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MARKETING Tempest In A Tea Cup Coffee, too. For Hindustan Lever on one side, and Tata Tea and Tata Coffee on the other, are slugging it out for supremacy in the Rs 3,700-crore beverages market. By Shailesh Dobhal
It is somehow apt that a British virtue, understatement, be the flavour of statements emanating from two companies fighting over a market, beverages, 90 per cent of which is accounted for by a quintessentially British drink, tea. A few thousand kilometres from Mumbai, in Kolkata, Homi R. Khusrokhan, Tata Tea's managing director is equally non-combative while discussing the imminent launch of a clutch of tea and coffee brands. ''Yes,'' admits the quiet-spoken Khusrokhan, ''we are about to make some major waves, but we will wait till it happens to tell the story.'' Don't let the quiet demeanours and quieter words fool you. There's a battle brewing in the Rs 3,700-crore beverages market. The growth rate has plummeted to a negative 8-10 per cent from over 20 per cent just two years ago; consumers are either down-trading to cheaper brands and unbranded offerings, or cutting down on consumption, or both; and the three companies vying for dominance in the marketplace, HLL, Tata Tea, and, to a lesser extent, Nestle India have discovered that growth, at least in the short-term, can come only at the others' expense.
And so the low-intensity (but high-stakes) war has gone on. It is a contest being fought on many fronts: brands, distribution, delivery formats (hot, cold, ready-to-drink), even, coffee and tea parlours-between Barista, Café Coffee Day, Qwiky's, Movenpick, and Nestle Café, there are over 100 of them across the country-for that lucrative out-of-home consumer segment. While Things Are Still Hot If it doesn't happen before, then things will surely come to a head in early 2002 when Tata Tea launches Tetley, a brand from the fold of The Tetley Group-the UK-based beverage major acquired by Tata Tea last year for Rs 1,870 crore (271 million pounds). The company is certain to position the brand in the premium segment of the market, teas costing over Rs 160 a kilogramme. That will bring it head to head with the country's largest tea brand, HLL's Rs 200-crore Taj Mahal. Tetley is the world's second-largest tea brand (after HLL-parent Unilever's Lipton) and its launch will change the complexion of competition in a segment where Taj has traditionally faced competition from minnows like Girnar Tea's Girnar and Hasmukhrai & Company's Society. There's more on HLL's plate. The recent merger of the marketing infrastructure of Tata Tea and Tata Coffee (seen by many as a sign of the impending merger of the two companies) means that the FMCG major will, arguably, for the first time have to contend with an integrated giant (much like itself). Tata Coffee will benefit from Tata Tea's reach of over 6 lakh retail outlets, and the latter, from the former's 2,500-odd vending machine network. Tetley is set to debut at the Barista chain, in which Tata Coffee owns a 34.3 per cent stake. Then there's the issue of the coffee marketer benefiting from the tea company's much-vaunted marketing skills. In anticipation of the Tetley launch, Tata Tea has already announced its decision to axe some smaller brands from its portfolio and focus on just a few national ones like Tata Tea and Agni. And in numerical terms, it has set itself the target of increasing its share of the packaged tea market from 20 per cent now to 27 per cent in three years. Predictably, HLL's famed marketing machinery has swung into overdrive. For one, there's the promotion for Taj. Then there's the quiet launch of Lipton Yellow Label tea bags, a repositioning exercise covering all its tea brands, and, if the rumour mills are to be believed-HLL strongly denies this suggestion-the acquisition of a strategic stake in a retail coffee chain.
This bout of chest-thumping on the part of the two largest players in the beverages market has galvanised a host of me-too companies into reacting in kind. Duncans, the G.P. Goenka Group company with a 4 per cent share of the tea market has relaunched its offering in the premium segment, Sargam and launched tea-bag variants of Sargam as well as another brand, Double Diamond. And the Ahmedabad-based Gujarat Tea Processors & Packers Ltd has just launched a premium blend, Good Morning. Things are not very different in the smaller coffee market. Tata Coffee is in the midst of a portfolio restructuring exercise, will likely kill some of its brands like Tata Coorg Pure, and is considering going national either on its own steam or through an acquisition. ''We will put all our resources behind it (going national),'' says the company's Managing director M.H. Ashraff. In response, HLL has extended the successful 'gold' promotion campaign it ran for tea brand Taaza to coffee brand Deluxe Green Label. And coffee giant Nestle (which refused to speak to BT for this article), is concentrating on extending the franchise of its brands Nescafe and Sunrise to cold-coffee variants Frappe and Choc Café. Why, industry sources say the reticent company may even slash prices of its offerings to combat HLL and Tata Coffee. The Tata Tea strategy, says Khusrokhan is to ''strengthen regional focus while seeking a larger national share''. So, Tata Tea and Tetley will be national brands, and Agni Chakra Gold, Gemini, and Kannan Devan will provide the regional back-up. And Tata Coffee will leverage Tata Tea's strengths in branding and distribution, especially in the southern part of the country which accounts for over 80 per cent of the coffee consumed in India. For Lever, it is just a question of continuing to do what it has done so well in the past-grow volumes. Ravindranath claims the recent promotion for Taj Mahal could see an increase in volume sales of the brand by as much as 10 per cent. ''Volumes are fine, but what about making money,'' asks Shalini Gupta, an analyst at Mumbai-based Motilal Oswal Securities, who tracks the company. Gupta could have a point; HLL has reportedly upped promotional spend on power brands-and in beverages this includes the likes of Red Label, A1, Lipton Taaza, Three Roses, Taj Mahal and Bru-by 30 per cent. It isn't just promotions that HLL is betting on; in an effort to tap the lucrative out-of-home segment for what marketers term the ready-to-drink (RTD) market, the company is set to launch Lipton Iced Tea, which has already been tested in several markets, at Rs 12 for a 250-ml pack.
The Great Out-of-Home Boom The battle will be fiercest for the out-of-home consumer. The penetration of tea, at 99 per cent, is almost total, and coffee suffers from being perceived as an expensive option and not intrinsic to the food habits of over 80 per cent of the Indian populace (its per capita consumption is 55 grammes compared to tea's 600 grammes). Ergo, growth can come only from brand-substitution, or tapping the out-of-home market through RTD offerings, vending machines, even coffee and tea bars. "We are looking at the soft beverages segment to target the youth," admits Ravindranath. HLL is also test marketing an unnamed cold-coffee offering and hopes to launch it by next year. But the real fun and games will start in early 2002 when the market expects Nestle and Coke, who have an international partnership in the iced tea and cold coffee categories, to launch their brands in India. These will be sold through the 14,000 vending machines Nestle controls, and the 5 lakh-plus retail outlets that Coke reaches. Tata Tea's Khusrokhan isn't averse to entering this market, but prefers to wait. ''Building a market for RTD teas is going to entail substantial investments and we could soon see the entry of cola giants into this business; ideally we'd like to be the second entrant.'' But that conservatism could hurt, much like it did Tata Coffee, which entered the market in 1993 when HLL and Nestle were already entrenched in the business. As a prelude, Tata Tea is helping Cadbury Schweppes conduct market research for the latter's bottled ice tea brand, Snapple. Snapple is one of the biggest customers of Tata Tea's US operations. But the fight for the out-of-home consumer will be won in coffee (and tea) bars. There are already a 100 of these in the country, and their number is expected to swell to 2,500 by 2004. ''Cafes will bring the zing back to coffee,'' predicts Harish Bijoor, the former marketing head of Tata Coffee and now, the coo of Zip Telecom. No serious player in the beverages business can afford to ignore this opportunity. ''Out-of-home consumption is a high value-added business model definitely worth pursuing for any company,'' agrees Khusrokhan. Tata Coffee has Barista and Nestle is following an independent path with Nestle Café, but hll denies that it has any parlour plans of its own or that it is eyeing the acquisition of a stake in the Bangalore-based Amalgamated Bean Coffee Trading Company's Café Coffee Day chain. ''We are being wooed by several large companies,'' says V.G. Siddartha Hegde, ABC's promoter. The café phenomenon could just be another retail-mirage. Neeraj Jain of Movenpick, the Swiss company that recently opened its first coffee shop in New Delhi, admits that consumers patronise cafes more for the ambience than the coffee and Sashi Chimala of Qwiky's echoes this belief. Still, there's no denying the volumes a chain of cafés will contribute to a beverage marketer. One analyst claims Barista will consume 3,000 tonnes of coffee a year by 2004-a third of Tata Coffee's annual produce. What cafes are to the upwardly-mobile, Lever's 25,000 'Hot Tea Shops'-small outlets that target the out-of-home consumer with brands like A1-are to the mass market. But it is vending machines that are key to the out-of-home strategies of all companies. HLL has 10,000 of these and will soon make its entire beverage line available through them; Tata Coffee has 2,500, and plans to increase the number to 4,000 by March 2002. And ABC plans to install 3,000 machines of its own by 2004, vending fresh instant coffee at the same price as instant coffee. Restaurant partnerships provide another avenue to beverage companies. Post Tata Coffee's acquisition of a stake in Barista, the chain has made an appearance at select Taj hotels across the country. McDonald's, with which Nestle is aligned globally, is currently trying out the FMCG major's tea and coffee in some of its 30 outlets across Delhi and Mumbai. And Tricon's marketing chief Pankaj Batra-the company operates 21 Pizza Hut outlets across 10 cities-says the company ''is looking to increase beverage options at Pizza Hut and evaluating potential partners''. The buzz in the market is that this partner will be either HLL or Nestle. All activity in the beverages market-despite claims to the contrary by competing companies-is part of a run-up to February, 2002. That's when Tata Tea will launch Tetley in what will be the first public shot of a hitherto behind-the-scenes battle. And that should stir things up. -additional reporting by
Abir Pal, Debojyoti Chatterjee, Nitya Varadarajan |
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Sipping
milk-less tea at hindustan lever limited's unremarkable South Mumbai HQ,
S. Ravindranath, the head of the company's beverages business is
explaining the in-your-face golden tabla promotion for flagship tea brand
Taj Mahal. For the benefit of those who blank ads-print and electronic-out
with the practised ease of a 21st century info-junkie, the campaign in
question started with a promise by long-time Taj endorser Zakir Hussain
that he would give up playing the tabla if someone found a better tea and
segued into a promotion to find the maestro's missing tablas. Back to
Ravindranath's explanation-''Taj Mahal's Ustad Challenge promotion has
nothing to do with the (impending) Tata Tetley launch.''
STATUS:
Runner-up in tea with no premium brand; marginal presence in
coffee
STATUS:
Market leader in tea; neck-to-neck with Nestle in coffee;
yet to firm up parlour-plans
STATUS:
Market leader in coffee; a laggard in tea
business
