The Hindu Business Line : HUL brews a bigger business

Last year Harish Manwani, Chairman, Hindustan Unilever Ltd (HUL), said he believed in value creation and was consolidating the company’s tea portfolio by developing value leadership. After dominating the premium end of the tea market, HUL is no w changing tack. Not content with being a value leader (with a 23 per cent share), it now wants to dominate in terms of volume as well and has decided to enter the economy segment, test-marketing a new brand, Brooke Bond Sehatmand. As its name suggests, the brand is positioned on the health and wellness plank and is expected to fulfil the vitamin need gaps in the lower strata of society. With this, HUL believes it would have a presence in the entire tea market.

“All these years we operated in just 33 per cent of the tea market. Considering 70 per cent of the category exists in the lower end, we would be now be operating in 100 per cent of the market,” says Vikram Grover, Category Head (Beverages), HUL. Pitting its brand against Tata Tea’s Agni, Brooke Bond Sehatmand is going to be the volume driver in HUL’s tea portfolio. “There is a large segment of the target group which is deficient in vitamins and we have launched in States such as Madhya Pradesh and Bihar where the opportunities lie. There is still no brand with a health proposition at the bottom of the market,” claims Grover, who believes that differentiation will be the key to this brand’s success.

The company claims that three cups of the tea guarantees delivery of 50 per cent of the recommended dietary allowance of added B Vitamins required by a person. It has also roped in Indian Institute of Development Management (IIDM) to launch Sehatmand Parivar – Sehatmand Bharat Abhiyaan, a movement with a mission to empower people to combat micronutrient deficiency through education in health and nutrition. Along with IIDM, Gram Panchayats and various governmental and non-governmental bodies are organising campaigns to build awareness on the importance and sources of nutrition, health and vitamins across villages in Madhya Pradesh.

Second foray

The cup that cheers … and nourishes.

However, this is not the first time that HUL is entering the economy segment. Its A1 Tea brand was sold mainly through the wholesale channel but discontinued to bring in a new offering in the same space. In fact, apart from Tata Agni, there are other regional brands such as Mili (from the Gujarat-based Wagh Bakri Tea Group) already present in this space. According to Parag Desai, Director, Gujarat Processors & Packers, Wagh Bakri Tea Group, “The chances of HUL succeeding in the economy segment are remote as it had to withdraw its A1 brand in the past due to quality issues. This is not the first time that HUL has tried to enter the economy segment. Even Taaza was a mass tea brand until the time it was brought under the Brooke Bond umbrella.” However, HUL denies having withdrawn its A1 tea brand completely from the market. “We continue to sell A1 in certain parts of the country although we have stopped supporting it under Brooke Bond,” states Grover.

But having spent sufficiently on brand building, HUL has been in a position to raise prices and upgrade its tea brands with new positioning to justify its price points. The hierarchy of price points goes from Brooke Bond Sehatmand at the bottom (at Rs 160 a kg) followed by Brooke Bond Taaza (at Rs 230 a kg) and Brooke Bond Red Label, Brooke Bond Taj Mahal and Lipton at the premium end of the market. “Today we have a product mix which is differentiated and we are leveraging our branding, which is going to be the formula for success,” elaborates Grover.

Analysts, however, claim that with tea prices rising globally, operating margins have been under pressure and that it is natural for HUL to tap into the economy segment at this point in time. However, Grover claims that HUL is well insulated from the vagaries of the global markets as its brands have been straddling every segment and price point. “As we have invested in our brands we have been able to move prices. This has led to both top line and bottom line growth for our brands,” he adds.

Competition from both local brands and Tata Tea has been threatening its volume shares for a while and it is high time it moved away to focus at the bottom of the market. But succeeding at the bottom end is not going to be easy with mostly regional brands dominating this space. “It would be tough for Levers to enter the economy segment as local brands will have an advantage in terms of operational costs,” states a brand manager of a regional tea brand.

However, the tea category has been growing at 12 per cent and the growth is faster at the lower end of the market today than the premium end today.

New focus

While in the past, HUL has been growing its premium tea portfolio with products such as speciality teas under Lipton and dessert teas under Brooke Bond, today such initiatives have been dropped in favour of growing the tea bag category. Its new commercial for Brooke Bond shows its brand ambassador Saif Ali Khan describing the different strength of tea bags (light, medium, dark). “We believe we are stronger in the segments of tomorrow than in the segments of today. Our share on the tea bag segment is in excess of 40 per cent today and is a segment of the future,” explains Grover. Investing in new categories and channels, HUL believes that modern trade and the out-of-home market will be the two channels which will drive future growth for the category. “Even modern trade is a channel of the future where we have a 40 per cent share today and through Lipton we dominate the OOH market today,” claims Grover.

HUL continues to rejuvenate its brands on the health and wellness platform. Recently, it re-launched its Lipton Yellow Label brand, emphasising the presence of theanine, an amino acid present in tea which improves mental alertness. In the past its Brooke Bond Red Label brand was also re-positioned as a natural care brand.

But just getting on to the wellness bandwagon is not going to be enough. Tata Tea is also seeking the same platform for its brands and has declared that it wants to build a health- and wellness-based portfolio. However, HUL is betting on the future drivers of growth such as modern trade and the OOH market, as it continues to test launch new tea offerings with an attempt to straddle the entire tea category.

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Functional teas, a key strategy for Brooke Bond

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