Tata Tea to serve cold beverages

Tata Tea plans to diversify into cold beverages in order to go up the value chain. This is a part of the company's strategy to grab a larger market share in the value-added segment, after achieving a higher share in terms of volume.

Sangeeta Talwar, executive director, marketing, told Business Standard: "We will strengthen our portfolio further by going up the value chain. We are trying to achieve this by fortifying tea among the youth. We are looking at entering new areas such as indulgence segments and diversifying into cold beverages such as ice tea." Players in the ice tea segment include Nestle and Unilever.

Profit through volume

Percy T Siganporia, managing director, Tata Tea, said increase in value could be achieved either by boosting profit margins or increasing gross profit.

Tata Tea had achieved high profits on account of higher sales over the years and this reflected in the company's growth in value, he said.

The company is the market leader in volume, but is the number-two player in the pecking order of value share.

"Having brands in the niche segment also adds to the imagery quotient of the company," Talwar said.

Over the past few years, as and when Tata Tea introduced a new product, its market share increased both in value and volume.

Tata Tea has launched value-added brands for the past few years. It has products in the niche segments such as herbal, wellness and flavoured tea. Similarly, Hindustan Unilever has also introduced flavoured tea specific to the Indian taste such as Elaichi and Masala.

Value for taste

Hemant Patel, a research analyst at Enam, points out that the growth potential in these new segments is huge as compared to conventional products.

Talwar said that contrary to popular belief that tea was facing competition from a growing demand for coffee among the youth, the demand for tea was strong with a penetration in India as high as 91 per cent.

The annual consumption of tea in India is 850 million kg a year and this was growing at about 3 to 4 per cent.

An analyst, who requested anonymity, said attracted by the higher margins, companies were introducing value-added products. Margins in the value-added segment are nearly one-and-a-half times higher than those for conventional products.

Rural rush

Tata Tea's market share in terms of volume has been consistently higher than its competitor Hindustan Unilever since June. Tata Tea's share in August was 20.4 per cent, as against 19.6 per cent for Hindustan Unilever.

The company attributes this high share to its diversified portfolio with products at various price points.

Tata Tea Premium, a medium segment product, is the highest selling tea brand in India with a market share of 10.4 per cent.

However, Tata Tea's market share in value terms is lower at 22.1 per cent, as against Hindustan Unilever's 25.2 per cent.

Tata Tea is also pushing sales in rural areas, which account for nearly 40 per cent of its sales. It has implemented a rural marketing project in Uttar Pradesh and is scaling up capacities and expanding its reach in low-penetration states such as Rajasthan and Gujarat.