tata Tea faces is the
lack of much product differentiation hence loyalty of consumers is a major area
of concern.
 Branding: Due to lack of branding activated my the organized players and low

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Switching cost of consumers retaining consumers becomes a challenge as they

switch over to cheaper brands.

 Distribution Network: The distribution network of Tata Tea comprises on 1.25

Lakh distributers this is not much when you compare to HUL who have the
strongest dealer network in the country.

Opportunities:

 New Product Development: The Company can integrate into fruit

& herbal teas. This segment has not yet been tapped by any of the tea
companies yet and this could give Tata tea the first movers advantage
if they decide to enter this segment.
 Rural Market: There is a large untapped rural market which needs
to be exploited. Although Tata Tea has made it s presence felt in the
rural markets this sector is characterized by a large un organized
sector and local players rule the rusts of the day in these markets.
 Export Potential: Tata tea is present in 40 countries around the
world. There are a lot more opportunities it can exploit if they can
increase their production capacity to exploit these untapped world
markets all over the world.
 Mergers and Acquisitions: There are more than 1000 tea companies
in India. Tata tea can increase its market share and penetration by
acquiring these small companies and also forming mergers with other
big MNC¶s like it did for Tetley Tea, Good Earth etc

Threats:

 Low Barriers:There are not too many entry barriers put by policy
makers this makes the Indian Tea market extremely fragmented
and unorganized. There are many regional players who hold small
chunks of markets. By imposing Entry barriers the existing players
will be in a better position to exploit the existing situation.
 Globalization: India is opening it s doors to MNC s and with that
comes the threat of globalization of the economy. The small and
regional players will face intense competitions from big MNC

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INTERNAL ENVIORNMENT ANALYSIS:

1)Resources:

 51 tea estates in states of Assam, West Bengal, Tamil Nadu, Kerela.

 Area of 26,500 hectares under tea cultivation.
 Produces about 60 million kg of black tea annually.
 Subsidiaries & Associated companies
 Overseas business

2) Capabilities

 Distribution system.
 Strong and trusted management.
 Research and development.
 Marketing.

3) Core competencies.

 Brand name

BUSINESS LEVEL STRATEGIES:

 Bought leaf factories & co-operatives to change the structure of green leaf
production
 Identified branded tea as its thrust area
 To exit the beverage retailing business to focus on branded products
 Tata Coffee sold off its stake in Barista, no plans of re-entering the business
 Introducing drinks like TiON, all over India
 Jaago Re campaign followed by the 'Aaj Se Khilana Bandh, Pilana Shuru'
campaign to target the youth for voting and work against corruption
 Focus on brands like Chakra Gold, Gemini and Kanan Devan in regions
where they are strong.

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MARKETING STRATEGY:

In spite of a global presence, the brands are distributed differently depending on the location.
As Tata tea is far better known in India and a powerful brand there, it is pushed on this
market and countries with a large Indian population. Therefore Tetley is the company's global
face and the largest markets focus on the Tetley brand. Where both brands co-exist in one
market, Tetley is positioned as the premium brand.

PROMOTIONAL STRATEGY:

The new campaign will Migrate Tata Tea from being a physically and emotionally
revitalizing tea experience to one that will challenge the consumers intellect to ³awaken´ to
what is around them. It will motivate people to internalize the tea experience and externalize
their social awakening. It is probably the first time that any brand is taking on the mantle of
social responsibility in such a manner. The campaign will also provide a poignant platform
for connection with the youth.´

The campaign in keeping with the magnitude of the strategy also plans to deploy a mega
approach to connect with the consumer at all possible touch points. Television will be the
lynchpin of the campaign. There will be one main commercial and six short duration
commercials. Each of the commercials will touch upon one relevant social issue. As part of
the campaign Tata Tea brand has also tied up with the Jaago India foundation. The
foundation & Tata Tea have launched a website that each month will cover a socially relevant
issue. The site will provide all the required information on the issue, will allow consumers to
interact and provide solutions. To generate interest and create empathy the site will feature
four short film on the topic of the month. Other than television and the website the campaign
will also use radio, press, shop level visibility and the new outdoor medium of malls and
multiplexes to drive home the message of Jaago Re. Many of the communication tools being
planned at the malls and multiplexes will be used for the first time in the country

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HINDUSTAN UNILEVER LIMITED:

Company Profile:

Unilever owns two of the most widely recognized product lines Lipton and Brooke Bond.
The major competition facing Lever at present is from Wagh Bakri Chai Tea, who is truly a
market challenger.

Lipton comprises of Yellow Label which is designed for upper middle, upper lower and
upper middle class, which is a market leader in the industry, it comes in all the packages
including hard packs, jars, and teabags. Lipton yellow label although the direct competitor of
Brooke Bond Supreme comes in the family of Unilever so it is prone to its competing attacks.
Lipton follows a massive promotion scheme to hold its share. Richbru is designed for middle
and lower upper classes, and Pearl dust is designed for rural areas, mostly districts of Sindh
where consumption of dust is extensive.

Brooke Bond comprises of:

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SWOT Analysis for (HUL):

Strength:
 Brand Name: According to Brand Equity, HUL has the largest number
of brands in the Most Trusted Brands [Link] has a very strong Brand
name in the Indian market. Its brands are strength for the company.
 Strong Distribution Net work: Hindustan Unilever's distribution
covers over 1 million retails outlets across India directly and its products are
available in over 6.3 million outlets in India, i.e., nearly80% of the retail
outlets in India. It has 39 factories in the country. Two out of three Indians
use the company’s products and HUL products have the largest consumer
reach being available in over80 per cent of consumer homes across India.
 Unique sizes have been introduced for various segments including teabags,
stir ready.
 Product Range: Wider product range with technological superiority, e.g.
Brooke Bonds hot tea can

Weakness:
 It is a product being introduced in an already existing tea market with
established brands.
 No competitive advantage can be brought in this industry. Only massive
advertising and promotional activities may entice consumer for trial.
 Brand Dilution : Having too many brand extensions can dilute and confuse
consumer perception and give fresh and new competitors to seize market
share

Opportunities:
 Alliance with Pepsi to access massive distribution network. Presence of big,
well known partners drives demand further.
 Declining markets for other beverages such as soft drinks
 .Rural Market: There is a large untapped rural market which needs to be
exploited. Although Tata Tea has made it s presence felt in the rural markets
this sector is characterized by a large un organized sector and local players
rule the rusts of the day in these markets.
 Greater awareness of health benefits of tea.
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Threats:
 A rigorous threat is the increasing number of branded and unbranded tea in
the market with ample price difference. For that, established companies need
to increase their advertising and promotional budget. There is a need to get a
better shelf space and more retailer patronization for the company's brand.

 Unilever presently pays80% as taxes on imported tea. This rise in import duty
on tea by government is intended to discourage it's consumption, which
possess to be a threat as it has resulted in higher prices for the consumers.
 Low Barriers: There are not too many entry barriers put my policy makers
this makes the Indian Tea market extremely fragmented and unorganized.
There are many regional players who hold small chunks of markets. By
imposing Entry barriers the existing players will be in a better position to
exploit the existing situation.
 Presence of other major players such as Coca-Cola and Nestle leading to
tough competition

PRESENT STRATEGY:
 Ownership: The owner of the premium Brooke Bond and Lipton tea
brands in India, Hindustan Unilever Ltd (HUL), has taken a decisive step
towards regaining absolute market leadership from Tata Tea Ltd by
entering the so-called economy segment of the market as well.
 Value Leadership: HUL already leads the domestic tea market in terms
of value and has been narrowing the gap in volume sales, where Tata
Tea's economy brand Agni, priced at around Rsl50 per kg, gives it the
edge.
 New Variants: HUL launched its Brooke Bond Sehatmand tea in
Madhya Pradesh, Chhattisgarh and Bihar in late January, using non-
governmental organizations among other channels in a low-profile
promotional campaign. The new tea, priced at Rs.l70-180 per kg,
includes folic acid, calcium and other vitamins as part of its
[Link] expects Brooke Bond Sehatmand to create a new
segment in the850 million tonnes (mt) a year tea industry. Of this,
packaged tea accounts for less than 350mt
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BIBLIOGRAPHY
Books
 The Marketing white book, 2009-2010, Statistics for FMCG sector
 4 P s, December issue, 2009, Living the ³GLOCAL´ life (Pg.72,73)

References
Articles (online):
 Mr. Daipayan Lodh, Motilala Oswal, 2008, a Equity Research on FMCG Sector.
 Mr Gaurav Kumar, 2008, an Industrial Analysis Report On Growth & Prospects Of
Tea Industry in India
 Mr. Shashank Chauhan, 2008, Benchmarking Of FMCG Industries In India
 [Link] Alee Mansur, 2006, Bangladeshi Tea In The International Market´-
Problems and Prospects
 A report by PricewaterhouseCoopers for IBEF, 2004, Fast Moving Consumer Goods.
 Mr. Sunil Bhat, 2008, Managerial Microeconomics FMCG Sector At Crossroads
 Federation of Chambers of Commerce and Industry (FCCI), 2008 FMCG-The Road
Ahead
 India Business Information & Consulting Service, 2009, FMCG Sector Report
 Indian Tea Industry: Outlook Positive for The Short To Medium Term
 [Link] Pandey, 2008, Tea Report
 [Link] Roy, 2009, Tata Tea Limited
 [Link], 2009, Tata Tea Limited
 Dr. V.N. Asopa, 2007, Tea Industry of India the Cup That Cheers has Tears
 Mr. Mandeep Saini, 2008, the Integrated Excellence
 [Link] Kr. Das, 2009, Sustainability in Tea Industry: An Indian Perspective

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