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Tata Tea

Tata Tea. Roll Nos. 41 - 50. Strengths - Tea Industry. Tea can be considered as a health drink (known of its antioxidant properties)   Demand for tea has been growing at some 2% per annum and should accelerate further . Weaknesses.

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Tata Tea

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  1. Tata Tea Roll Nos. 41 - 50

  2. Strengths - Tea Industry • Tea can be considered as a health drink (known of its antioxidant properties)   • Demand for tea has been growing at some 2% per annum and should accelerate further 

  3. Weaknesses • Draconian Indian labor laws, do more harm to industry and labor.  • Labor intensive industry so related problems  • Limited scalability; it’s a US $ 5 billion market globally and growing at a very slow pace.  • Supply from more efficient players like Kenya, Vietnam, Sri lanka  • Climate change may harm tea growing region, escalating prices and hampering the capacity.

  4. Opportunities • Visible trend towards the health drink; up to the tea industry to make aware consuming population of the facts.  • Tea has a distinct advantage over more popular beverage – coffee  • To make tea more acceptable and fashionable like coffee  • To come up with new flavors/formulation of the tea

  5. Threats • To retain young population from being lured by multinationals to aerated and flavored drinks.  • Labor problems • Cost escalation  • Fragmented production

  6. Tata Tea Vision • Be India’s foremost tea based beverage company Mission • Achieve market and thought leadership for branded tea in India • Be recognised as the foremost innovator in tea and tea based beverage solutions • Drive long term profitable growth • Co-create enhanced value for all stakeholders • Make Tata tea a great place to work

  7. Company History • A part of the Tata group of companies, one of the largest and most respected business houses of India. • Tata Tea was formed in 1983. • Headquartered in Kolkata, India. • Set up in 1964 as a joint venture with UK-based James Finlay. • Tata Tea has been involved in the tea extract business for last 40 odd years.

  8. Business of Tata Tea • Leads market share (in volume) in India • Hot beverages • Tata Tea, Tetley, Kanan Devan, Chakra Gold, Gemini • Mineral water • Non carbonated drinks • Chai Unchai outlets

  9. SWOT (Tata Tea) STRENGTHS • Market leader in tea segment • Backward integration • Wide market coverage WEAKNESS • Concentration risk over single category

  10. SWOT (Tata Tea) contd… OPPORTUNITES • Potential in fruit & herbal teas • Global existence • Low penetration level THREAT • Competition from regional and local players

  11. Porter’s Model Threat of new entrants: • High level • Encouraging govt. policies • Easy to imitate Bargaining power of suppliers: • High; as suppliers are few Bargaining power of buyers: • Low; as demand is high • Loyalty for taste

  12. Porter’s Model (contd.)… Threat of substitute products: • Moderate to high • Substitutes – Coffee, Cold drinks, etc (young generation new to tea) • Existing consumers are loyal Competition: • Intense competition • Lipton, Brooke bond, other local players, loose tea market • Ad-spend of cos. : indication of competition

  13. Internal environment analysis Resources : • 51 tea estates in states of Assam, West Bengal, Tamil Nadu, Kerela. • Area of 26,500 hectares under tea cultivation. • Produces about 60 million kg of black tea annually. • Subsidiaries & Associated companies • Overseas business Capabilities • Distribution system. • Strong and trusted management. • Research and development. • Marketing. Core competencies. • Brand name • Distribution network

  14. Business Level Strategies Bought leaf factories & co-operatives to change the structure of green leaf production Un-remunerative operations are 1st given the opportunity to transform and if not hived off Re-organisation of 20 tea estates in clusters of 5 Identified branded tea as its thrust area To exit the beverage retailing business to focus on branded products

  15. Business Level Strategies • Tata Coffee sold off its stake in Barista, no plans of re-entering the business • Introducing drinks like TiON, all over India • ‘Jaago Re’ campaign followed by the 'Aaj Se Khilana Bandh, Pilana Shuru' campaign to target the youth for voting and work against corruption • Focus on brands like Chakra Gold, Gemini and Kanan Devan in regions where they are strong

  16. Competitive Rivalry and Competitive Dynamics • Competitors: Firms operating in the same market, offering similar products and targeting similar customers. • Competitive Dynamics: Ongoing actions and responses taking place between all firms competing within a market for advantageous positions. • Competitive Rivalry: Ongoing actions and responses taking place between an individual firmand its competitors for advantageous market position.

  17. Competitive Rivalry v/s Dynamics • Competitive Dynamics (All firms) • Market speed (slow-cycle, fast-cycle, and standard-cycle • Effects of market speed on actions and responses of all competitors in the market • Competitive Rivalry (Individual firms) • Market commonality and resource similarity • Awareness, motivation and ability • First mover incentives, size and quality

  18. Drivers of Competitive Behavior • Awareness • Motivation • Ability • Competitive Analysis • Market commonality • Resource similarity Feedback • Inter firm Rivalry • Likelihood of Attack • First-mover incentives • Organizational size • Quality • Likelihood of Response • Type of competitive action • Reputation • Market dependence • Outcomes • Market position • Financial performance A Model of Competitive Rivalry

  19. Competitive Dynamics

  20. TATA TEA in Practical Era… Competitors with their Market Share & Profit:

  21. Competitive Rivalry & Dynamics Rivalry • The competitors are using same resources to acquiring product here Tea leaves. • It is working for • To use to innovate products e.g. Tata Tea Gold • To give aggressive advertising • To invent or modify the product in R&D e.g. Tetley green Tea It become difficult for competitors to acquire market share of Tata Tea. • The company has loyal customers. Approx 52.37% of market share is captured by Tata tea. • Because of it’s quality standard. • Variety of brands.

  22. contd… Dynamics: • Tea companies have competitive advantage of slow cycle market. In which - Tea needs less innovation & upgradation - All firms are like to protect their market share by maintaining quality. • The firm Tata tea enjoys global market share of more than 38.76% ( • Market is very sustainable for Tea because the user of tea are not ready to change their preferences for long time period.

  23. Revenue by Business Segment

  24. Corporate Level Strategy • Started out with tea extract business, owned tea plantations • Later on ventured into coffee business as both drinks go hand in hand (Related diversification) • Entered the business of packaged drinking water (Himalaya) • Now also venturing into RTD beverages (introduced a juice drink Tion in India) , seeking more opportunities in this space • The Co entered in these businesses keeping in line with their focus on providing “a refreshing drink for a thirsty world” • Taken a conscious decision to hive off their plantation business

  25. Corporate Level Strategy • Taken a conscious decision to hive off their plantation business • Tata Tea no longer a tea company, it is a “beverage company” • The Co entered in these businesses keeping in line with their focus on providing “a refreshing drink for a thirsty world” • New strategy - To diversify away from its core categories of tea and coffee and build positions in high growth areas of ‘good for you’ beverage through strong product innovation and growth.

  26. BCG Matrix T o C

  27. M & A’s TATA Tea has 3 subsidiary – Tata tea inc US, Tata Coffee, Tata Tea GB (formed to acquire and add Tetley into the group) • Tata Tea along with Tata sons acquired Tetley group of UK – 100% owned for $453 million in Feb 2000. • Tata Tea GB subsidiary acquired Joekels Tea Packers of South Africa with 33% for $0.91 million in Sep 2006. • Tata Tea GB subsidiary acquired JEMCA Czech Republic $11.60million in May 2006 • Tata Tea GB acquired Good Earth Corporation & FMali Herb Inc – US - 100% owned for $31 million in Oct 2005. • Tata Tea Tetley subsidiary acquired Vitax and Flosana trademarks – Poland.

  28. Restructuring • Restructuring of the organization structure worldwide   • Strategy - Focused on 'Good for you' drinks along with coffee and tea - more like ready to drink beverages (have launched Tion drink in Chennai and planning national launch)  • Divest - Pulled out of retailing business - sold off stake in Barista and moved out of ChaiUnchai chain of tea stores in Bangalore  • Emphasis on R&D - innovation (disruptive) in tea and coffee business - (first innovation in ready to drink with tea bags of liquid tea - Tetley fusion) • Re-branding exercise for Tata Tea name • Restructuring the operations in North India 

  29. Revenue by Geography

  30. International Strategy • To be world’s no.1 tea-based beverage company • West Asia, South America and Africa to be targeted • Will soon begin operations in France and Australia • Regional focus to be on brands like Vitax, Jemca, Eight O'Clock Coffee, etc

  31. Co-operative Strategies

  32. Thank You

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