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TATA TEA V/S HINDUSTAN UNILEVER LIMITED

BY:HARDIK PUJARI MIHIR KERIWALA PAVAN TIWARI VASHISHTH DAVE

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CONTENTS1. INDIAN TEA HISTORY............................................................3 2. GLOBAL TEA INDUSTRY.......................................................5 3. INDIAS SHARE IN WORLD PRODUCTION.........................6 4. SWOT ANALYSIS OF INDIAN TEA INDUSTRY..................7 5. PORTERS FIVE FORCES........................................................8 6. FEATURES OF INDIAN TEA INDUSTRY..............................9 7. INTRODUCTION OF TATA TEA...........................................11 8. SWOT ANALYSIS OF TATA TEA.........................................13 9. BUSINESS LEVEL STRATEGY.............................................14 10. MARKETING STRATEGY.....................................................14 11. PROMOTIONAL STRATEGY...............................................14 12. INTRODUCTION OF HINDUSTAN UNILEVER LTD.........16 13. PRODUCTS OF HUL.............................................................17 14. SWOT ANALYSIS OF HUL...................................................17 15. PRESENT STRATEGY.........................................................18 16. BCG MATRIX OF TATA TEA & HUL.................................19 17. RECOMMENDATIONS ON TOP 2 PLAYERS.....................20

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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 Crs. Presently, Indian tea industry is having (as on 18.12.2010) 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.

Market Growth Rates1990 - 1996 1996 - 2001 2001 - 2006 2004 - 2009 2009 - 2014

% 1.30% 2.70% 2.20% 1.80% 2.00%

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market growth rate3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 1990 - 1996 1996 - 2001 2001 - 2006 2004 - 2009 2009 - 2014 market growth rate

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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 (2.56billion pounds) of tea per year, China is the number one source for tea on the planet. At 980million 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 Indias 175 (385.81million pounds). Kenyas exports exceeded Indias that same year with 188 million kilos (414.47million 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 Indias 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 audiences attention.

INDIAS SHARE IN WORLD PRODUCTION

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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. 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 Hindustan Unilever (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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PORTER'S FIVE FORCES:threats of new competitors

bargaining power supplier

competitive rivalry

bargaining power of customer

threat of substitute product

Industry Rivalry (High): There are approximately700 tea companies in India hence there is intense rivalry amongst them. Market is dominated by a large number of unorganized players. Industry growth is slow. There are low switching costs.

Bargaining Power of Buyers (High): There is a large numbers of buyers purchasing the product. The bargaining power of buyers is extremely high as the buyers have many options available. Not much product differentiation in terms of taste also low switching cost. Buyers purchase a large proportion of the industrys total output.

Bargaining Power of suppliers (Low) There is large number of producers of tea in India. There are substitute like coffee available. Suppliers product creates low switching cost.

Threat of substitutes (Moderate) Substitutes coffee, cold drinks, juice (young generation new to tea) Existing consumers are loyal. Substitutes price may be lower.

Threats of new entrance (high) Large untapped rural market for branded tea segment in rural India and Indian tea in global markets. Encouraging government policies like food and beverage cost.

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Special Features of Indian Tea Industry: Production dependent of agro-climatic conditions. Same plant and same agro-practices give variations in quality in different regions. Product Life is for limited period. Labour intensive. High Cost due to high input cost. No priority for Scientific Cost Management. Huge proportion old tea & Low Productivity. Low investment in Development Programme

TOP 2 PLAYERS IN INDIAN TEA INDUSTRY

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TATA TEA

HUL

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Company Profile:Tata Tea Limited, also known as Tata-Tetley, is the world's second largest manufacturer and distributor of tea. Tata Tea is the largest vertically integrated tea firm in the world, from its plantation activity through to its packaging and marketing initiatives. Tata Tea Limited, together with its subsidiaries, engages in processing, producing, marketing, and distributing tea products primarily in India. It also involves in the cultivation and manufacture of black tea and instant tea, tea buying/blending, and sale of tea in bulk or value added form. It offers tea primarily under the following brand names:

TATA TEA PRODUCTS

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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 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, coffee and investment income. Tata tea Brand is ranked the second most trusted beverage brand in brand equity.

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SWOT Analysis Tata Tea:Strengths: Market Leader: With a value share of 22.6% in November, Tata Tea is now themarket 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 Devan. 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 thelack of much product differentiation hence loyalty of consumers is a major area of concern. Branding: Due to lack of branding activitied my the organized palyers amd low 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

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

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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.

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 aago Re will migrate Tata Tea from being a physically and emotionally revitalizing tea experience to one that will challenge the consumers intellect to awaken 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.

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The foundation and 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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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, Tata Tea- truly a market challenger. Lipton comprises of Yellow Label which is designed for upper middle, upper lower and upper middle class, which was a market leader in the industry once in its time. 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.

Our visionUnilever products touch the lives of over 2 billion people every day whether that's through feeling great because they've got shiny hair and a brilliant smile, keeping their homes fresh and clean, or by enjoying a great cup of tea, satisfying meal or healthy snack.

Our Mission

Unilevers mission is to add vitality to life. They meet everyday needs for nutrition; hygiene and personal care with brands that help people feel good, look good and get more out of life.

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PRODUCTS OF HUL TEA

SWOT Analysis for (HUL): Strength: Brand Name: According to Brand Equity, HUL has the largest number of brands in the Most Trusted Brands List.HUL has a very strong Brand name in the Indian market. Its brands are strength for the company. Strong Distribution Network: 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 companys 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 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. consumer perception and give fresh and new competitors to seize market share.

Weakness:

Brand Dilution: Having too many brand extensions can dilute and confuse

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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 unorganized sector and local players rule the rusts of the day in these markets. Greater awareness of health benefits of tea.

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 pays 80% as taxes on imported tea. This rise in import duty on tea by government is intended to discourage its consumption, which possess to be a threat as it has resulted in higher prices for the consumers. There are many regional players who hold small chunks of markets. leading to tough competition

Presence of other major players such as Wagh- Bakri and Jeevraj and other players

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, using non-governmental organizations among other channels in a lowprofile promotional campaign. The new tea, priced at Rs.l70-180 per kg, includes folic acid, calcium and other vitamins as part of its ingredients.

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BCG Matrix for Tata Tea2.6

M k t G r t h r a t e

2.4 2.22 1.8 1.7 1.6

1.5

1.3

1.2

1.1 1.0 0.9 Relative Market Share

0.8

0.7

BCG Matrix for HUL Tea2.6

M k t G r t h r a t e

2.4 2.22 1.8 1.7 1.6

1.5

1.3

1.2

1.1 1.0 0.9 Relative Market Share

0.8

0.7

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RECOMMENDATIONS TO TOP 2 PLAYERS TO INCREASE MARKET SHARE: Increase number of service outlets: In recent times there have been numerous coffee shops springing up in Tier A cities like Mumbai, Delhi, Bangalore etc. Likewise Tea houses should be set up in a similar fashion and premium quality teas should be served at these outlets. Strategic alliance: Tie up with their own range of five star hotels to supply premium quality tea and coffee as also with lower end three star hotel n also local eateries (Udipi-joints etc). Tie-up with airlines, Rajdhani, Shatabdi, caterers etc to promote their tea coffee also mineral water brands Own Depots: To start own depots of Tata Tea and HUL tea so that they can sell loose tea thus reducing cost of packing which will also reduce the VAT & additional charges. Thus masses from lower income group would be effectively targeted. Penetration: Deeper penetration in rural markets by using self help women groups for door to door selling. Profit margins for retailers: Increase profit margins for retailers to achieve higher sales volume as they are the main influencing factors in lower income group people. Promotional activities: More number of ads which are equally effective as middle class people from towns gets influenced by ads to a large extent. E.g Jago Re campaign. Product Innovation: Enter new market segment with product innovation like tea flavored ice-creams, tea wine, tea chewing gums etc Flavors: Launching of flavored teas bamboo cups in China bring it to India too. Launching of more flavors in India (lemon tea, black tea). Related Diversification: Future strategy of entering childrens drinks like Complan, Bournvita, Horlicks. Bundling: Providing a bundle pack like a small tea sachet free with 100 Gms pack of biscuits. New Markets: Explore new and untapped markets not only in India but also in different countries. Branding: The top 2 players i.e. Tata Tea & HUL should focus their attention on proper branding of their products and should try to create a brand loyalty among the consumers of their products.