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Sujata
Agrawal and Saloni Meghani
Any
'brief history of tea' will list the geographies that have
left their fingerprints on the teacup — China, Japan, Europe,
England and America. But a few years ago, the global beverage
business woke up to quite a stir from another part of the
map — India.
Tata Tea’s acquisition of Tetley, UK, was the largest ever
by any Indian company.
Making this cuppa for that sought after ‘share-of-throat’
is a fine art that the company does not pretend to have acquired
instantly. It has distilled its strategy over many years.
The preparation started way back in 1983, when Tata Tea decided
to move from being a commodity player to interacting directly
with the consumer. It involved a change in the mindset of
the company — from thinking about pricing only to strategies
for building brands, markets and distribution networks.
Tata Tea was the first brand from the company’s stable and
is today the No 1 in the domestic market. Other brands like
Agni, Kanan Devan, Gemini and Chakra Gold followed.
In the 1990s, the company realised that its place lay in the
global sun and not just in India. It also realised that acquiring
an international brand would be preferable to building one
afresh the world over.
In 1995, the company bid for Tetley — a well-known innovator
in tea packaging and strong in buying, blending and logistics
management — but failed. Having already taken the first sip
of global tea, the company was not to be easily deterred from
reaching out again. In 2000, when an opportunity arose once
more, 271 million pounds changed hands and Tetley was in the
Tata fold.
It was the perfect blend. Tata Tea was a leader in India in
the packaged tea segment with a presence in developing countries
through exports. Tetley was the second largest tea brand in
the world, with a presence in developed geographies. The integrated
vista offered access to new markets and products to both,
not to mention the synergy in tea buying and blending operations.
Tata Tea could now offer tea to its consumers in any part
of the world and in any form they wanted.
Challenger brand
“Our
new vision is to take the challenge for leadership in tea
around the world,” says Homi Khusrokhan, managing director,
Tata Tea.
In the light of the fact that Unilever is about three times
the size of the Tata Tea-Tetley combine, the phrase needs
to be qualified further. “Leadership isn't necessarily about
being just the biggest volume player. We want to concentrate
on leadership in the eyes of our customers and consumers.
We want a perceived leadership,” says John Nicholas, managing
director (commercial), Tetley Group.
A small player can be seen as a leader, not by being the biggest
but by being the most innovative and expert in its category.
“You have to be very clear about what your brand stands for
in the market and focus on projecting that identity. You should
not try to be all things to everybody. The key is to fight
the brand leader from a different angle by projecting a different
identity. You can then create a bigger business without directly
competing against it,” he concludes.
Ken Pringle, vice chairman, Tetley Group adds, “The risk of
large-scale branding is that you dilute your proposition so
that you have no real salience with any particular group of
either consumers or customers.” He elaborates on his idea
of a ‘lighthouse’ brand. “If you have consumers who are as
passionate about the brand as you are, they become the best
spokespeople for the brand. Ben & Jerry’s ice creams in
the US is one such example.”
Mr Pringle feels that innovation is what differentiates a
product from that of its competitors. He does not consider
a change in flavour a product innovation. “Differentiation
comes from strategy and execution. It’s about having the first
mover advantage in markets. You must differentiate yourself
not just in the brand or the way you communicate with consumers
but in the very nature of the way you operate the business.”
Getting glocal
“Global business is also about recognising that there are
geographic blocks. The phrase, ‘think global, act local,’
plays a very important role in Tata and Tetley,” adds Mr Pringle.
Tea is heavily rooted in local culture and its functional
attributes and taste parameters are very influenced by it.
There would have to be a modification of the blend to ensure
levels of appeal for different markets.
Says Mr Khusrokhan, “You may have a global presence but the
brand strategy and local distribution arrangement have to
be appropriate for the local market.” He believes that a brand
has to be fairly strong in its own market anywhere.
He is clear that Tata Tea is a powerful Indian brand and may
never be as well known globally as in India. Tetley would
therefore be the company's global face. “The Tata Tea brand
may be known in a few countries with large Indian populations
such as the Middle East and the US,” he says.
In the UK, Tetley stands for flavour and strength and is associated
with health to some extent. In developing geographies, flavour
would be a matter of local orientation and Tetley would be
positioned as an international brand with British credentials
in the premium tea bag segment.
Internationally, brands are standardised in terms of super
market and speciality teas. Consumers with the supermarket
mindset are brand loyal but are also tempted by bonus offers.
Mr Khusrokhan is not worried that globally Tetley is known
as Tetley and not a Tata Tea brand. “In the tea industry brands,
in their own right, are so powerful that generally companies
haven't had to use the corporate name behind the brand. For
instance, many people don't know that Taj Mahal tea is a Hindustan
Lever product. They think it comes from Tata Tea. It is only
recently that Unilever has started putting 'Brooke Bond' on
their pack so that people become conscious of the mother brand”.
To create awareness of the Tata name overseas, Tata Tea will
use the words 'a Tata Enterprise' on the Tetley pack.
Recipe
for success
Among
the ingredients, other than brand, that Tata Tea is working
on for the right international mix are the integration of
processes and the synergy of operations.
“We are integrating and trying to work as one virtual company,”
says Mr Khusrokhan. The focus is on having common systems
and creating a global database for market and data collection.
“The greatest synergy is in terms of new growth areas and
in tea buying and blending operations,” he adds.
Under the new growth strategy, certain markets have been identified
where Tata Tea will introduce its brands by way of ‘soft launches’.
These regions include the Gulf countries, West Asia North
Africa (WANA) countries, Syria, Jordan and certain market
in the Far East. The Tetley Group will offer the Tetley brand
in most of the developed markets of the world, as also Pakistan,
Bangladesh and Russia.
“Generally the largest markets will focus on the Tetley brand.
However, there are some markets which we have determined would
be more suitable for the Tata Tea brand, especially those
with large pockets of Indian population,” says Mr Pringle.
“Wherever both the Tata Tea and the Tetley brands co-exist
in one market, Tetley will be positioned as the premium brand,"
says Abhijit Mazumdar, ED–global business division, Tata Tea.
The new entity is also looking at developing altogether new
products.
Tata Tea’s presence in developing markets and Tetley’s in
developed markets will help the cause of both. Says Vijay
Singh, managing director, developing markets, Tetley Group,
“As a consequence of the differential growth rates, almost
70 per cent of the tea consumed in the world is in the developing
markets. These markets largely have either loose or packet
tea and this offers us a long-term opportunity to upgrade
them to tea bags."
"The challenge lies in building the brand as Tetley is a late
entrant and has limited awareness. The other challenge is
that of distribution, which is critical to success. Creating
distribution networks is expensive and time consuming. This
is why we need to develop unique business models that enables
us to leverage distribution either created by our partner,
a joint venture or an alliance,” he adds.
Tetley plans to have a few manufacturing hubs around the world
which won't necessarily be directly connected to their original
domestic markets. It has recently spent some time moving its
sourcing base around. For instance, tea for Australia is now
sourced from India, which will also be the source for some
other developing markets. There is also the joint venture
with the Laksons Group in Pakistan for a tea-blending plant,
and with ACI Ltd in Bangladesh for manufacturing, marketing
and distribution of Tetley. The combine has also opened the
opportunity for Tetley to buy packaging from India and for
both companies to use their joint buying power to negotiate
better worldwide freight prices.
The
companies have created three teams to work on designing integrated
processes. The Commercial and Business Processes Team will
streamline and standardise marketing. The Global Supply Chain
Team will concern itself with raw materials, finished products,
delivery and distribution and the Support Team will look at
finance, research, communications, IT and HR. “We have cut
across individual operation areas and gone though an intense
benchmarking process in Tata Tea, Tetley as well as other
companies. The end result of this exercise will be that we
will have world-class processes that are endemic to the branded
business,” says Percy Siganporia, deputy , Tata Tea. A fourth
team, known as the Growth Team, is looking at geographical
and product category growth.
The cultural integration, which is often an issue in many
a merger or acquisition, has been smooth for Tata Tea and
Tetley. Mr Nicholas says, “We are different but we are learning
from each other. For instance, Tetley is very process oriented
while Tata Tea is quicker to respond and more action-oriented.”
Mr Pringle emphasises, “We have focused on bringing together
skill sets of both teams. We can add to each other’s knowledge
and skills and create business with better value prospects.”
For instance, Tetley is well known for its packaging innovations.
Its round bags in the 1990s were received with greedy gulps
by consumers, who saw it as a faster and better brew. Laminated
packaging replaced cardboard and changed the consumers' perception
on the freshness of tea.
In India, however, taste preference is stronger than brand
loyalty. Says Mr Khusrokhan, “Most consumers have a personal
recipe for making tea and stick to the one brand that gives
them that satisfaction. The name of the game is raising the
consumers’ curiosity, arousing interest and encouraging them
to try something different.”
While
Tetley is standardised, Tata Tea has strong regional brands
and different blends for different areas as each region has
its own taste preference. Speciality and herbal teas are high
growth segments but in India they are a very small, niche
segment. In the US,s cold tea is the biggest segment but again
in India, it is tiny.
Overall,
the conventional black tea market is growing at around one
or two per cent all over the world. Consumption of black tea
in some markets is either static or falling and the competition
comes not just from cold drinks and soft drinks, but even
water. However fruit and herbal tea, ready-to-drink teas and
teas drunk out of home are showing rapid growth.
Tetley and Tata have shaken hands at the right time. They
are sure to concoct a powerful brew to warm the cockles of
every tea lover's heart.
Also read other articles on the
Tata Group and globalisation:
Uploaded
on January 5, 2004
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