The Hindu Business Line : Banking on qualitea

Wagh Bakri, which offers HLL and Tata Tea stiff competition in the Gujarat, MP and Rajasthan tea markets, will bide its time in expanding its presence.

WITH the gradual growth in consumption of tea over the decades, the domestic tea market in India has witnessed a remarkable change. From being one which predominantly consumed loose tea, it has slowly transformed into a brand-dominated packet tea market. The share of the packet teas has increased from a meagre 15 per cent in the early '80s to over 40 per cent now, the market leaders being Hindustan Lever and Tata Tea.

Brands of these market leaders are present all over India. They have region- and consumer taste-specific brands. Despite their marketing acumen and overwhelming presence, both have failed to achieve leadership in some pockets where regional players continue to rule. One such place is Gujarat, which is one of the largest tea-drinking States of India, along with Rajasthan and Madhya Pradesh. Every tea company tries to get healthy market shares in these three States.

The Wagh Bakri group is the market leader in Gujarat. Here, the company sells 15 million kg of tea through its different brands and holds a 25 per cent market share. Gujarat consumes 60 million kg of tea every year and out of it approximately 25-28 million kg is sold in branded packets. In Rajasthan, Wagh Bakri's market share is 20 per cent with sales of 1.5 million kg and in Madhya Pradesh it is the number three player with a 10 per cent share and sales of 0.75 million kg.

The Wagh Bakri group was set up in 1892 in South Africa. Due to Apartheid, the group's founder, Narandas Desai, shifted base to Gujarat with a recommendatory letter from Mahatma Gandhi. Though Wagh Bakri owned estates in South Africa, in India the group concentrated only on retailing and even today does not own a single tea garden. It buys tea from auction houses.

At present, the group operates through three tea companies. The first and the oldest (set up in 1917) is Gujarat Tea Depot Co Ltd which owns the Wagh Bakri brand name. The second is Standard Tea Processing Co which focuses on tea buying and blending. The third is Gujarat Tea Processors & Packers which sells the teas. The group has registered a turnover of Rs 190 crore in 2003-04. In the current financial year, 2004-05, its turnover is expected to cross Rs 200 crore. All the three companies are closely held by the members of the Desai family.

Over the years, the group has almost stopped selling loose tea. Today it is more or less a 100 per cent branded packet tea player. The Wagh Bakri brand was introduced 75 years ago. It was followed by other brands such as Mili, D'ling Tea Chest, Good Morning and Nav Chetan. According to Parag Desai, Director, Wagh Bakri is the umbrella brand and all other brands operate under it. D'ling is the most premium brand. Then it is Good Morning and Mili. Nav Chetan is placed at the lowest rung.

Interestingly, the name Wagh Bakri in Gujarat means `tiger' and `goat.' The registered trademark of the group shows a tiger and a goat drinking tea from the same feeding trough. The group has a socialistic explanation for this logo. The trademark "symbolises the co-existence of the one and all - be it rich and the not-so-rich, the strong and the not-so-strong, the bold and the not-so-bold ..."

"We are not a commodity player. We are a company nurturing brands and selling our products only through our brands. Our products are available from Re 1 pouches to one kg packs. We have 49 different pack sizes. Our products are available in cartoons, jars, pouches and tea bags. We sell a negligible amount of loose tea but only through our own branded outlets. We have six such outlets in Ahmedabad," says Desai.

Leading tea companies have agreed on several occasions that they are facing steep competition from the established regional players and one of them is Wagh Bakri in Gujarat. According to Desai, the group's "immaculate" distribution network had helped it stay ahead of competition.

"We spend a lot of time and energy on our distribution network. Most of the brands focus on cities and to some extent the towns. We have extended this network to the villages. We have built relationships with the shop owners not just in the sophisticated urban localities but even in the rustic villages," he said.

Piyush O. Desai, chairman and the patriarch of the Wagh Bakri group, explained that a proper distribution network is just a supporting structure. The group's goodwill and acceptance among the consumers have been built over the years by regular delivery of good quality tea.

"We have constantly focused on selling good quality tea to our consumers. Today Wagh Bakri and its other brands stand for quality. We have not compromised on it. We are confident that we can increase our market share if we continue to deliver the best quality tea to the consumer. On this account nobody will be able defeat us with any sort of marketing gimmick or promotional programme," says Desai.

He is also critical of competing brands. According to him, a large number of tea packaging companies are compromising on the quality and concentrating on promotional activities instead. In the long run it would not prove beneficial to them because consumers would dump the brand once the promotions are over.

On this philosophy Wagh Bakri is trying to become a leader in Rajasthan and Madhya Pradesh. The group is not aggressively pushing for market shares in these two States. Instead it wants to follow a slow-and-steady growth path.

According to Chairman Desai, the group can grab market shares with attractive promotional offers. However, there is always the danger of losing these shares in tougher times. "Instead, if we can grow on a solid footing through the distribution of our quality products, we can negate any fear of an early erosion of our market share. That is the reason we are not selling our products everywhere in India. We are confident that our quality will attract new consumers anywhere in the country but there is no point in becoming just one player among so many others," he said.

A senior executive of a rival tea company based in Kolkata agreed that Wagh Bakri is a strong regional player. Its strength lies mostly in Gujarat where it has been very popular over the years. "It has become more of a tradition in that region. Wagh Bakri has inherited it and nurtured it too. Gujaratis love this brand," he said. Though Wagh Bakri has spread its wings to Rajasthan and Madhya Pradesh, the executive said that its strength is "limited" to just one State.

On the quality of Wagh Bakri's products, the marketing chief of another tea company, a significant national player, noted that it is present in the market with different variants of quality at different price points. "Like other players they have a presence in every sector of the market," he said.

The group has also opened a tea parlour in Jaipur to introduce its products to consumers. When asked whether it would consider tea parlours as a secondary business operation, the group's top brass didn't offer a positive response. For them it will remain as the one exception because in all tea parlours in India, they say, the accompanying food and snacks remain the top billed items, not the beverage itself.

The group will also not integrate its operations backward with acquisitions of tea estates. According to Paras Desai, a Director of the group who oversees tea purchases), Wagh Bakri would not like to enter "untested" territory. "We are happy buying tea from the auction houses. We will ask the producers to manufacture even better quality of tea," he said.

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