Tata Tea

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About The company

Along with its subsidiary companies, Tata Tea manufactures 70 million kilograms of tea in India, has 54 tea estates, ten tea blending and packaging factories and employs around 59,000 people. The company owns 51 tea estates in India and Sri lanka , especially in Assam ,West Bangal in eastern India and Kerlain the south. The company is the largest manufacturer of Assam Tea and the second-largest manufacturer of cylon tea

Set up in 1964 as a Joint venture with Ukbased James Finlay and Company to develop value-added tea, the Tata Tea Group has now product and brand presence in 40 countries. It is one of India's firsmultinational companies. The operations of Tata Tea and its subsidiaries focus on branded product offerings in tea, but with a significant presence in plantation activity in India and Sri Lanka.

The consolidated worldwide branded tea business of the Tata Tea Group contributes to around 86 per cent of its consolidated turnover with the remaining 14 per cent coming from bulk tea, cofee and investment income. The company is headquartered inKolkatta. With an area of approx 159km² under tea cultivation, Tata Tea produces around 30 million kg of black tea annuallyInstant tea is used for light density 100% teas, iced tea mixes and in the preparation of ready-to-drink (RTD) beverages. Tata Tea owns five brands in India - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini. The company has a 100% export-oriented unit (KOSHER and HACCP certified) manufacturing instant tea in Munnar, Kerala, which is the largest such facility outside the United States. Tata Tea has subsidiaries in Australia, Great Britain, United States, Czech Republic and India.

History

1980s

In the early 1980s, the tea industry in India was experiencing rising input and labor costs and dwindling margins as well as high taxes. India was facing competition on the world market not just from China, but also from other countries entering the business.

In 1983, Tata Tea bought the stake belonging to the James Finlay group to form the individual entity Tata Tea. In the same year, the company decided to move from the commodities business to consumer branding. The first brand Tata Tea was introduced. This was followed by other brands like Kannan Devan, Agni, Gemini and Chakra Gold. In spite of being the largest market in the world, the concept of branded tea took time to be accepted.[citation needed]

In 1987, Tata Tea set up a fully owned subsidiary, Tata Tea Inc., in the USA.

1990s

In the 1990s, Tata Tea decided to take its brands into the global markets. It formed an export joint venture with Britain's Tetley Tea in 1992. Other new enterprises included a majority interest in Consolidated Coffee Ltd. (Tata Coffee Ltd.) and a joint venture to manage agricultural estates in Sri Lanka. Tata Tea Inc. in the United States processed and marketed instant tea from its facility in Florida, based on sourcing of instant tea products out of Munnar and Karalla. In 1993, they entered into a joint venture with Allied Lyons PLC in the UK to form Estate Tata Tetley.

In the mid-1990s, Tata Tea attempted to buy Tetley and the Lankan JVC acquired 51% shareholding in Watawala Plantations Ltd.

By 1999, Tata Tea's brands had a combined market share of 25% in India.[citation needed] The company had 74 tea gardens and was producing 62 million kilograms of tea a year, two-thirds of it packaged and branded. Towards the end of the year, the tea business was hit by a drought in much of India. In addition, Russia, once the largest buyer of Indian tea, temporarily withdrew from the market.

2000s

An important step for Tata Tea was the acquisition of the Tetley Group (based in the United Kingdom) in 2000. It was a £271 million ($432 million) leveraged buyout. Tata Tea reportedly outbid the American conglomerate Sara Lee in what was described as the largest takeover of a foreign company by an Indian one to date. At the time, Tetley was the world's second largest tea company after Unilever's Brooke Bond-Lipton and had an annual turnover of £300 million. It was the market leader in Britain and Canada and a popular brand in the United States, Australia and the Middle East.

Established in 1837, Tetley was the first British tea company to introduce the tea bag to the UK in 1953. The tea bag was followed by the first round tea bag in 1989 and the 'no drip, no mess' drawstring bag in 1997. Tetley now contributes for around two thirds of the total turnover of Tata Tea.

In 2005, Tata Tea decided to sell the Munnar Estate to its workers. Employee cost (of the standalone entity) dropped sharply by about 40 per cent. They acquired the Good Earth Teas brand, which has a significant presence in the American specialty market.

In 2007, Tata Tea launched the campaign Jaago Re! to awaken the youth to social issues. The campaign was successful[citation needed] and has been continued into 2008 as well. In 2009, their campaign revolves around the issue of corruption with a new adline 'Ab Se Khilana Bandh, Pilana Shuru'.

Profile

Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop value-added tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley Group, today represent the world's second largest global branded tea operation with product and brand presence in 40 countries. Among India's first multinational companies, the operations of Tata Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in plantation activity in India and Sri Lanka.

The consolidated worldwide branded tea business of the Tata Tea Group contributes to around 86 per cent of its consolidated turnover with the remaining 14 per cent coming from Bulk Tea, Coffee, and Investment Income. The Company is headquartered in Kolkata and owns 27 tea estates in the states of Assam and West Bengal in eastern India, and Kerala in the south.

Marketing strategy & Report

In spite of a global presence, the brands are distributed differently depending on the location. As Tata tea is far better known in India and a powerful brand there, it is pushed on this market and countries with a large Indian population. Therefore Tetley is the company's global face and the largest markets focus on the Tetley brand. Where both brands co-exist in one market, Tetley is positioned as the premium brand.

EXECUTIVE SUMMARY {draw: frame} The major point in the relative growth of Tata Tea is that of Efficient Brand Differentiation & Strong Strategic Planning. The market share of Tata Tea in comparison with HUL on the basis of the Value can be shown below: {draw: frame}

ANALYSIS OF MICRO, MACRO AND GLOBAL ENVIRONMENT COMPETITIVE STRUCTURE The number of firms in an industry or those supplying substitute products affects the strength of competition. The competitive structure in which Tata Tea is operating is Monopolistic Competition. Features of Monopolistic Competition structure are as follows: Many firms compete with one another. Each firm has a relatively small market share. The tea market is highly consolidated in India, with HLL and Tata Tea accounting for almost half of retail value sales. According to the statistics available from varied different sources on net, HLL (Brooke Bond and Lipton) is the clear leader, holding over 24.5% of the market share, while Tata Tea (Tata) trails it with almost 20.5%. The remainder of the market is far more fragmented and shared between numerous small players. Marketers try to differentiate their offer from that of the competitors by varying their marketing mix. Firms strive to make their products and services appear unique to the customers. According to Business Standard dated November 19, 2002, Tata Tea brand underwent a makeover in the look and feel departments, its polypack form, in which Tata Tea had been traditionally packed, sported a new metallic finish. There was a change in price point too. Tata Tea sells different blends according to the regional tastes in India. Tata Tea's products are sold throughout India through a vast network of 600,000 outlets situated in larger villages, towns and cities. It launched a “video on wheels” program (a truck with a video that moved through rural areas showing commercials and selling packet tea). Tata Tea is also known for the genuine...

Government and the Tata Tea

The Indian tea industry as the second largest employer in the country has enjoyed the attention of the Indian government. When the export sales went down, the government has been sympathetic to the demand of the industry and its cultivators. It has passed resolutions supporting the industry domestically and has also lobbied extensively with organizations like the WTO internationally.

The Indian administration along with the European Union and six other countries (Brazil, Chile, Japan, South Korea and Mexico) filed a complaint with the WTO against the Byrd Amendment which was formally known as the Continued Dumping and Subsidy Offset Act of 2000 legislated by the US. The essence of this act was that non-US firms which sell below cost price in the US could be fined and the money given to the US companies who made the complaint in the first place. The act adversely affected the commodities business of the complainant states and has since been repealed after WTO ruled the act to be illegal.

Furthermore, the Indian government took cognizance of the changed tea and coffee market and set up an Inter-Ministerial Committee (IMC) to look into their problems in late 2003. The IMC has recommended that the government share the financial burden of plantation industry on account of welfare measures envisaged for plantation workers mandated under the Plantation Labor Act 1951. Moreover, IMC has recommended to introduce means so that the agricultural income tax levied by the state governments can be slashed and the tea industry be made competitive. It has recommended that sick or bankrupt plantation estates should be provided with analogous level of relaxation for similarly placed enterprises/estates as are available to industries referred to BIFR.

A Special Tea Term Loan (STTL) for the tea sector was announced by the Indian government in 2004. It envisaged restructuring of irregular portions of the outstanding term/working capital loans in the tea sector with repayment over five to seven years and a moratorium of one year, which was to be on a case to case basis for large growers. The STTL also provides for working capital up to Rs. 2 lakhs at a rate not exceeding 9% to small growers.

In addition to these measures, the Tea Board plans to launch a new marketing initiative, which will include foray into new markets such as Iran, Pakistan, Vietnam and Egypt. It also plans to renew its efforts in traditional markets like Russia, the UK, Iraq and UAE. Noteworthy is its intent to double tea exports to Pakistan within a year.

Assam Orthodox Tea is set to receive the Geographical Indications (GI) exclusivity. A GI stamp identifies a certain product as emanating from the territory of a WTO member or region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographic origin.

The Cabinet Committee on Economic Affairs set up the Special Purpose Tea Fund (SPTF) under the tea Board on December 29, 2006. The aim is to fund replantation and rejuvenation (R&R) programme. In the same year, Tata Tea entered into an agreement to take over Jemca, which controls a 26 percent market share in the Czech Republic.

The CCEA gave its approval for pegging the subsidy at 25 per cent and adoption of a funding pattern of 25 per cent promoter's contribution, 25 per cent subsidy from the government and 50 per cent loan from the SPTF. Banks have also been instructed to increase the lending period to over 13 years.

5 Yearly Annual Report of Tata Tea

Mar ' 09

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Other income

145.39

109.86

75.76

57.96

50.42

Stock adjustment

-18.67

18.39

-15.59

11.60

-29.33

Raw material

785.99

549.25

355.18

279.93

227.21

Power and fuel

-

-

-

-

-

Employee expenses

91.75

71.83

179.15

167.86

255.12

Excise

-

-

-

-

-

Admin and selling expenses

-

-

92.75

89.99

-

Research and development expenses

-

-

-

-

-

Expenses capitalised

-

-

-

-

-

Other expenses

367.67

337.65

261.18

256.88

304.44

Provisions made

-

-

-

-

-

Depreciation

10.65

10.17

18.54

19.43

21.99

Taxation

70.00

73.00

43.20

43.59

33.23

Net profit / loss

159.06

312.86

306.57

186.93

128.92

Extra ordinary item

-9.59

156.21

106.50

25.17

-

Prior year adjustments

-

-

-

-

-

Equity capital

61.84

61.84

59.03

56.22

56.22

Equity dividend rate

-

-

-

-

-

Agg.of non-prom. shares (Lacs)

400.00

399.79

399.18

399.42

397.52

Agg.of non promotoHolding (%)

64.68

64.65

67.62

71.05

70.71

OPM (%)

11.06

15.29

18.47

17.90

15.81

GPM (%)

16.35

18.98

22.84

21.61

19.38

NPM (%)

10.43

24.77

26.75

17.97

13.57

5 Yearly Sales of Tata Tea

Mar ' 09

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Sales

1,379.25

1,153.43

1,070.35

982.05

899.63

Operating profit

152.51

176.31

197.68

175.79

142.19

Interest

48.60

46.35

11.63

8.97

8.47

Gross profit

249.30

239.82

261.81

224.78

184.14

EPS (Rs)

25.72

50.59

51.93

33.25

22.93

Tata Tea becomes largest selling tea brand

In the packed tea segment, Tata Tea, world's second largest tea operation, has outplaced Hindustan Unilever to attain the top place in terms of sales volume during June 2007.

Tata Tea's share stand at 19.2% in June as compared to 18.6% of HUL. HUL has been a leader in the Indian organised tea market with successful brands such as Taj Mahal, Brooke Bond and Lipton.

Tata Tea had been positioning its offering different and building a wider distribution network. It has witnessed strong growth in Tata Tea Premium and Tata Tea Gold and repositioned its Agni brand.

It has also forayed into new segments by launching Tata Tea Lifewith natural herbal extracts, Tetley Green Teaand a special long leaf single origin teas in the premium segment.

In 2002, HUL's (formerly HLL) market share was 26.1% while that of Tata Tea was 16.3%. But the gap has been narrowing down since then and for the first time in June HUL lost its pole position to Tata Tea.

The country's largest selling branded tea and the company's flagship brand - Tata Tea - took a new initiative to take its number one position in the market to newer heights. The brand has revamped its packaging and communication.

The new communication endeavors to define and add meaning to the company's "Bush to cup" vision. It emphasis's on the detailing and the R&D efforts to ensure the finest quality leaves, manifesting the company's passion for providing the best value to its consumers. A commitment that is reflected in the consumer's fondness and liking for the brand across the nation. A relationship that has been nurtured over the years through a consistent delivery of great taste in every sip.

The communication aligns the brand with the modern day consumer by portraying vibrant, youthful and modern user imagery. While it cues upper middle class personality to build stronger aspirational values, it still retains an essence which is relatable by the cross section of its varied users.

Over the years Tata Tea has come to stand for trust coupled with a strong and credible plantation tradition.

The brand enjoys strongest mind-share among tea labels (2001 ET-ORG survey) and has the highest penetration in various markets (2001 IRS survey). Through its new communication Tata Tea is therefore rightfully laying claim on being the nation's first choice in tea.

For Tata Tea this is the right time to re-energize itself and make a clear statement. There has been significant erosion in the tea market due to the cyclical nature of the commodity. There has been an explosive growth in the number of small regional players offering mediocre products but with the lure of attractive promotions or very low prices.

Through the new communication campaign Tata tea intends to put the bigness of the Tata Tea story in front of the consumer - bigness in terms of size and taste; bigness in terms of Tata Tea's vision and commitment to bigness in terms of the tremendous R&D which goes into the product. The re-launch platform is therefore rooted in the "number one" status of the brand and the communication seeks to bring out the width and depth of the Indian consumer's relationship with the taste of Tata Tea.

To further strengthen the Tata Tea platform, the packaging construct has been significantly upgraded for better barrier properties. The package graphics have been modernized and updated to relate better to the contemporary consumer. Pertinently, Tata Tea revolutionized branded tea retailing in India by offering the country's first poly-packed tea in the mid-eighties.

Products and Brands

The company has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini -- catering to all major consumer segments for tea. The Tata Tea brand leads market share in terms of value and volume in India and the Tata Tea brand is accorded "Super Brand" recognition in the country. Tata Tea's distribution network in the country with 38 C&F agents and 2500 stockists caters to over 1.7 million retail outlets (ORG Marg Retail Audit) in India.

The company has a 100% export-oriented unit (KOSHER & HACCP certified) manufacturing Instant Tea in Munnar, Kerala, which is the largest such facility outside the United States. The unit's product is made from a unique process, developed in-house, of extraction from tea leaves, giving it a distinctive liquoring and taste profile. Instant Tea is used for light density 100% Teas, Iced Tea Mixes and in the preparation of Ready-to- drink (RTD) beverages.

With an area of approx 15,900 hectares under tea cultivation, Tata Tea produces around 30 million kg of Black Tea annually.

Status of Tata tea in Tea Industry

Tata Teahas been listed among the top 100 brands in India by Super brands India, the Indian division of the globally renowned Super brands Limited.

Tata Teawas selected over 711 leading Indian brands across98 categories. Awarded by an independent Super brands council, comprising of eminent professionals in marketing and advertising, Tata Tea will be featured as one of the strongest Indian brands in the Super brands volume to be printed in Italy.

Super brands are known internationally as the ‘Oscars of branding'. According toSuper brands, 'A Super brand offers consumers significant emotional and / or physical advantages over its competitors which (consciously or sub-consciously) consumers want, recognize, and are willing to pay a premium for. The process circumvents any ranking by market shares but focuses on the more permanent but harder to achieve criteria of brand image and perception. Hence the selection influences were the brands' mind dominance, goodwill, consumer loyalty, trust and emotional bonding.'

Vivek Mathur, vice-president — marketing, Tata Tea said "This is the first time that the Super brands concept has been brought to India for endorsing leading consumer brands. The Super brands status vindicates our strategy of providing best end cup experience to the customer and investing behind brand building. I am confident that Tata Tea will further strengthen its number one position in times to come."

Anmol Dhar, chief executive officer, Super brands India, said, “In a fiercely competitive and diverse market of tea, it is an achievement to make one's brand stand out. Tata Tea seems to have captured the essence of the huge Indian tea market and Super brands recognize it.”

Tata Tea Reasserts No. 1 Status

The country's largest selling branded tea and the company's flagship brand - Tata Tea - took a new initiative to take its number one position in the market to newer heights. The brand has revamped its packaging and communication.

The new communication endeavors to define and add meaning to the company's "Bush to cup" vision. It emphasises on the detailing and the R&D efforts to ensure the finest quality leaves, manifesting the company's passion for providing the best value to its consumers. A commitment that is reflected in the consumer's fondness and liking for the brand across the nation. A relationship that has been nurtured over the years through a consistent delivery of great taste in every sip.

The communication aligns the brand with the modern day consumer by portraying a vibrant, youthful and a modern user imagery. While it cues upper middle class personality to build stronger aspirational values, it still retains an essence which is relatable by the cross section of its varied users.

Over the years Tata Tea has come to stand for trust coupled with a strong and credible plantation tradition.

The brand enjoys strongest mind-share among tea labels (2001 ET-ORG survey) and has the highest penetration in various markets (2001 IRS survey). Through its new communication Tata Tea is therefore rightfully laying claim on being the nation's first choice in tea.

For Tata Tea this is the right time to re-energize itself and make a clear statement. There has been significant erosion in the tea market due to the cyclical nature of the commodity. There has been an explosive growth in the number of small regional players offering mediocre products but with the lure of attractive promotions or very low prices .Through the new communication campaign Tata tea intends to put the bigness of the Tata Tea story in front of the consumer - bigness in terms of size and taste; bigness in terms of Tata Tea's vision and commitment to bigness in terms of the tremendous R&D which goes into the product. The re-launch platform is therefore rooted in the "number one" status of the brand and the communication seeks to bring out the width and depth of the Indian consumer's relationship with the taste of Tata Tea.

To further strengthen the Tata Tea platform, the packaging construct has been significantly upgraded for better barrier properties. The package graphics have been modernized and updated to relate better to the contemporary consumer. Pertinently, Tata Tea revolutionized branded tea retailing in India by offering the country's first poly-packed tea in the mid-eighties.

Reference:

1. http://www.tatatea.com/careers.htm

2. http://www.labnol.org/india/corporate/tata-tea-becomes- largest-selling-tea-brand/993/

3. http://www.tatatea.com/no1status.htm

4. http://www.tata.com/company/releases/inside.aspx?artid=Q5bdBm qjAnQ=

5. http://www.business-standard.com/india/news/tata-tea-seeks-distribution-tie-ups-onglobal-scale/375024/

6. http://money.rediff.com/companies/tata-tea-ltd/12660006/results-annual

7. http://www.tatatea.com/comp_news4.htm

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