With packaging costs rising and a spurt in global demand for tea, Duncans Tea Limited(DTL), has decided to hike the prices of its key brands to offset margin pressures.
Duncans has already taken three effective price hikes this year,about four per cent each time.
"The increase in global demand has pushed the price of tea and packaging costs too have shot up considerably. this is likely to affect tea prices over the next few months," M C Appaiah, Chief Operating Officer of the company said adding, "Even with the crude oil prices coming down, there will be no immediate respite hence a price hike is inevitable."
Packaging constitutes 15 per cent of the total cost of the final product.
Further, the company has re-launched its key brands and expanded its portfolio to new price points in order to prevent consumers from downtrading to loose tea, in wake of the price hikes.
''Loose tea is about 30 per cent cheaper than packaged tea. The challenge is to stop people from converting to loose tea by providing quality products at competitive price points,” Appaiah said.
It has also introduced a new brand -Aaag- in the economy segment.
The company will dedicate 10 per cent of its turnover for marketing and advertising to build the brands.
“Now that we have completed our portfolio by introducing products across categories, we hope that by next year, our new brands will contribute as much as 20 per cent to the total turnover,’ Appaiah added.
As a part of its channel expansion plans, Duncans is in the process of tying up with post offices to make its brands available in the rural markets.
“ We will start with Maharashtra as it has a huge post office network,” Krishnendu Ghosh, head,marketing, Duncans Tea Ltd said.
The company already has a distribution tie-up with IRCTC, the catering division of the Indian Railways to serve its tea-bags to passengers on select routes.
It also has an exclusive tie-up with Bharat petroleum Corporation Limited(BPCL) and Hindustan Petroleum Corporation Limited(HPCL) whereby LPG suppliers will carry Duncans tea packets with them to make it directly available to the consumer.
