Tea Study – College Essay Example

by severe price competition, the teabag segment is a product category, which is not a mass product yet. The largest tea bag manufacturer in India which packs several of the leading tea bag brands – Lipton, Taj Mahal, Tetley, Nestle, Double diamond etc estimates 7000 tons/annum as the tea bag consumption in the Indian with an annual growth rate of 20 per cent of which majority comes from the out of home segment. The current Indian tea bag arket is similar to Russia in mid nineties when it was in nascent state and then showed a meteoric rise. It is estimated that by 2015 the Indian teabag market shall touch the figure of 15000 tons/annum. Market leaders of the packaged teas viz. HLL and Tatas hitherto had not shown much interest in teabags but both of them have become aggressive in last three years, as they have realized the potential of this category. Regional preferences in branded tea Major players are offering different types of tea in different parts of the country with a focus on the quality perception of the particular demography.

For example, in most cases the tea available in the south of India is mainly dust, whereas the norths Indians prefer leaf tea. On the other hand, western market of Gujarat and Maharashtra prefer good quality packet and loose tea while in MP and Rajasthan CTC fanning is the choice. States like West Bengal and Assam do not hold packet tea as a value for money and mostly go for loose tea. Pack sizes Most of the companies have tea in all pack size - 2kg, 1kg, 500gm, 250gm, 100gm, 50gm and 25gm packaging.

There are also sachets, which are priced

as low as Re. 1. Various regions have distinctive packaging preference for poly pack and box pack (mono cartons). 250 gm size is the most preferred size. However, from the last two years on retail shelf one could find odd pack weights like 180 gm, 225 gm etc as a part of strategy of cost cutting by several companies by reducing the product quantity. Branded tea penetration is quite high in cities like Delhi and Ahmedabadwhen compared to other major cities in India. State| No. f Household(in millions)| Branded Teapenetration  per cent | Delhi| 2. 6 m| 91 per cent| Ahmedabad| 1. 0 m| 90 per cent| Bangalore                          | 1. 4 m| 69 per cent| Chennai| 1. 4 m| 72 per cent| Kolkata| 2. 9 m| 20 per cent| Mumbai| 3. 7 m| 72 per cent| Hyderabad| 1. 2 m| 59 per cent| Pune| 0. 9 m| 64 per cent| Flavored teas doing well The product diversification strategy by big players in tea industry has also lead to pep in flavoured tea production in last ten years. Tata Tea, Taj mahaland Twinings have introduced flavoured teas in the market.

The differentflavours that are available in Indian market are that of ginger, cardamom, lemon, earl grey (with bergamot essence), ashwaghandha, mulethi(yashtimadhu), and tulsi. On the other hand green teas sales have picked up on health grounds. Though Indians are hard-core black tea consumers, their interest in flavoured tea can be attributed to their curiosity to test new products and the change in trend in consumption. Flavoured tea market in India is growing at the rate of 25 per cent annually.

The tea business brews more than 71% of Tata Global Beverages’ revenues, but galloping prices at the garden level has meant margins have crunched and remain under

severe pressure. As an offset, the company, formerly called Tata Tea, would make acquisitions in the more lucrative health beverages and snacks space globally, sources familiar with the development said. The idea is to strengthen presence in segments that are rapidly growing, and analysts tracking the company said small to medium-sized buyouts could be in the offing.

Tata Global, which has transformed to an international entity than a local one —it derives more than 65% of consolidated revenues outside India — is experiencing challenging times in its staple businesses that includes coffee. Volume growth in tea in India is a bare 1% now compared with 3-4% two years back. Globally, the trend is flat. “Growth rates have not looked up and we are still seeing pressure as commodity prices continue to go up,” said Sushant Dash, vice-president- marketing, Tata Global.

Last fiscal, tea prices rose significantly, upping input costs by 50%. Tata Global raised prices by 35-40% in June, but that’s not sufficient to cover the inflation, said analysts. Ergo, the pain on margins. “In the last 3-4 years, the company has been facing constant margin pressure. It’s unlikely to change going forward because frequent price increases are not an option,” said Himani Singh, analyst with Elara Capital. Five years ago, tea made up for almost entire turnover of the company. Today, 29% is made up of coffee and water.

Nikhil Vora, managing director, IDFC-SSKI Securities said the significance of tea could reduce as the company strives to grow three times its current size. “It (tea) is an extremely challenging business, it’s possibly the bottom-end of the consumer brand-business that one can look at. Tata Global cannot grow

from $1. 5 billion billion to $5 billion with tea and coffee alone. The way out is to look at other categories within beverages, water and foods,” Vora said. One complaint analysts have is that Tata Global has not yet leveraged its substantial distribution strength in India to generate consumer involvement.

For example, its water brand Himalayan, made by unit Mount Everest Mineral Water, is utilising only 30% of the parent’s distribution reach, they point out. And the company’s endevours in newer segments - such as green tea, nutritional drinks and iced tea, all of which are fast growing - will need patience, they said. A joint-venture with PepsiCo that the company embarked on will also be a huge positive, analysts said. But it’s unlikely any of the lines will replace the predominance of tea anytime soon. “They are all long-haul businesses.

Yes, Tata Global is trying to diversify into other streams of beverages in many geographies, but the efforts will take time to fructify. Therefore the dependence on tea will remain for a while,” said another analyst, who did not wish to be named. Tata Global’s Dash said according to the Tea Board, the current shortage in tea crop is around 25-30 million kg. The headroom is narrow because household penetration of tea has already touched 91% in India, analysts said. To boot, the market is well covered by both, big players such as Hindustan Unilever Ltd and Tata Global, and a plethora of regional and local entities.

Headwinds also exist because rising prices of tea, milk and sugar have led to greater downtrading by consumers to mass brands and loose tea. “The higher-end better quality tea

prices have gone up more than the lower variants. So the gap between the economy segment and the premium segment has widened,” Dash said. In the bargain, Singh said, loose tea has seen maximum growth. “Till there is some softening in tea commodity prices, we don’t see any major volume growth for Hindustan Lever and Tata Global in tea,” he said. Not that Tata Global is not trying to ride the downtrade.

The company has relaunched Tata Tea Premium, the largest mass brand in its portfolio, and has also started experimenting with different stock-keeping units (SKUs). For example, it has started pilot runs of a Rs 30 packet of Agni, its lower-end brand. That’s par for the course, Singh said. “The company will change the mixes, SKUs and take some medium-range price hikes - all of which will have an impact on margins,” he said. The company sells Tetley in the high-end, Tata Tea Gold in the premium end, Tata Tea Premium in the mass end and Agni at the lower-end.

To consolidate, Tata Global could also merge Tata Coffee and Mount Everest Mineral Water with itself which would fold in a slew of businesses - Tata Tea, Tata Coffee, mineral water business Himalayan, Eight O’ Clock Coffee, Tetley, Good Earth and others - into the mothership. But this is unlikely to impact consolidated revenues, said analysts. The Indian tea industry is facing threats on account of its high cost of production. The threat is particularly acute in the international arena where India is now a distant fourth with a global share of 12 per cent in 2009 and after Kenya, China and Sri Lanka.

That is nothing

new, but over the last few years, the organised industry has been exposed to threat from within the country too — from the small tea growers (STG) who now account for 28 per cent of total Indian tea output. The phenomenon is more pronounced in the South where 44 per cent of the produce is from this segment while in North India 24 per cent comes from STG. The industry construct is changing with a new paradigm evolving. High cost During the Eighth and the Ninth Plan periods, a large number of agriculturalists in North Bengal and Assam switched over to tea cultivation lured by good tea prices.

Small growers holding upto 10-12 hectares thus started co-existing with corporates/proprietary gardens in North and South India and now perhaps no policy is formulated by the Government without keeping in mind this sector's interest. However, the organised sector faces competition from this sector as STG is outside the ambit of the Plantation Labour Act under which the organised industry has to fulfil certain social obligations which results in shouldering the highest COP (cost of production) in the world. The organised industry has addressed this hallenge in two ways – while some corporates like the Tatas have de-risked their operations by evolving as a beverage company rather than remaining as a plantation outfit only, others have chosen to take benefit of this development (of emergence of STG) by increasing their purchases from bought leaf factories (BLF) to which the STG sell their green leaves. There has been a mushrooming of BLF units in Assam and North Bengal. Currently, the share of BLF in total tea production is about 23

per cent against 10 per cent in 2001.

However, their teas are sold privately and inadequate quality control or expertise makes this sector produce a low quality product mostly. Status paper Says a recent status paper by the Indian Tea Association “Due to various reasons, the sector has much lower cost of production and thus can offload tea at lower prices. This adversely affects the general tea market because of uneven competition. ” During 1998 and 2007 while the organised sector has lost 57 million kg of crop, the BLF sector registered a 169 million kg jump, just as the area cropped by the corporate sector increased by a mere 0. 3 per cent while that of the STG by 14. per cent. Now steps have been initiated to achieve the requisite quality standards as the organised sector is increasingly sourcing their teas from this sector,as part of its strategy to tackle competition as well as to meet the increasing demand. These facets on the Indian tea industry has been highlighted in a recent status paper published by the Indian Tea Association which says that over the years, India has slipped to the fourth position in world tea exports as its competitors like Kenya and Sri Lanka, serviced by well-organised low-cost high quality small-holder sector is outdoing India.

Boosting exports and higher overall price-realisation will be the main thrust of the industry, the report said. Demand-supply Following erratic weather conditions where either there were drought conditions or incessant rains triggering a pest attack that will leave Indian crop down by 22 million kg in 2010. The industry now expects a crop level of 957 million kg, with

imports of 20 million kg and a consumption of 870 million kg. There appears to be equilibrium in demand and supply. Exports are being seen at around the level of 190 million kg which is lower han in 2009 but realisations are expected to be better on improved prices. Commenting on the rising consumption of tea, the study is of the view that the demand which is now growing at an annual rate of three per cent is still low and the industry has to devise ways of tackling competition especially from the aerated beverage segment. Experts say that this can only be done through innovation as well as promoting the drink as one with health-giving properties. Some broad areas have already been identified in this respect between the ITA and the Tea Baord.

A domestic consumption level of 870 million kg has been projected for this year. Safeguard duty Imports have been a cause for concern to the Indian growers especially in view of the two Free Trade Agreements in force now — the India-Sri Lanka and the India-ASEAN one — under which duties will come down progressively to 40 per cent in 10 years from 100 per cent now. The industry wants this to continue as a safeguard duty. At its recently held annual general meeting, the ITA chairman highlighted this issue before the Union Finance Minister also. Value added exports

With volumes dropping, the emphasis now should be on value-added exports as these teas realise better price. Emphasis should also be placed on enhanced production of orthodox teas, the paper says. Exports are estimated at 190 million kg against 198 million kg in 2009

and 203 million in 2008. The history of tea in India dates back to (750-500 BC). According to renowned researchers tea in India has been cultivated and consumed for thousands of years. However commercial production of tea in the country only began with the arrival of the British in India.

Coming down from centuries, consuming tea has almost become a part of the Indian culture. Over the years, tea has evolved to become one of the most important commodities in India. India is among the largest tea producers in the world with the highest rate of tea consumption being within the country itself. India is home to numerous tea estates in Assam and especially in the southern part of the country. Tea is native to India and some of the top Indian tea brands are ranked among the best in the world. Being the second largest tea producing nation only after China, India receives heavy revenues from its tea exports.

India Accounts for almost 30% of the global tea production. The tea industry in India has remained among the most stable industries for more than a period of 150 years now. Be it tea production, consumption or tea exports India is the leader in all aspects. The favorable climatic conditions, vast terrains and tea technology in India facilitate the growth of a variety of tea starting from black tea to green tea to herbal tea. The growth of the tea industry in India has been phenomenal over the last 50 years and the tea industry in India manages to churn out a total turnover of around Rs 10,000 crore.

Tea production since independence has grown by almost 250%

while the land required for tea cultivation has only grown by 40%. The rank of the top tea brand in India is undoubtedly held by the FMCG giants Hindustan Unilever Limited. It is the largest producer and supplier of tea not only in India but in the world. The brand is known as Lipton and it is the highest consumed tea in and across the country. The other top tea brand in India is Tetley which is a product of Tata Tea Ltd. Tata Tea Ltd is the second largest producer and supplier of a host of branded teas in the country.

The company produces almost 40 million kilograms annually. Tata Tea has a market share of almost 20. 2% in the Indian tea market. Top Tea Brands in India 1. Tata Tea 2. Godrej Tea 3. Lipton 4. Brooke Bond 5. Twinnings 6. Hindustan Unilever Limited is the largest supplier of teas in the world; it's most widely recognized brand is Lipton Teas 7. Tata Tea Ltd is the second largest supplier of branded teas in the world, producing 40 million kilograms. It's most widely recognized brand is Tetley Teas 8. Read more: http://wiki. answers. com/Q/Who_are_the_top_five_tea_producing_companies_in_India#ixzz1m9oDRX2u

Tea is a natural oxidant and a source of natural flouride. India is one of the big players when it comes to tea production. Tea is exported in large amounts from India. India coounts for 31% of global production of tea and is thus one of the world leaders. India has been producing tea for the last 150 years. India offers a wide range of tea such as the original Orthodox to CTC and Green Tea. The tea leaves from Darjeeling

and Assam have their own rich aroma in which can take a lot of pride. The total turnover of the tea industry of India is around Rs. 10,000 crores. Here is a list of the most popular Tea Brands of India. Tata Tea Tata Tea Limited is owned by the Tata Group. It is India’s best and most widely consumed Tea Brands and is the world’s second largest manufacturer and distributor of tea. Tata Tea has launched a social campaign named “Jaago Re! ” to awaken the youth against corruption. Tata Tea is the biggest player in the Tea Industry of India. Tata Tea owns five brands in India: Tata Tea, Tetley, Kanan Devan, Chakra Gold, and Gemini. Tata Tea has subsidiaries in Australia, Great Britain, United States, Czech Republic and India. ? Society Tea Society Tea is owned by Hasmukhrai ; Co. stablished 75 years ago. They are the key tea manufacturers in India since 1933, and today, Society Tea is known for its consistent taste and richness of quality. Society is synonymous to a fragrant aroma and is known nationally as well as internationally for it. Society has an innovative advertising campaign and strong distribution network. ? Duncan’s Double Diamond Tea A premium CTC leaf brand, Double Diamond represents strength – that of character, achievement and elegance. Just a spoonful of this tea brews a rejuvenating cup, where strong flavour and aroma co-exist in fine balance.

Packaged in the Duncans home colours and iconised diamonds, this flagship brand is the chosen cup of the educated, young and forward-looking couples of today, who believe in the ‘right quality at the right price’. A trendsetter in

the jar segment, Double Diamond maintains an attractive inventory of jars and is also available in small packs. ? Brooke Bond Red Label Tea Red Label is for the housewife who seeks to bring her family together over a cup of great Red Label with its perfect strength taste and colour. With the tag line ’Chuskiyaan Zindagi ki’, It is the second largest tea brand in the country.

Red Label is a 107 year old brand and has tremendous equity and heritage in the Indian market. Red Label holds the Guinness Record for the world’s largest tea party. It is now proven that regular consumption of 3 cups of Red Label Natural Care every day can enhance one’s immunity and help one fall ill less often. ? Taj Mahal Tea Brooke Bond Taj Mahal- India’s best tea since 1966. For over four decades, Taj Mahal has been the gold standard of tea in India. It has been a pioneer of innovations in the Indian tea market. Taj Mahal was the first to introduce tea bags and also the first to usher-in new formats like instant tea and dessert tea.

Taj Mahal is the most premium brand of tea in the Indian market. Since 2006, Saif Ali Khan is the brand ambassador of Taj Mahal Tea. Taj Mahal is special because it is made from the rarest and the best tea leaves. ? Wagh Bakri Tea Group Waghbakri tea house is a premium tea house in inception since the year 1892. The tea baron, Sir Narandas Desai started the company in Ahemadabad being experienced in the art of blending and tea growing which he learned while owning a

tea estate in South Africa. Sir Narandas Desai was praised by Mahatma Gandhi for his commendable work.

The generations that followed gave boost to his pioneering efforts and developed the business to its present status of being one of the largest tea houses in India. ? Lipton Tea Lipton is a very famous brand of Tea in India, currently owned by Hindustan Unilever. Lipton teas are a blend selected from many different plantations around the world, from well-known producing countries like India, Sri Lanka, Kenya, and China. Lipton Yellow Label is blended from as many as 20 different teas. Available in over 110 countries, Lipton is particularly popular in Europe, North America and the Middle East, parts of Asia and Australia.

Lipton’s main pillar brands are Lipton Yellow Label and Lipton Iced Tea. Other product lines exist as well, like the Lipton pyramid range in Europe and North America, and Lipton Milk Tea in East Asia. ? Tetley Tea Tetley, a wholly owned subsidiary of Tata Global Beverages, is the world’s second largest manufacturer and distributor of tea. Owned by India’s Tata Group, Tetley’s manufacturing and distribution business is spread across 40 countries and sells over 60 branded tea bags. It is the largest tea company in the United Kingdom and Canada and the second largest in the United States by volume.

Tata Tea Group, now Tata Global Beverages, is the second largest manufacturer of tea in the world after Unilever. ? Marvel Tea Marvel, a leading branded organization, is one of the India’s most recognized and respected brands. Conceived in 1994 by Shri R. C. Jain, the Marvel group has gone on to grow very successful business

in sectors ranging from FMCG, Real Estate and Health Care. Marvel Tea Estate (India) Limited is amongest India’s top 3 branded tea packaging companies, with over 3000 distributors network. It has a unique brand identity and tea taste which is the key strength of the company.

Marvel Tea is Rich in taste, flavour and aroma and is Made for premium class segment. ? Pataka Tea Pataka Tea, the flagship unit of the beverages ventures of Pataka Group, was set up in 2000 for operations in the packet tea industry. The offerings entail a diverse portfolio of brands, namely Premium, Mukta and Special, which are increasingly gaining popularity with the country’s tea enthusiasts. Pataka Tea and the family of beverages to follow are in coherence to maintain the highest standards of inclusive corporate ethics, and commitment to the communities and environment.

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 and Orissa.

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. 8000 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 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 buyer 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.

Until the 1991, USSR was the largest buyer of Indian tea but again with the disintegration of the Soviet Union the Indian tea industry went for

a toss. Further, 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.

During the early 1950s, around 79 million Kg or about 31% of total production of tea was retained for domestic market consumption and the trend changed dramatically to 771 million Kg or about 81% of total production of 956 million Kg of tea in 2006. Today, the tea business in India is an important source for earning foreign exchange. 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.