Marketing Report on Tata Tea Assignment

Marketing Report on Tata Tea Assignment Words: 4053

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 In. dia, 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.

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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 freshness of its products. Companies use different strategies to push their products. MICRO ENVIRONMENTAL FACTORS Micro Environmental factors affect the firm’s ability to serve customers. These factors are as follows: Employees There are around 56,000 employees working for Tata Tea. Quality of employees determines how well the company will succeed in achieving targets. The fficiency of employees also depends on the satisfaction they get. Apart from the traditional perks and rewards that a normal company gives to an employee, Tata Tea has a workplace HIV/AIDS policy for its employees. The necessity of a workplace HIV/AIDS policy for Tata Tea Ltd. was significantly felt because Tata Tea, being an agro-based industry, is dependent on its huge manpower resources to sustain its operations. Suppliers The qualities of suppliers have a very important role as it’sindirectly going to affect the manufacturers. Tata Tea Ltd. is the second largest supplier of branded tea in the world.

Teas for their various brands are sourced primarily from their own estates spread across Assam, Dooars and Kerala. All surplus requirements are met through the Auction centres located at Guwahati, Calcutta, Siliguri, Cochin, Conoor and Coimbatore. Competitors Marketing Intermediaries Tata Tea is the largest vertically integrated tea firm in the world, from its plantation activity through to its packaging and marketing initiatives. Customers MACRO ENVIRONMENTAL FACTORS Macro Environmental factors do not affect the operations of a company and its relationship with its customers and suppliers, directly and indirectly.

However, they affect the company in the long run. These factors are as follows: DEMOGRAPHIC Population Age Mix: Different age mix that attract the attention of the marketers are as follows: Infants ??? Infants are no where the target customer of Tata Tea. Children (School going ??? teens)??? Now a days, even children have started having tea instead of milk. Thus they are surely not the major target customers, but one of the customers. Occupation & Literacy: Tata Tea has various brands catering to people from different occupations.

An illiterate or a literate, both consume tea in almost the same quantities. ECONOMIC Income Distribution: With economy of India striking higher GDP growth, the purchasing power of people has greatly increased. A marketer needs to understand the distribution of income to make more meaningful conclusions for arriving at specific decisions. Tata Tea has taken into consideration this factor and has come up with different brands for different annual household income group. NATURAL There is an environmental problem of Deforestation and Habitat Loss.

Although India’s remarkable increase in the production of tea has achieved with only slight expansion of acreage, the majority of tea is cultivated in tea estates and garden which occupy approximately one million acres in northern India. TECHNOLOGICAL Technology has major impact on businesses. Business functions that are directly influenced by technology are as follows: Product:Tea is available is both dust and leaf form and available in packets, polypacks, jars and tea bags. Flavored and Herbal teas are also available. Apart from hot tea, iced tea is also in vogue.

Price: As technology is available in cheaper rates, the operating costs have reduced. Advertising:Creative ad can be developed with the help of technology which can bring an important change in the way the business advertise. For example, the TV commercial prepared on the then famous song “Jumma Chumma” of the movie Hum, featuring Amitabh Bachchan. Tata Tea’s products are handled by five advertising agencies which include Rediffusion (Tetley), McCann Erickson (Chakra Gold), Publicis Zen (Agni/Kanan Devan), Vaishnavi (Tata Tea) and Saatchi & Saatchi (Gemini).

Tata Tea’s marketing strategy is “tactical” advertising. Distribution:Technological advancements in transportation industry have helped in bringing markets closer. Tata Tea launched a “video on wheels” program – a truck with a video that moved through rural areas showing commercials and selling packet tea. *POLITICAL ???* LEGAL This environment is composed of laws, government agencies and pressure groups that influence and limit various organizations and individuals.

Although the Indian market is flooded with a number of flavored tea offerings, the entry of established teahouses into the market was delayed since government regulations permit the use of only natural flavors, which are costly and comparatively less stable. While for food materials other than tea, the legislation allows the use of artificial or nature identical flavors, it remains an irony that the same is not extended to tea. According to Beverage daily. com dated April 05, 2004, oversupply was not the only reason for the difficulties faced in the domestic tea market.

The Indian government lifted quota restrictions on commodity imports in 2001, resulting in an increase in cheap, low-quality tea from neighbouring countries such as Nepal, Vietnam and Indonesia, and while this pushed down prices across the board, there was no corresponding rise in consumption. SOCIO – CULTURAL Tata Tea marketsdifferent blends of tea under the same brand name to address the regional preferences and consumers. In South, idol worship is very important. Thus temple festivals were targeted for promotion of Tata Tea.

GLOBAL ENVIRONMENT RESPONSE TO MARKETING ENVIRONMENT STRATEGIC PLANNING PROCESS SBU & ITS MAJOR COMPETITORS ON THE BCG MATRIX (Note: The Indian Tea Industry is growing at an annual rate of 3% to 3. 5%) Relative Market Share {draw:frame} {draw:frame} * {draw:frame} {draw:frame} *Relative Market Share Relative Market Share RECOMMENDED STRATEGIES Figure 2 clearly shows that Tata Tea falls under the category of Cash Cows because the market growth of the Indian Tea Industry is not as high as compared to the other industries in India.

Now, since the market growth is low, Tata Tea should not emphasize on Expansion, rather, it should concentrate more on the following strategies: PRODUCT DEVELOPMENT STRATEGIES Tata Tea should go for new product development. Presently, Tata Tea has not come up with any medicinal flavors of tea like Tulsi **& Ginger. Thus, it can venture into these flavors so as to cater the consumers who are health conscious. This in turn would most probably increase its market share. HORIZONTAL DIVERSIFICATION Tata tea can venture into the various other segments like Hot Chocolate, Soft Drinks, and Fruit Juices.

For this they have to invest very strategically as these product segments are highly price sensitive and also have many players. HORIZONTAL INTEGRATION PROMOTIONAL ALLIANCE Tata Tea can go for a promotional alliance with products like Sugar Free, Kurkure (Pepsi Product), Marie Gold (Britannia Product), Parle-G, etcetera in order to capture higher amount of consumer attention. DOWNSIZING THE BUSINESS It has been noticed that Iced Tea product of Tata Tea has not been able to yet capture the domestic market and is not contributing much to the profitability of the company.

Hence it is recommended to divest the business of Iced Tea product and concentrate more on the other products which are doing well. SEGMENTING, TARGETI*N*G AND POSITIONING STRATEGIES MARKET SEGMENTATION LEVELS CONSUMER MARKET SEGMENTATION GEOGRAPHIC SEGMENTATION The regional effect on sales of a branded tea is very much prominent in India specially, and thus the company launched different variants as mentioned above to serve varying tastes in different regions or states, like consumers in Mumbai expects their cup of tea to be a darker color, while other markets like Punjab and parts of Gujarat prefers a golden color.

The local players also share a large chunk of market in small regions. Tata coffee, a subsidiary of TTL also produces various brands in coffee such as Tata Cafe for north Indian region and Tata Kapi for south. Now based on global markets TTL has a customized portfolio of offerings for each country ranging from black, green, fruit and herbal teas, iced ready-to-drink teas and an extensive range of exotic specialty tea. In global market TTL sells its instant and filtered coffee products like Tata Cafe and Coorg. DEMOGRAPHIC SEGMENTATION Taking the Income Factor into consideration, arious products of TTL can be categorized as follows: PSYCHOGRAPHIC SEGMENTATION BEHAVIORAL SEGMENTATION Occasions: During any occasion round the year, tea is a preferred hot beverage to serve. Benefits: Tata Tea offers the benefit of “freshness” and “preferred taste”. User Status: Market can be segmented into, _Non-User ??? _Infants are the non-users in case of tea market. _Ex-Users ??? Those people who used to initially consume tea, but cannot consume it right now as they are having Ayurvedic medicines. Potential Users_ – _Teens entering college life as college canteen is a place where generally students start having tea. First-time Users – Adolescents are the first-time users because tea can keep them awake which is very much required for them during their exams. Regular Users ??? All those who have created a habit to consume tea and are addicted to it. Usage Rate: Market is segmented into, Heavy Product Usage ??? Tea is heavily consumed by labourers. Medium Product Usage ??? College going students, corporate professionals, house wives, etcetera are medium product users.

Light Product Usage ??? Senior Citizens are light product users. Buyer Readiness Stage: TTL comes second after HHL and thus everybody is aware about its products. Loyalty Status: Buyers can be divided into, Hard-Core Loyals??? It is very common that an individual accustomed to one particular taste and blend of tea will not change his/her brand what-so-ever happens. In such a case, TTL will have its hard-core loyals. Shifting Loyals ??? Over a span of time, an individual gets bugged up with the same taste of tea. This triggers him to shift to another brand and taste a new brand.

TARGETING EFFECTIVE SEGMENTATION CRITERIA MEASURABLE The tea packets are available in the size of 250gms, 500gms and 1kg. These packs make feasibility to opt for suitable amount. Thus TTL targets different users which buy as per their needs and capability. SUSTAINABLE TTL is the second largest tea market in India and is profitable enough to serve the target customers. ACCESSIBLE There are nearly 1. 7 million retail outlets in India which serves the purpose of easy availability of the product. DIFFERENTIABLE TTL differentiates its products from its competitors’ on the grounds of flavors and freshness.

It forayed into new category by launching Tata Tea Life with natural herbal extracts, Tetley Green Tea and a special long leaf single origin tea in the premium segment. ACTIONABLE TTL launched a “video on wheels” program – a truck with a video that moved through rural areas showing commercials and selling packet tea. EVALUATING & SELECTING THE MARKET SEGMENTS In evaluating different market segments, the two factors that are considered are as follow: Segment’s Overall Attractiveness: Two main competitors of TTL are HLL and Goodricke Tea.

Coffee, malt based beverages like Horlicks, Bournvita and Soft Drinks are the substitute products. Retailers, wholesalers, small shops and kiranas are the buyers. Power of buyer is not strong, but as it is a monopolistic market, ignorance to it would be harmful to the company. TTL do not have any outside supplier. Company Objectives & Resources: Tata Tea’s company perspective is, “We believe that our customers and consumers define the success of our organization. We believe that our people are at the heart of our organization; and that we should give them the freedom to achieve.

We believe in tea and in our products and their role in adding to the well-being of people the world over. We believe in earning the respect of all those who know us. We believe that by striving to deliver our vision and by living our values we shall create more valuable business and hence over the long term increase returns to our shareholders. ” The Segment Concentration is Product Specialization. {draw:frame} {draw:frame} TLL specializes itself in two product categories namely tea and coffee. The company provides every kind of variant in both these products based on the arying consumer demands. It has a hold over every category and leads the market at present. POSITIONING PRODUCT DIFFERENTIATION PRODUCT FORM: The tea is categorized in two forms that are dust and leaf, and both of them are produced in different variants according to quality segmentation. FEATURES: TTL has introduced many blends like black, green, fruit and herbal tea. Also, iced ready-to-drink tea mixes and instant tea mixes are being produced. These act as extra features added to a normal tea and serves the purpose of those people who want something special.

SIZE OF PACKAGE: Tea packets of 250gms, 500gms and 1Kg are available in market. Besides these tea dip-bag packs are also manufactured. These provide ease of choice to select appropriate quantity pack. PRODUCT QUALITY: TTL has a team of tea tasters and blenders who are calibrated to the specific requirements of Tea Tasting to deliver consistent quality of tea as per the standards laid down for each Brand of tea. Also they take care of the packaging material quality and maintain the standards for Indian as well as overseas market.

POSITIONING The company tried many tag lines to attract the people. After trying out various options to sign-off like ‘Tata Tea Ka Taste Deewana Bana De’, ‘Yeh Rishta Hai Taste Ka’, ‘Desh Ka No 1 Taste’, and so on, Tata Tea planned a new mass media advertisement campaign. The campaign highlights the new positioning as “Taste Kaamyabi Ka” and the advertisement features Sania Mirza who acts as a role model for youth to achieve success in life. It also allows the brand to extend its appeal and popularity across a broad section of its target market.

The new positioning reflects the role that Tata Tea Premium plays in the consumer’s life. The positioning is about the physical and mental rejuvenation that Tata Tea Premium provides to help overcome difficulties and achieve success. Tata Tea’s products are handled by five advertising agencies which include Rediffusion (Tetley), McCann Erickson (Chakra Gold), Publicis Zen (Agni/Kanan Devan), Vaishnavi (Tata Tea) and Saatchi & Saatchi (Gemini). Many of these agencies have had a long association with the brand, which reflects on a better understanding of the brands.

The company is also looking at marketing tie-ups with major retail chains across the country and has tied up with a few southern retail majors to promote Tata Tetley. Also, TTL had tied up with Sony Music to promote Tetley brand. USP: TTL has seen consumers responding to their genuine efforts to craft an offering which caters to their evolving expectations of product formulation, beverage delivery on preparation, supply of product in increasingly faster cycle times. Based upon continuous consumer tracking, the brand as perceived by consumers is constantly refurbished to match up to their evolving aspirations.

Consumers direct the directional changes that the brand needs to reconsider and TTL enables such shifts occur in a cost effective manner. The consumers continue to reward such effort with enhanced purchases of the brands and develop a stronger affinity for the Tata brand. And after achieving mindset of consumers towards the brand, company is trying to develop products along the lines that customers find relevant. That is the reason TTL has become market leader in terms of sales at present. TTL’s innovation in all aspects of brand marketing and sales has helped to transform the brands into ‘trust marks and love marks’.

COMPETITIVE ANALYSIS Main competitors of Tata Tea are HLL and Goodricke Tea. HINDUSTAN LEVER LIMITED (HLL) The objective is to touch consumers with a 3-way convergence of product availability, brand communication and higher levels of brand experience. Brook bond has to focus its effort on building four powerful sub brands ??? Taj Mahal, Red Label, Taaza and 3 Roses. Lipton ice tea targets young people who want to have drinking pleasure but also concerned about their health. STRATEGIES STRENGTH HLL is a market leader with market share of 24. 5%. Brook bond, sub brands cater to various segment.

The company itself has over 15,000 vending machines. In 2005, HLL derives nearly 40% of its revenue from its sales in rural India. Hindustan Lever Network Direct Selling is one of the big channels and is growing at over 20% per annum. According to 2002 data, The Company’s weaknesses spotted in limited success in changing the eating habits of people; complex supply chain configuration and unwieldy number of stock keeping units with dispersed manufacturing locations and also in price positioning in some categories that allows for low price competition and high social costs in the plantation business.

REACTION The response of HLL is Proactive**. In 2006, Brooke Bond introduced a natural variant of 3 roses to increase its market share. In 2005, HLL has developed customer management and supply chain capabilities for partnering the emerging channel of self-service stores and supermarkets.

GOODRICKE TEA To grow, cultivate, manufacture, treat, blend, process, buy, sell, and deal in tea in various form, to carry on the business as planters in all its branches, to manufacture, buy, sell and deal in machinery for processing tea and in connection therewith or acquire by amalgamation, purchase, take over or otherwise the whole or part of the asset, liabilities and under taking in India or elsewhere of any other company, body corporate, firm, association of persons to target the mass segment with Zabardast brand In Dec 2005, company re-launched Goodricke Perfect packet teas across India.

This was a blend of 40 per cent Darjeeling and 60 per cent Assam teas. In 2003, Company increased its capacity by 50%. Company has been in the packet tea business for over 19 years. According to 2005 data, company had good market share in Madhya Pradesh, Punjab, Haryana, West Bengal, Rajasthan, Jharkhand and Uttar Pradesh. Goodricke owns 10 gardens in Assam, 12 in Dooars and 8 in Darjeeling WEAKNESS The company had negligible business in South India.

MARKET LEADER STRATEGIES MARKET LEADER ??? HINDUSTAN LEVER LIMITED (HLL) EXPANDING THE TOTAL DEMAND Finding New Users: In 2004, Project Shakti that was operational in 11 states was launched to reach 100,000 small villages to cover 100 million rural Indians. DEFENSIVE STRATEGIES MARKET FOLLOWER STRATEGIES MARKET FOLLOWER ??? GOODRICKE TEA South Indian like strong tea and thus HLL launched a brand using Strong Assam dust. Goodricke Tea following the market leader also launched “Zabardust” using strong Assam leaf and dust.

In 2003, Goodricke Tea launched the Georgia brand of tea after entering into an exclusive agreement with Coca Cola. Company made a move to make an impression in the society by giving specific emphasis on health, safety & welfare of the workers. The company commissioned Goodricke School for special education in North Bengal in April 2006 for physically & mentally challenged people. PORTER’S FIVE FORCES MODEL Coffee is the main threat because at present it is considered best substitute for tea and its preference is more in south as compared to tea.

A person can switch from tea to coffee with spending negligible higher price. Malt based beverages such as Horlicks by GlaxoSmithKline and Bournvita by Cadbury Schweppes which are favorite hot drink in south are growing fast. Soft drinks also represent a significant threat to the ongoing dominance of tea in the longer-term, with aggressive marketing campaigns by leading multinationals successfully persuading many young consumers to migrate from tea to soft drinks for various drink occasions. Now day’s people are more concerned about their health and to avoid caffeine in tea their preference for milk is increasing.

Tata tea had started campaigning to promote tea as a health drink. Company launched value packs to take on these smaller brands at price points of Rs 10-11 for 50gm and Rs 5 for 25-35gm and it helped Tata Tea to develop a new customer base. BARGAINING POWER OF BUYERS Buyers in this case are retailers, wholesaler, small shops and kiranas. The bargaining power of buyers is not strong but it is a monopolistic market and ignorance of these would be harmful for the company. The retailers are growing at a fast rate and they do negotiate for their margins.

Margins for Dealers remain unchanged across geographies, but the company tried to provide incentives on new trade initiatives. Wholesalers have access to small villages and they tend to switch from one brand to another so company tried to build good relation with them and launched a loyalty program “Ek Rishta” in which points are accumulated according to the quantity of tea bought and in returns for points a lucky draw was held in which high value gifts ??? white goods, gold chains etc. were distributed. Not to leave kiranas, Tata tea offered them better than average discounts.

INTENSITY OF RIVALRY AMONG FIRMS In tea market, there are two major players – Tata Tea and HLL with Brooke Bond and Lipton brand. There are some small players operating at national level like Goodricke Tea, Godrej, Duncan and Tea India and some at regional level but they are acting just like market followers. Intensity of rivalry between Tata Tea and HLL is very high. HLL being the market leader gives good competition to market challenger, Tata Tea. Market share of HLL is 24. 5% and that of Tata Tea is 20. 5%. Tea market is very large with annual sales of 800 million kg, but it is growing at barely 3-3. per cent a year. Because of competition from unpackaged tea and increased advertising spend their operating margin reduced and lead to price war between the two. Goodricke Tea is the third major player after HLL and Tata Tea. Intensity of rivalry between them can be deduced from given below figure. {draw:frame} REFERENCES Marketing Management by Philip Kotler & Kevin Lane Keller ??? 12th Edition Marketing Management – ICMR http://www. domain-b. com/companies/companies_t/tata_tea/index. html http://www. rediff. com/money/2007/aug/09tata. htm http://www. hehindubusinessline. com/2007/04/08/stories/2007040801880200. htm www. tatatea. com http://wrightreports. ecnext. com/coms2/reportdesc_COMPANY_C356EC230 http://en. wikipedia. org/wiki/Tata_Tea http://tata. com/tata_tea/articles/200001012tea_story. htm www. euromonitor. com/Health_and_Wellness_Beverages_in_India – 24k www. euromonitor. com/Tea_in_India www. hinduonnet. com/fline/fl1925/stories/20021220002008500. htm www. teauction. com/result. asp www. bitsaa. org/sandpaper/research/research. htm www. hll. com www. marketresearch. om/map/prod/1373176. html www. thehindubusinessline. com/2006/03/17/stories/2006031703510800. htm chennaionline. com/events/Business/2006/03brookebond. asp www. hll. com/brands/lipton. asp www. hll. com/brands/brook_bond. asp www. unilever. com/ourcompany/newsandmedia/pressreleases/1999/indian. asp http://www. hll. com/mediacentre/mediacentre_2007. asp http://www. thehindubusinessline. com/2005/12/09/stories/2005120902181000. htm http://www. foodanddrinkeurope. com/news/ng. asp? id=18257 http://www. teauction. com/home/teanhealth. asp

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