Tea Affairs
Indian
tea companies are reworking on their branding strategies to position
themselves on the global map. Debashish Sengupta and Dr Rajkamal track
their roadmap to success
Blessed
with suitable agro-climatic conditions for production of high quality
tea, India produces 826 million kilograms of tea, representing approximately
30 per cent of the world's tea supply. The packaged tea market is
highly consolidated in India with Unilever and Tata Tea accounting
for almost half of the retail value sales. Unilever (Brooke Bond &
Lipton) is clearly the market leader, holding over 30 per cent of
the market share, while Tata Tea (Tata) trails behind with almost
20 per cent. Although tea is popular with a variety of social classes
and consumer age groups the world over, India consumes the largest
quantity of tea in the world, accounting for nearly 14 per cent of
the global retail volume sales. Geographically, tea is more consumed
in the North, East and West of India. Despite being perceived a 'tea
major', India hasn't been able to make an impact matching its immense
potential on the global arena.
INDIAN TEA INDUSTRY AND ITS
PROBLEMS
The tea industry in India is plagued by several
issues. Domestically, the retail price of tea is depressed by oversupply
as reflected in the sharp disparity in growth between volume (+28
per cent) and value (-10 per cent) in the retail market between 1998
and 2003. The problem has been magnified with the government lifting
quota restrictions on commodity imports in 2001, resulting in an increase
in cheap and low quality tea from neighbouring countries like Nepal,
Vietnam and Indonesia. The resultant drop in the price of tea has
not matched with a rise in consumption. In addition to this, newcomers
such as
Indonesia and Vietnam as well as old rivals like Sri Lanka and Kenya
are threatening our export markets. The combination of these factors
has meant squeezing margins for the tea producers resulting in a large
accumulation of excess stock within the industry. The only way out
for Indian tea producers is to revive their businesses and explore
the overseas market in an aggressive fashion. However, to thwart the
competition in these markets, Indian tea needs to create strong international
brands.
THE NEED FOR BRANDING
Indian tea
producers should take a leaf out of the Dilmah Tea of Sri Lanka founded
by Merrill Fernando. Dilmah Tea built its brand for pure Ceylon Tea
amid civil strife, competition from low cost upstarts and increasingly
powerful multinational corporations. The first step was taken in the
year 2000 by creating a holding among the top three tea brands in
Australia, it holds 12 per cent of the market share there while in
New Zealand, it holds around 21 per cent. Dilmah Tea has also made
headway in Russia holding nearly 3.4 per cent of its market. In order
to survive, producers have modernised and increased their global competitiveness
by sharing information and collaborating in planting and harvesting
methods to ensure that Ceylon Tea retains its premium position. In
sharp contrast, Indian tea producers sold most of their tea to the
former Soviet States, which was why after the breakdown of their communist
government, our tea sector fell into a cycle of poor productivity
and quality. The labour policies of the government have also put additional
pressure on the producer's cost base. Today it costs US$1.5 to produce
2.2 pounds of Indian tea, which sells for about US$1. Market capture
across the boundaries is only
contd...
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