Roll Nos. 41 - 50

Tata Tea

Tea can be considered as a health drink (known of its antioxidant properties)  

Demand for tea has been growing at some 2% per annum and should accelerate further 

Strengths - Tea Industry

Draconian Indian labor laws, do more harm to industry and labor. 

Labor intensive industry so related problems Limited scalability; it’s a US $ 5 billion market

globally and growing at a very slow pace. Supply from more efficient players like Kenya,

Vietnam, Sri lanka Climate change may harm tea growing region,

escalating prices and hampering the capacity.

Weaknesses

Visible trend towards the health drink; up to the tea industry to make aware consuming population of the facts. 

Tea has a distinct advantage over more popular beverage – coffee 

To make tea more acceptable and fashionable like coffee 

To come up with new flavors/formulation of the tea

Opportunities

To retain young population from being lured by multinationals to aerated and flavored drinks. 

Labor problems Cost escalation Fragmented production

Threats

Vision Be India’s foremost tea based beverage company

MissionAchieve market and thought leadership for branded tea in IndiaBe recognised as the foremost innovator in tea and tea based

beverage solutionsDrive long term profitable growthCo-create enhanced value for all stakeholdersMake Tata tea a great place to work

Tata Tea

A part of the Tata group of companies, one of the largest and most respected business houses of India.

Tata Tea was formed in 1983.Headquartered in Kolkata, India.Set up in 1964 as a joint venture with UK-based

James Finlay.Tata Tea has been involved in the tea extract business

for last 40 odd years.

Company History

Leads market share (in volume) in IndiaHot beverages

Tata Tea, Tetley, Kanan Devan, Chakra Gold, GeminiMineral waterNon carbonated drinksChai Unchai outlets

Business of Tata Tea

SWOT (Tata Tea)STRENGTHSMarket leader in tea

segmentBackward integrationWide market coverage

WEAKNESSConcentration risk over

single category

SWOT (Tata Tea) contd…OPPORTUNITESPotential in fruit & herbal

teasGlobal existenceLow penetration level

THREATCompetition from regional

and local players

Threat of new entrants:High levelEncouraging govt. policiesEasy to imitate

Bargaining power of suppliers:High; as suppliers are few

Bargaining power of buyers:Low; as demand is highLoyalty for taste

Porter’s Model

Threat of substitute products:Moderate to highSubstitutes – Coffee, Cold drinks, etc (young generation new to

tea)Existing consumers are loyal

Competition:Intense competitionLipton, Brooke bond, other local players, loose tea marketAd-spend of cos. : indication of competition

Porter’s Model (contd.)…

Resources :• 51 tea estates in states of Assam, West Bengal, Tamil Nadu, Kerela.• Area of 26,500 hectares under tea cultivation.• Produces about 60 million kg of black tea annually.• Subsidiaries & Associated companies• Overseas business

Capabilities• Distribution system.• Strong and trusted management.• Research and development.• Marketing.

Core competencies.• Brand name• Distribution network

Internal environment analysis

Bought leaf factories & co-operatives to change the structure of

green leaf production

Un-remunerative operations are 1st given the opportunity to

transform and if not hived off

Re-organisation of 20 tea estates in clusters of 5

Identified branded tea as its thrust area

To exit the beverage retailing business to focus on branded

products

Business Level Strategies

Tata Coffee sold off its stake in Barista, no plans of re-entering

the business

Introducing drinks like TiON, all over India

‘Jaago Re’ campaign followed by the 'Aaj Se Khilana Bandh,

Pilana Shuru' campaign to target the youth for voting and work

against corruption

Focus on brands like Chakra Gold, Gemini and Kanan Devan

in regions where they are strong

Business Level Strategies

Competitive Rivalry and Competitive Dynamics

Competitors: Firms operating in the same market, offering similar products and targeting similar customers.

Competitive Dynamics: Ongoing actions and responses taking place between all firms competing within a market for advantageous positions.

Competitive Rivalry: Ongoing actions and responses taking place between an individual firm and its competitors for advantageous market position.

5–17

Competitive Rivalry v/s Dynamics

Competitive Rivalry (Individual firms)

◦ Market commonality and resource similarity

◦ Awareness, motivation and ability

◦ First mover incentives, size and quality

Competitive Dynamics (All firms)

◦ Market speed (slow-cycle, fast-cycle, and standard-cycle

◦ Effects of market speed on actions and responses of all competitors in the market

5–18

A Model of Competitive Rivalry

Competitive Analysis• Market commonality• Resource similarity

Drivers of Competitive Behavior• Awareness• Motivation• Ability

Inter firm Rivalry• Likelihood of Attack

• First-mover incentives• Organizational size• Quality

• Likelihood of Response• Type of competitive action• Reputation• Market dependence

Outcomes• Market position• Financial

performance

Feedback

5–19

Competitive DynamicsSlow cycle market Fast cycle market Standard cycle

market

Competitive advantage

Shielded from imitation for long periods of time

Not shielded from imitation

Moderately shielded

Sustainability High Low Partial

Imitation Costly Quick & inexpensive

Moderate

Strategy Concentrate on competitive action & try to protect ,maintain & extend proprietary advantage

Competitors quickly imitate or improve on firm’s products.

Upgrade quality continuously, seek large market share, gain customer loyalty

Competitors with their Market Share & Profit:TATA TEA in Practical Era…

Market Cap.

(Rs. cr.)

Net Profit

(year 2008-09)

Tata Tea 5,239.07 159.06

Mcleod Rus 2,196.78 88.79

Tata Coffee 593.84 18.64

Assam Company 503.36 -2.82

Bombay Burmah 411.65 -13.88

Jayshree Tea 326.29 13.88

CCL Products 206.06 19.00

Harrisons Malay 191.84 6.04

Dhunseri Tea 179.18 16.66

Duncans Ind 50.83 -38.61

Rivalry

The competitors are using same resources to acquiring product here Tea leaves. It is working for To use to innovate products e.g. Tata Tea Gold To give aggressive advertising To invent or modify the product in R&D e.g. Tetley green Tea

It become difficult for competitors to acquire market share of Tata Tea. The company has loyal customers. Approx 52.37% of market share is captured by

Tata tea. Because of it’s quality standard. Variety of brands.

Competitive Rivalry & Dynamics

Dynamics: Tea companies have competitive advantage of slow cycle market. In

which

- Tea needs less innovation & upgradation

- All firms are like to protect their market share by maintaining quality.

The firm Tata tea enjoys global market share of more than 38.76% ( Market is very sustainable for Tea because the user of tea are not ready

to change their preferences for long time period.

contd…

Revenue by Business Segment

77.67

21.49

0.84

Revenue %

TeaCoffee & other produceOthers

Business Segment

Revenue (Rs. Lakhs)

Tea 378514.72

Coffee & other produce 104712.27

Others 4088.15

Total 487315.14

Started out with tea extract business, owned tea plantationsLater on ventured into coffee business as both drinks go hand

in hand (Related diversification)Entered the business of packaged drinking water (Himalaya)Now also venturing into RTD beverages (introduced a juice

drink Tion in India) , seeking more opportunities in this spaceThe Co entered in these businesses keeping in line with their

focus on providing “a refreshing drink for a thirsty world”Taken a conscious decision to hive off their plantation business

Corporate Level Strategy

Taken a conscious decision to hive off their plantation businessTata Tea no longer a tea company, it is a “beverage company”The Co entered in these businesses keeping in line with their

focus on providing “a refreshing drink for a thirsty world”New strategy - To diversify away from its core categories of

tea and coffee and build positions in high growth areas of ‘good for you’ beverage through strong product innovation and growth.

Corporate Level Strategy

BCG Matrix

Product Growth

Rate

Star Question Mark

Cash Cow Dog

Market Share

T

C

o

TATA Tea has 3 subsidiary – Tata tea inc US, Tata Coffee, Tata Tea GB (formed to acquire and add Tetley into the group)

Tata Tea along with Tata sons acquired Tetley group of UK – 100% owned for $453 million in Feb 2000.

Tata Tea GB subsidiary acquired Joekels Tea Packers of South Africa with 33% for $0.91 million in Sep 2006.

Tata Tea GB subsidiary acquired JEMCA Czech Republic $11.60million in May 2006

Tata Tea GB acquired Good Earth Corporation & FMali Herb Inc – US - 100% owned for $31 million in Oct 2005.

Tata Tea Tetley subsidiary acquired Vitax and Flosana trademarks – Poland.

M & A’s

Restructuring of the organization structure worldwide  Strategy - Focused on 'Good for you' drinks along with coffee

and tea - more like ready to drink beverages (have launched Tion drink in Chennai and planning national launch) 

Divest - Pulled out of retailing business - sold off stake in Barista and moved out of Chai Unchai chain of tea stores in Bangalore 

Emphasis on R&D - innovation (disruptive) in tea and coffee business - (first innovation in ready to drink with tea bags of liquid tea - Tetley fusion)

Re-branding exercise for Tata Tea name Restructuring the operations in North India 

Restructuring

Revenue by Geography

Geography Sales Revenue (Rs. Lakhs)

India 150816.83

UK 123942.34

USA & Canada 144671.83

Rest 65356.48

Total 484787.48

31.11

25.57

29.84

13.48

Revenue %

IndiaUKUSA & CanadaRest

To be world’s no.1 tea-based beverage companyWest Asia, South America and Africa to be targetedWill soon begin operations in France and AustraliaRegional focus to be on brands like Vitax, Jemca,

Eight O'Clock Coffee, etc

International Strategy

Co-operative StrategiesEntity Year of

formationStatus Role

Tata Tea, Inc, USA 1987 100 per cent subsidiary To process and market instant tea from its facility in Florida, based on sourcing of products from facility at Munnar

Consolidated Coffee Ltd(Tata Coffee Ltd)

1991 Acquisition of 52.5 per cent stake

To diversify into coffee via a company which was Asia's largest seller of coffee

Estate ManagementServices (P) Limited,Sri Lanka

1992 Joint venture To manage 22 plantation companiesinvolved in tea, rubber, coconut and palm oil, that were privatised by the Sri Lankangovernment

Tata Tetley, India(merged with Tata Tea with effect from April 1, 2005)

1993 100 per cent subsidiary Kochi-based EOU that services thebranded business of specific Tetley and Tata Tea markets outside India

Asian Coffee Ltd (later merged with Tata Coffee)

1995 Acquisition of 55 per cent stake

To get into selling instant coffee globally

Watawala PlantationsLimited, Sri Lanka

1996 Acquisition of 49 per cent stake through EMSPL

Production and marketing of tea, oil palm and rubber in Sri Lanka

Tata Tea (GB) Limited

2000 100 per cent subsidiary Special Purpose Vehicle (SPV) established for the acquisition of Tetley, UK

Tetley Clover Pvt Ltd.,Pakistan

2003 50:50 joint venture of Tetley with Lakson group in Pakistan

To import and sell tea in Pakistan as well as build a tea blending factory in Baluchistan

Tetley ACI, Bangladesh

2003 50:50 joint venture of Tetley with Advanced Chemical Industries (ACI) in Bangladesh

To distribute Tetley's products inBangladesh

Good Earth, USA 2005 Acquisition of 100 per cent stake by Tetley

Establish Presence in the US andacquisition of strong product portfolio

Jemca, Czech Republic

2006 Acquisition of 100 per cent stake by Tetley

Market Leadership in Czech republic with a product portfolio which goes across both mainstream and speciality

8’ O Clock Coffee, USA

2006 Acquisition of more than 50 per cent stake, alongwith Tata Coffeeand Tata Enterprises Overseas

To help establish global presencein coffee and facilitate movementup the value chain

Glaceau, USA 2006 30 per cent minority stake alongwith Tata Sons

Presence in unfolding crossover space of the beverages market through enhanced water

Thank You