Think national, act local
It's a tea-versus-chai battle between regional tea brands and multinational heavyweights who are vying for more market share in the Rs 15,000-crore Indian tea market.
In the last eight to 10 years, the regional brands have seen huge traction, with many of them expanding their geographies. Industry insiders claim that these local players have not only held their own ground against multinational players like Hindustan Unilever and Tata Global Beverages (erstwhile Tata Tea), but have also managed to give them a serious fight in terms of gaining market share.
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According to Parag Desai, executive director at Gujarat Tea Processors and Packers Ltd, which sells Wagh Bakri tea, there are roughly around 3,000 packet tea brands in the country which together command over 40 per cent of the market. While no official data is available on the exact market shares of companies, industry insiders estimate that the share of regional brands has increased from about 29-30 per cent in the mid-2000s to over 40 per cent now.
For example, Wagh Bakri has seen major expansions after its entry into the Maharashtra market seven years back. It has since expanded to Delhi in 2009, and Goa, Chhattisgarh, Andhra Pradesh, Chennai and Western UP after 2013. The company had earlier tested waters in Rajasthan and Madhya Pradesh, respectively, 18 years and 15 years back. The company has managed to garner a 50 per cent market share in Rajasthan and Madhya Pradesh, and what's more, the brand has secured15 per cent market share in Maharashtra in the last seven years, taking its overall India market share to around 8 per cent.
According to industry sources, Tata currently has around 22 per cent market share in the packet tea market, which constitutes 50 per cent of the overall 1,200-million-kg Indian tea market. The second largest tea company in the world derives nearly 70 per cent of its revenues from tea and has a nation-wide presence.
While reach is a major advantage in drawing revenues, it's the micro-marketing approach that has helped the regional brands. As Arvind H Shah, president of the Gujarat Tea Traders Association, explained, "The taste and flavour of tea depends on water and milk, which have regional variations. Local players can easily create blends that cater to local tastes."
Jayant Somabhai Patel, managing director of Somabhai Tea Processors Pvt Ltd, which is the market leader in Saurashtra region of Gujarat, said, "All regional houses have a dedicated team of tea tasters, often comprising the owners themselves, and they keep a very strict focus on quality. In comparison, for multinationals, who see more churning in their tea tasters' teams, it is natural to see some fluctuations in the blend and quality."
Patel himself is a tea taster, so is Desai of Wagh Bakri. The directors of Wagh Bakri taste nearly 600 cups of tea every day, as the company does not allow a single batch of packet tea to go out in the market before the directors (along with a team of 50 tea testers) have okayed it.
Patel's company has already readied a team, which will look into expansions to neighbouring states of Rajasthan and Madhya Pradesh. Then there are players like Girnar and Society Tea, which are major forces in the Maharashtra market. While Girnar has expanded to the southern markets, opening a full-fledged office at Coimbatore (Tamil Nadu) for tea exports and local marketing, Society Tea has remained more or less focussed on the Maharashtra market, especially Mumbai region. Mails sent to Girnar and Society Tea remained unanswered.
With eyes on expanding footprint, North-based Mohani Tea, which is a major player in Uttar Pradesh, has recently started exports to markets in Western Africa.
Perhaps, realising the importance of local flavours, Tata Global Beverages has recently re-launched its Kanan Devan brand (which sources tea leaves from the Kanan Devan hills in Munnar), and aims to raise its market share in the state. HUL has its brands Taaza and Red Label which are aimed at the mass segments. As such, tea is consumed as a beverage in the urban markets; in the rural areas, it is more of food, says a senior official at Wagh Bakri. He elaborates that while 80 per cent of the loose tea market lies in rural areas, nearly 80 per cent of the packet tea market lies in urban areas. Hence, tea companies have to take a balanced approach towards expanding their distribution network. While availability would drive volumes, ensuring consistent quality while expanding to the hinterland also becomes equally important.
The overall packet tea market in the country is growing at single digits, around 1-2 per cent. While regional players see a strong growth (Wagh Bakri growing at 9-13 per cent on an average), big players aren't left behind. HUL has registered a 12.4 per cent growth in turnover from its beverages segment, riding on the back of double digit growth in tea.
With time, the tea-versus-chai battle is only likely to get tougher. As Shah predicts, over time packet tea would dominate the entire tea market, with loose tea losing out in the process, adding more fuel to the scramble for market share.