AN OVERVIEW ?Introduction ?Historical perspective of tea market ?Current scenario ?Consumer habits and practices ?Consumer awareness ?Market size and growth ?Major players ?Positioning ?Future trend ?Conclusion ?Bibliography ?INTRODUCTION The Tea Business in India is nearly a 170 years old practice. This agro-based industry is a very important contributor to the economy of India. The main axis of tea business in India is located along the rural hills and backward areas of Northeastern and southern states like Assam, West Bengal, Tamil Nadu and Kerala.
Further, the regions, which are associated with small time tea business in India, are Karnataka, Tripura, Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Manipur, Sikkim, Nagaland, Meghalaya, Mizoram, Bihar andOrissa. The process of tea cultivation in India requires specific climatic and as well as soil conditions, which is prevalent only in the aforesaid areas of India. The tea business in India is mainly based on cultivation of tea variants like CTC, Orthodox tea and green tea. There is a huge demand for green tea in developed countries for its rich aromatic flavor and medicinal properties.
The trend of green tea consumption is also on the rise in India due to rise in purchasing power capacity and overall living standards of Indian. In India, tea is an essential item of domestic consumption and is the mostly consumed beverage. Further, tea is the cheapest beverage amongst all the beverages that are available in India and it is very popular amongst all sections of India society. The Indian tea industry engages around 20 lakh of workers, directly and they mainly represents the under privileged sections of the India society. The Tea Business in India registered a total turnover of Rs. 000 crore in the financial year ended 31st March 2006- 2007. Some notable facts about the tea industry of India are as follows – •There are 1655 registered tea manufacturers in India •A total of 2008 registered tea exporters controls the export of tea from India •The total number of registered tea buyers in India is 5148 •There are nine tea auction centers in India India is now the largest producer, exporter and consumer of tea. Tea is one of India’s oldest organized industries, with gardens located in remote and largely backward areas of the country.
Indeed tea is perhaps the only commodity in respect of which India leads in productivity and technical innovation – while maintaining a high level of quality. Its industry provides employment directly to nearly a million people and indirectly to a large number in ancillary and service industries. The Indian tea industry suffered loss due to emergence of China, Vietnam, Indonesia, Sri Lanka and Kenya as cheap tea exporters. Today, the major competitors to all Indian tea varieties are China (green tea), Sri Lanka (orthodox), Kenya (CTC), Indonesia (orthodox) and Vietnam.
Over the last decade, the Indian tea industry registered a substantial growth with respect to the overall production of Indian tea, due to ever increasing size of its domestic market. Its contributions to the country in all aspects of tea production, consumption and export, India has emerged to be the world leader, mainly because it accounts for 31% of global production. It is perhaps the only industry where India has retained its leadership over the last 150 years. Here are some statistical facts about the Indian Tea Industry: The total turnover of the tea industry is around Rs. 10,000 crores.
Since independence tea production has grown over 250%, while land area has just grown by 40%. There has been a considerable increase in export too in the past few years. Total net foreign exchange earned per annum is around Rs. 1847 crores. The labour intensive tea industry directly employs over 1. 1 million workers and generates income for another 10 million people approximately. Women constitute 50% of the workforce. INDIAN TEA India Tea is very famous along the world, and among tea lovers. India has always been a tea producing and tea consuming country. The Indian tea is an epitome of taste, warmth and happiness.
Tea brings cheers and this fact is well known to tea lovers all over the world being the largest producer of tea in the world India also consumes large amount of tea. “Chai” as tea. India produces finest tea leaf in the World and the Darjeeling, Assam and Nilgiri tea are becoming very popular all over. The range of teas in India consists of premium much in demand Darjeeling tea leaf from Darjeeling tea estates in West Bengal, the strong Assam tea leaf and brisk Nilgiri tea from Southern India. Each of the tea producing regions in India has their unique and distinct taste of which the tea drinkers know best.
The varieties in India are the white tea leaf, black tea, green tea, and organic tea. Though consumption of the black tea leaf is wide spread, the green tea is also becoming popular for its taste and healthy properties. Over 70% of the tea is consumed within India itself. A number of renowned teas, such as Darjeeling, also grow exclusively in India. The Indian tea industry has grown to own many global tea brands, and has evolved to one of the most technologically equipped tea industries in the world. Tea production, certification, exportation, and all other facets of the tea trade in India are controlled by the Tea Board of India.
Tea is grown in Assam, West Bengal, Tamil Nadu, Kerala, Karnataka, Tripura, Himachal Pradesh Uttar Pradesh and Bihar. However production in substantial quantities is limited to the first five states. There are important differences between tea grown in north India and those grown in south India. In north India, production is seasonal –there being no production in winter and usually only one type of crop (tea) is grown. In south India production usually takes place throughout the year. Estates usually have a diversified output which includes tea, coffee, cardamom, rubber. Another distinguishing point is that estates tend to be much smaller.
The large variety of tea produced does not lead itself easily to the formation for a futures market. Tea is the highest taxed industry in India. DRAWBACKS: Is the high level of uncertainty that the industry faces, While the level of uncertainty with respect to its agricultural operations – with its greater dependence on the environment- is predictably high, the efficiency of its manufacturing operations is also influenced by the weather. The price of made tea is volatile and difficult to predict. Tea prices depend on many factors including international supply and demand.
Though India is a major tea producer and supplier in the world market, its export share is declining. The export share was 22 per cent in 1978; in 2001 it is down to 13 per cent due to severe competition from Sri Lanka, Indonesia, Kenya and China. The growth in this sector is also negatively affected by the entry of carbonated drink brands. The major challenges faced by the producers are: •Changing consumer profiles •Lower price realizations •Low productivity •Threat of imports ?HISTORICAL PERSPECTIVE OF TEA MARKET 1970s The Tea Business in India had witnessed phenomenal rise till the independence of India.
The growth story of the Indian tea industry continued till the early 1970s and then it fell dramatically. United Kingdom was one of the largest and most important buyers of Indian tea but with the steady rise of Kenyan tea industry the market of Indian tea fell dramatically since, it exported same quality of tea at a discount. 1980s In the early 1980s, the tea industry in India was experiencing rising input and labor costs and dwindling margins as well as high taxes. India was facing competition on the world market not just from China, but also from other countries entering the business.
In 1983, Tata Tea bought the stake belonging to the James Finlay group to form the individual entity Tata Tea. In the same year, the company decided to move from the commodities business to consumer branding. The first brand Tata Tea was introduced. This was followed by other brands like Kannan Devan, Agni, Geminiand Chakra Gold. In spite of being the largest market in the world, the concept of branded tea took time to be accepted. In 1987, Tata Tea set up a fully owned subsidiary, Tata Tea Inc. , in the USA. 1990s In the 1990s, Tata Tea decided to take its brands into the global markets.
It formed an export joint venture with Britain’s Tetley Tea in 1992. Other new enterprises included a majority interest in Consolidated Coffee Ltd. (Tata Coffee Ltd. ) and a joint venture to manage agricultural estates in Sri Lanka. Tata Tea Inc. in the United States processed and marketed instant tea from its facility in Florida, based on sourcing of instant tea products out of Munnar and Kerala. In 1993, they entered into a joint venture with Allied Lyons PLC in the UK to form Estate Tata Tetley. In the mid-1990s, Tata Tea attempted to buy Tetley and the Lankan JVC acquired 51% shareholding in Watawala Plantations Ltd.
In 1997 the company was embroiled in a major scandal known as the “Tata Tapes controversy” which related to funds the company provided to the outlawed United Liberation Front of Asom (ULFA), an armed-struggle group operating in Assam. By 1999, Tata Tea’s brands had a combined market share of 25% in India. The company had 74 tea gardens and was producing 62 million kilograms of tea a year, two-thirds of it packaged and branded. Towards the end of the year, the tea business was hit by a drought in much of India. In addition, Russia, once the largest buyer of Indian tea, temporarily withdrew from the market. 000s An important step for Tata Tea was the acquisition of the Tetley Group (based in the United Kingdom) in 2000. It was a ? 271 million ($432 million) leveraged buyout. Tata Tea reportedly outbid the American conglomerate Sara Lee in what was described as the largest takeover of a foreign company by an Indian one to date. At the time, Tetley was the world’s second largest tea company after Unilever’s Brooke Bond-Lipton and had an annual turnover of ? 300 million. It was the market leader in Britain and Canada and a popular brand in the United States, Australia and the Middle East.
Established in 1837, Tetley was the first British tea company to introduce the tea bag to the UK in 1953. The tea bag was followed by the first round tea bag in 1989 and the ‘no drip, no mess’ drawstring bag in 1997. Tetley now contributes for around two thirds of the total turnover of Tata Tea. From 2005 Tata Tea began a restructuring exercise to divest direct ownership of plantations in India, a process facilitated by subsidized loans from the World Bank’s International Finance Corporation. In 2007, Tata Tea launched the campaign Jaago Re! to awaken youth to social issues. The campaign was extended into 2008.
In 2009, their campaign revolves around the issue of corruption with a new adline ‘Ab Se Khilana Bandh, Pilana Shuru’. The international trade union IUF criticized the company in 2009 for not allowing statutory maternity leave to pregnant tea pluckers. ?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 output – among 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 north east India alone. With domestic demand at an estimated 825 million kg (MKg) as of 2009, India is one of the largest consumers of tea globally. However, as domestic demand accounts for over 86% 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. Although tea is produced in 14 states in India, five of them – Assam and west Bengal in north India, TamilNadu, Kerala and Karnataka in south India account for over 98% of India’s tea production. Of which 85 – 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, 65% of the cost of production is incurred on labour. The tea industry has an important and special place in the Indian economy The Indian tea industry is bogged down by the dogma of tradition. Mix in a bit of complacency, and it is quite understandable why the gap in the global market share is gradually expanding. TEA – PRODUCTION CONSUMPTION AND EXPORT India is now the largest producer, exporter and consumer of tea, with India accounting for 27% of the world tea production.
India’s expenditure on beverages and processed foods accounts for 8% of food expenditure in rural areas, and 15% in urban areas. India is also an important tea exporter, accounting for around 12-13% of world tea exports. Further certain varieties of tea (for example Darjeeling) are grown only in India and are in great demand across the world. All Darjeeling teas possess the lightness of flavor and fine coloring that set them apart from all other teas. India’s tea industry exports were estimated at Rs. 17. 31 billion during 2006, accounting for 0. 4% of India’s exports.
In value terms, tea ranks as the fourth-largest agricultural product export item from India, with exports of around US$410 million in 2004. In terms of employment, the tea industry employs around 1. 27 million people at tea plantations and 2 million people indirectly, of which 50% are women. The latest available data indicates that tea accounts for 90. 6% for India’s consumption of stimulants (tea, coffee, and cocoa beans), followed by coffee (7. 7%), and cocoa beans (1. 7%). Tea plantations in India are mainly located in rural hills and backward areas of North-eastern and Southern States.
The North- Eastern region with 82% of area accounts for 76% of total tea production. The other areas where tea is grown to a small extent are Karnataka, Tripura, Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Manipur, Sikkim, Nagaland, Meghalaya, Mizoram, Bihar and Orissa. The tea as an agricultural output earns more money for the country than as a manufactured product. But this by no means indicates that tea manufacturing is a nascent concept in India. The only player that has crossed the seven seas to promote branded tea in form of Poly-packs etc is Tata Tea.
But the fact that there are no other major house which has promoted itself as a tea manufacturing house provides enough scope to the houses themselves to improve their status. Over the years India has been slipping on productivity and quality parameters. Industry is sensitive to productivity and quality which matters most for the survival of tea companies. Evident that during 2001- 2002, although total land under cultivation improved marginally by 2. 5 percent, tea production actually dropped by 1. 3 % due to aging life of plantations. Reasons for decline in export:- )Fall in Soviet Union, main trading partner of India. Tea exports have come down by 70% from 44 Mn/ Kg in 2000 to 12. 5 Mn/Kg in 2003. 2)Exports to trading ally Iraq, Iran and Afghanistan was affected during the same period due to tension and war in Middle East. Exports came down by roughly 70% between 200 and 2003. 3)Quality has always been the biggest consideration in tea exports. Other emerging countries like Srilanka and Kenya are scoring high due to modern methods of production and branding. Whereas, India is on continuous slippage in terms of quality and branding thereby giving away its share of exports. )Concern over quality has resulted in exports of high margins value added tea (tea bags and branded tea) came down from 45 % of total tea exports in 1999 to 33% in 2003 (value terms). ?CONSUMER HABITS AND PRACTICES Model to raise tea consumption Tea has become a utility drink today. We have to recapture the romance of drinking tea and also create awareness of the health benefits that tea delivers. While the government, the Tea Board and industry have to work more closely, it is also clear that we need a model that will raise tea consumption and protect the market base.
Take the shift in consumer preference to cold beverages: the answer is within the industry itself, in the form of better iced teas. Perhaps we need to look at retailing models like Barista because it delivers invaluable inputs in understanding customer behaviour and in educating drinkers. But we should not look at the retailing model just from the economic angle, because start-up costs and long gestation periods of these businesses ensure that the bottom-line is by no means rosy. The value of tea bars is in their delivery format through which variants can be tested and consumer tastes can be captured.
Tea preferences amongst consumers depend on individual choices. “In Gulf countries for example strong tea with colour is preferred in European countries light tea with flavours is preferred. ” ?CONSUMER AWARENESS Tea is the most traditional and affordable beverage in India, it is perceived as being old fashioned and less functional than some substitute products. For instance, malt-based beverages such as Horlicks and Bournvita are the favourite type of hot drink in the South, and are also the fastest growing.
This drink is consumed as a substitute for milk in this milk-deficient region, and is favoured for its functional benefits. Furthermore, in the south, coffee is bigger as a proportion of total hot drinks than in the rest of the country. Local preferences are different in the south, India’s main coffee-producing region. Soft drinks such as carbonates also represent a significant threat to the ongoing dominance of tea in the longer-term, with aggressive marketing campaigns from leading multinationals successfully persuading many young consumers to migrate from tea to soft drinks for various drink occasions.
The industry has therefore launched a series of campaigns to promote tea as a health drink, with celebrities and scientists invited to endorse the health benefits of tea, while the Tea Board and leading players such as Unilever and Tata Tea have set up a fund of Rs 200 million to promote tea drinking. The recent pesticide controversy of carbonated drinks provided a good opportunity for tea marketers to promote the natural aspects of the drink. ?MARKET SIZE AND GROWTH ?PLAYERS IN INDIAN TEA INDUSTRY COMPANYBRANDS
Hindustan UnileverLipton, Lipton yellow label, Brooke bond Supreme, Taj Mahal, taaza, 3Roses, Red Label, Al Karak Tata TeaTata tea premium, Tata tea gold, Tata tea Agni, Tata tea Life, Kannan Devan, chakra gold, Gemini Taaza, temptation, Tetley Assam co. ltdPremium Assam tea, fruity black tea, triangle bag Assam organic tea. George WilliamsonGeorge Williamson tea Harrisons MalayalamHarrison tea Warren tea ltd. Warren tea Duncan’s Industries ltd. `Gold Cup’ and `Shakti Dust’ Wagh Bakri Ltd. Organic tea, Good morning tea, WB Perfect, D’ling (delightful varieties of tea) Wagh Bakri. Goodricke Group Ltd.
Instant tea Hasmukhrai & CoInfini tea Sapat Packaging IndustriesChai time, Parivar Premium, Parivar Family Blend, Sapat Shaha, sahyatri GodrejGodrej Noble House and Godrej Chai House Jay Shree TeaBirla tea (sadabahar jaandaar kalline gold ) Birla tea MAJOR PLAYERS ?POSITIONING Tea trading in the domestic market is done in two ways- Auction and Private Selling. Market Reports are received from the six major auction centre’s in India, namely, Calcutta, Guwahati, Siliguri, Cochin, Coonoor, Coimbatore and N. I. teauction. com Bulk trading is done through the auctions held in these centres.
A”Brand” – New Awakening •Unifies four brands to create a mega Tata Tea brand •Launches Jaago Re, a holistic 360 degree advertising campaign using the unique route of social awakening October 1, 2007: Tata tea, India’s largest volume tea company announced a new chapter in its evolution by unfolding an innovative positioning and presentation of its largest tea brand – Tata tea. Launched in 1985, Tata Tea reated the polypack revolution in Tea in this country. Over the years the brand has built on its success and today clearly is the market leader in terms of both value and volume.
Furthermore, the brand has moved over the years from being a single product offering to have offerings across all segments and price value equations. In the last several years, the brand has been consistently delivering double-digit growth in a market that is growing by 3-4% every year The four Tata Tea brands – Tata Tea Premium (largest selling brand in India), Tata Tea Gold, Tata Tea Agni and Tata Tea Life – currently are advertised and positioned uniquely. These four brands have now been bought together less than one umbrella brand- Tata Tea.
This consolidation and unification of the four brands is aimed at communicating to the consumer a single, unified message in terms of emotional connect. Har Subah Sirf Utho Mat, Jaago Re. Jaago Re, the new campaign, will kick-start across the country on October 1, 2007. The new campaign leverages the unique position that Tea enjoys in our culture and attempts to migrate Tea from being a physical and emotional revitaliser to becoming a catalyst for ‘social awakening’. This campaign will clearly establish thought leadership for the brand to go along with its market leadership
TEA AS A REFRESHMENT Tea: It Does the Body Good Mainly tea has been positioned as refreshment. There’s simply no denying that a daily spot of tea does the body good. Tea contains high levels of antioxidants, some of which are called polyphenols, flavonoids, and catechins, and all of which take on the “free radicals” in the body and prevent them from harming the healthy cells on body. Tea also contains flouride, which benefits your teeth and has bacteria killing properties which helps control bad breath and the formation of plaque.
HEALTH BENEFITS OF TEA AND IT’S ANTIOXIDANTS: Heart Benefits: •Cancer Prevention •Hypertension-Reducing Benefits •Immunity-Boosting Benefit AIDS-Fighting Benefit The Indian consumer is bound to pay more for a brand that promises them an aromatic tea even if it does not have a strong flavour – this was one of the conclusions of a study on consumer preferences for quality attributes of tea. ?FUTURE TRENDS Tea is for Trendsetter Tea is growing faster than coffee as the trendsetting beverage. Older tea buzzwords were “fair trade” and “organic”, “green tea” and “bubble tea”.
Recently, tea is hipper than ever and is showing up in places where one can’t imagine. Here are some of the hottest up-and-coming tea trends: Tea-Resistible Cocktails In the trendiest big city nightlife spots, tea is making its way into the most innovative of libations. Bartenders are slipping green, black, and scented teas into all kinds of drinkables A Tea for All — Tearooms, Tea Lounges, Tea Bars No matter the space or the place, the tea business is booming. Specialty tearooms, tea lounges, and tea bars where tea lovers can belly up to the bar for tasting sensations are popping up all over big cities. Tea cuppers” set up tasting presentations so tea aficionados can learn about and appreciate firsthand fine, world-flavored teas. Iced tea is a form of cold tea, often served in a glass with ice. It may or may not be sweetened. It can be mixed with flavored syrup, with common flavors including lemon, peach, raspberry, lime, and cherry. While most iced teas get their flavor from tealeaves , other herb-infused beverages are also sometimes served cold and referred to as iced tea. Some people call this “sun tea”.
In addition, sometimes it is also left to stand overnight in the refrigerator. Iced tea is also a popular packaged drink in some countries, in India it’s an emerging trend. Nestle India has introduced Nestea brand, an iced tea. SPECIAL FEATURES OF THE INDIAN TEA INDUSTRY: ?Production department of the 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 ?Nom priority for scientific cost management Huge proportion old tea and low productivity ?Low investment SWOT ANALYSIS OF TEA INDUSTRY OF INDIA STRENGTH ?Demand for tea has been growing at some 2% per annum and should accelerate further. ?Technical and manpower skill: due to a huge population base in India technical and manpower skill is available in abundant. ?Good Research support by tea growers has and will help industry grow further. WEAKNESS ?Labour intensive industry: the second-generation labourers 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, Sri Lanka. ?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, Srilanka and Kenya ? Import of tea from other countries. ?Cost escalation on the account of increase in the cost of production. PORTER’S FIVE FORCES: INDUSTRY RIVALRY (High) ?There are approximately 700 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 are a large number of buyers purchasing a product. The bargaining power of buyers is extremely high as the buyers have many options available. ?Not much product differentiation in terms of also low switching cost. ?Buyers purchase a large proportion of the industry’s total output. BARGAINING POWER OF SUPPLIERS (Low) ?There is a large number of producer’s tea in India. ?There are substitutes like coffee available ?Supplier’s product creates low switching cost. THREAT OF SUBSTITUTES (Moderate) ?Substitutes – coffee, cold drinks juice (young generation new to tea) ? Existing consumers are loyal. Substitute’s price may be lower. As there are so many players in the industry a price war is unavoidable. ?The substitute product quality and performance may better. THREAT OF NEW ENTRANTS (High) ?Large untapped rural market for branded tea segment in rural area and Indian tea in global markets ? Encouraging government policies like food and beverage act. ?CONCLUSIONS In India tea is the main beverage for each and every household. Tea is an important part of the daily routine of every genuine from celebrity to low class labour every one need it at least once in a day.
India is one of the largest producer, exporter and consumer of tea. Tea production in India is mainly dependent on the production in North India as compared to South India. North India is the main region for tea production in India. Tata tea and HUL are the major players of the Indian tea industry. Tata tea is the leader among the selected tea producing companies. Tea industry in India has shown great flourishment in last few years. ?BIBLIOGRAPHY: Business India Business world www. tatatea. com www. teaindustry. com