Green to Gold

Twinings has opened up the green tea segment in the fight for the top end of the tea market

Indian tea connoisseurs, used to their cup of Darjeeling or Classic Assam, had no taste for green tea till recently. The issue was availability. It could be had either in expensive hotels or in select outlets and was mostly of the imported variety. It was too niche a market to excite the entrenched tea companies.

Twinings, headquartered in the United Kingdom, saw an opportunity there. Green tea is known to have medicinal properties which help reduce weight, prevent cancer and even fight heart diseases. It could expand the market by selling the health and wellness platform to the young: Green tea could reduce the average age of premium tea drinkers from above 35 to 25 plus.

The first step was to gauge consumer response. So, last year, Twinings tied up with direct marketing company Amway and introduced the green tea packs in its catalogue books for consumers. It also sampled the product amongst the “Diamond” members of Amway (most successful partners) and trained them on the benefits of green tea. The result was phenomenal: Twinings sold its three-month inventory within 30 days.

The real challenge was the next step: How to sell green tea to a larger number of consumers across the country which found it too bland and were used to black tea.

It tackled the challenge with three simple yet innovative measures: One, it reduced the pack size to 10 bags from the traditional 25 and 100 so that consumers do not have to spend too much to test the product (after all, green tea is 10 per cent more expensive than normal flavoured tea); two, it introduced green tea in lemon and mint flavours to make it more palatable for Indian tastes; and three, it initiated talks with pharmacy chains like Apollo to stock the product in their stores with the literature endorsing the medicinal value of the tea. This reinforced the health proposition of the brand.

“With green tea we are growing in value by 50 per cent month-on-month and if we push the product in more cities and locations, it can easily go up to 100 per cent,” says Twinings India Managing Director Suresh Iyer. Green tea might be only 5 per cent of Twinings’ sales right now but, by the end of the year, Iyer says the contribution will rise to 20 per cent.

Green tea is the latest attempt by Twinings to move Indian tea consumers up the value ladder. The company, which came to India eight year ago, has created a new market segment of super-premium tea from scratch into a business of over Rs 200 crore.

Five years ago, premium tea constituted about 10 per cent of the Rs 3,200-crore packaged tea market and the super-premium segment was a mere 5 per cent of premium tea sales. Now, the premium segment constitutes 20 per cent of the Rs 4,200-crore packaged tea market in which super-premium tea contributes as much as 25 per cent. Twinings is the leader in that segment.

Its domination in the tea bag category is reflected in the fact that it has a 35 per cent market share in tea bags sold in modern branded retail outlets, ahead of both Tetley as well as Hindustan Unilever.

Iyer says that from the beginning it was clear that mass-marketing strategies which are used to sell other FMCG products such as chocolates or noodles (Iyer has worked in both Cadbury and Nestle) would not work for a premium brand like Twinings.

So the game could not be won by merely expanding distribution and keeping the price affordable. In fact, such a strategy would destroy the brand’s premium image and also force it to fight head on Tata Tetley and Hindustan Unilever which dominate the mass tea bag market.

Iyer, therefore, took a different track. He decided to concentrate on the growing number of large supermarkets and retail stores (Big Bazaar or Spencer’s). His research showed that consumers coming to these stores spend 4-6 per cent of their household expenses on tea (compared to only 2 per cent in kirana shops) and are ready to look at new products and also pay for them.

So, Twinings built a three-pronged strategy: One, it selected 20 per cent of the top outlets in 30 key cities in the country to place its brands; two, in order to ensure that the product is adequately visible, it took up to 50 per cent of the self space in the tea bag category (it sent tea experts who would sample as well as explain to potential customers the main features of the product); and three, it did not play on price and wrote its tags at a premium over rivals.

“Our prices of green tea enjoy a 50 per cent premium over Tetley, while our normal dip teas have a premium of 85 per cent over Tetley and 74 per cent over Taj Mahal,” says Iyer. “Our biggest competitor in the super-premium segment, Dilmaah, dropped prices and was 40 per cent below us. But it had to increase its prices and now the gap is 20 per cent.”

Twinings also realised that premium tea can also sell out of home — in hotels, airlines, top-end restaurants and even offices. So that was another reasonably large market which could be tapped. The company tied up with almost all the five-star hotels in the country to stock Twinings in their restaurants as well as rooms. It also roped in Kingfisher and Jet International in to push its tea. And it tied up with a partner to deliver tea in over 100 top corporate sector offices in the country.

Twinings has its critics. Rivals say that the super-premium market is too small and Twinings cannot grow beyond a point. “Even after so many years, Twinings is non-existent in India. The tea is reasonably good, but the problem is with distribution. It is only present in some select cities.

It will face major competition from other companies as they are now focusing on the upper segment of the market. In 2006-07, Twininings was eyeing acquisitions in the Indian market to beef up its distribution, but even that did not work out,” says the chief executive of a leading tea company.

“They are in a catch-22 situation — they cannot reduce price which will adversely impact their premium image. And if they don’t do that, they don’t grow,” says a senior executive of another competing tea company. Twinings also faces growing completion.

Hindustan Unilever might not be pushing it too hard but it has introduced flavoured tea in lemon and earl grey flavour s, taking Twinings’ own brands head on. Tetley on the other hand is offering an Indian version in masala and elaichi flavours. And, of course, there is Dilmaah, the Sri Lankan company, with which Twinings battles head on across global markets.

Iyer says that he is committed to grow at least 45 per cent per annum in value terms and will triple Twinings’ turnover in five years. “Tetley and Hindustan Unilever are in the mass tea bag market and not in the super-premium segment. Yes, Dilmaah is a competitor, but it has a very small share of the market and that does not worry us.”

Iyer’s plan is to increase the availability of Twinings from just 30 cities to 100 in the next two years. He is also going beyond the large retail stores; the company has identified 28 large malls across the country in which it will set up tea bars to offer consumers a forum to try out its products. The tea company is pushing to sell its products also in smaller hotels to push volumes. And to ensure that it can service smaller hotels, it is introducing a mail order service under which institutions can order on the Net and get their products delivered at their doorsteps.

Iyer also wants to tie up with cash-and-carry operators (it already has a tie-up with Metro) in order to serve the small retailers. Of course, it is also looking at increasing its processing capacity of 1,000 tones per annum in Kolkata. Iyer says he has to increase capacity by at least 50 per cent and is looking at setting up regional processing centres in the north, west and south to cater to the growing demand.

“Ultimately, when people serve hot beverage at home they must give consumers the choice and say ‘coffee, tea or Twinings,’” says Iyer.

Ishita Ayan Dutt also contributed to this article