The Hindu Business Line : Tea industry must focus on aggressive promotion, marketing strategies

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Tea industry must focus on aggressive promotion, marketing strategies

P.S. Sundar

LOOSE tea is losing its share to packet teas and tea bags in the Russian marketand in the rest of Common wealth of Independent States (CIS) nations. The UK and the US no longer market loose tea. Apart from packet teas and tea bags, ready-to-drink tea is fast catching up.

It is estimated that the ready-to-drink tea market has grown 10 times in the last 15 years and is now worth over $2.5 billion.

In Pakistan, too, packet teas are fast substituting loose tea. In Poland, Egypt and the UAE where India wants to plant a firm foot, loose tea has no significant share.

Loose tea continues to be sold predominantly only in smaller markets such as Sudan and Syria. Packet teas, tea bags and ready-to-drink teas are counted as value-addition and the cash-rich markets are deep into these segments. In the ready-to-drink segment, there is lot of experimentation with regard to flavours. Unless the Indian tea industry moves up the value chain ladder, there is little scope for it to win over competitors in the New Year, and beyond. This becomes significant in the context of the industry preparing itself to survive the challenges posed by global over-supply.

The over-supply of around two million kg a year in the late nineties rose to 50 million kg last year. The Food and Agriculture Organisation has predicted that this would rise to around 98 million kg by 2014.

This is a serious challenge because there would be no point in continuing with investment on producing tea that is not saleable. . In the case of over-supply, teas can be sold only when the prices are slashed; but how low can an industry go in the price war? Only to the extent of absorbing the losses. But, should one remain in the business to earn profits or to absorb losses? To survive in such a situation, the industry should either regulate the supplies, activate the demand or do both simultaneously.

Supply regulation does not mean automatic reduction in production. It deals with the industry's expertise in keeping the supply chain attractive to consumers. This means getting rid of poor quality teas with low value but high volume, which pull down the prices, from supply chain. There should not be an excess supply of teas in the guise of `plain and medium grades' than what is needed for blending for the mid-range shelves.

India should step up its branded products, popularise the quality logos and capture the high-end markets with its packets.

The industry must focus on aggressive promotion and marketing strategies, emphasising the health benefits of drinking Indian teas. Sri Lanka has marched ahead on this task and Kenya is following suit. They have to do this because they depend on exports to siphon off around 95 per cent of their production.

But, to that extent, India will lose its foreign buyers. The impact is already visible. While Sri Lankan tea earns around $1.77 a kg and Kenyan $1.54, India has to lower the price to around $1.42 to beat the competition. The South Indian teas, which are over-dependent on exports, are bought for $1 or less on an average.

This does not automatically mean that the Indian industry can sell all its teas in the home market. Here too, packet teas and ready-to-drink teas are fast catching up. The Indian market cannot be regarded as a residue platform to siphon off the tea unwanted abroad.

Indians drink tea worth around Rs 5,000 crore annually; that is why the whole world has an eye on entering India. Besides supplying quality tea, it is time the industry treated the home market as a prime outlet with exclusive showrooms, airport kiosks and health outlets.

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