Tata Tea vs. HUL Tea- Vashishth & Group

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Transcript of Tata Tea vs. HUL Tea- Vashishth & Group

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TATA TEA V/S HINDUSTAN UNILEVER LIMITED

BY:HARDIK PUJARI MIHIR KERIWALA PAVAN TIWARI VASHISHTH DAVE

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CONTENTS1. INDIAN TEA HISTORY............................................................3 2. GLOBAL TEA INDUSTRY.......................................................5 3. INDIAS SHARE IN WORLD PRODUCTION.........................6 4. SWOT ANALYSIS OF INDIAN TEA INDUSTRY..................7 5. PORTERS FIVE FORCES........................................................8 6. FEATURES OF INDIAN TEA INDUSTRY..............................9 7. INTRODUCTION OF TATA TEA...........................................11 8. SWOT ANALYSIS OF TATA TEA.........................................13 9. BUSINESS LEVEL STRATEGY.............................................14 10. MARKETING STRATEGY.....................................................14 11. PROMOTIONAL STRATEGY...............................................14 12. INTRODUCTION OF HINDUSTAN UNILEVER LTD.........16 13. PRODUCTS OF HUL.............................................................17 14. SWOT ANALYSIS OF HUL...................................................17 15. PRESENT STRATEGY.........................................................18 16. BCG MATRIX OF TATA TEA & HUL.................................19 17. RECOMMENDATIONS ON TOP 2 PLAYERS.....................20

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INDIA TEA HISTORY:Tea is an agro-based commodity and is subjected to vagaries of nature. Despite adverse agro climatic condition experienced in tea growing areas in many years, Indian Tea Plantation Industry is able to maintain substantial growth in relation to volume of Indian tea production during the last one decade. Tea is an essential item of domestic consumption and is the major beverage in India. Tea is also considered as the cheapest beverage amongst the beverages available in India. Tea Industry provides gainful direct employment to more than a million workers mainly drawn from the backward and socially weaker section of the society. It is also a substantial foreign exchange earner and provides sizeable amount of revenue to the State and Central Exchequer. The total turnover of the Indian tea industry is in the vicinity of Rs.9000 Crs. Presently, Indian tea industry is having (as on 18.12.2010) 1692 registered Tea Manufacturers 2200 registered Tea Exporters 5848 number of registered tea buyers Nine tea Auction centres. The tea industry in India is about 172 years old. It occupies an important place and plays a very useful part in the national economy. Robert Bruce in 1823 discovered tea plants growing wild in upper Brahmaputra Valley. In 1838 the first Indian tea from Assam was sent to United Kingdom for public sale. Thereafter, it was extended to other parts of the country between 50's and 60's of the last century. However, owing to certain specific soil and climatic requirements its cultivation was confined to only certain parts of the country.

Market Growth Rates1990 - 1996 1996 - 2001 2001 - 2006 2004 - 2009 2009 - 2014

% 1.30% 2.70% 2.20% 1.80% 2.00%

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market growth rate3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 1990 - 1996 1996 - 2001 2001 - 2006 2004 - 2009 2009 - 2014 market growth rate

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GLOBAL TEA INDUSTRY:The global tea industry is largely dominated by India the second largest producer and the largest consumer of tea. India is succeeded China and followed by Kenya Sri Lanka, Vietnam and Indonesia in the production hierarchy of countries. The tea industry is peculiar, the soil characteristics, the climate and the rainfall determine the character of the tea and its taste. Tea affects the taste buds; therefore, it is difficult to replace a particular variety with a substitute. This explains why certain types are favoured by certain countries: for example, the CIS (commonwealth of independent states i.e. Russia) countries favour Indian and Sri Lankan teas. UK and Pakistan favour Kenyan teas. India accounts for 26 per cent of world's production. While Sri Lanka, Kenya and Indonesia are the other leading producers; their combined production is lower than that of India. What makes India an interesting object of study is that its size is no millstone around its neck; its production growth between 1996 and 1998 at 5.63 per cent was way ahead of the increase in world production of one per cent only. In 2008, world tea production reached over 4.73 million tonnes. Producing 1.16 billion kilos (2.56billion pounds) of tea per year, China is the number one source for tea on the planet. At 980million kilos (2.16 billion pounds), India stands at number two. Kenya and Sri Lanka follow. When it comes to exports, China ships out 297 million kilos (654.78 million pounds) of all types of tea whereas India, with primarily black tea, moves 203 million kilos (429.9 million pounds). This ranking is fairly recent. Prior to the 1960s, India was the top producer and exporter. For example, in 1955, India shipped out 165 million kilos (363.77 million pounds) of her total production of 301 million kilos (663.59 million pounds). The fierce rivalry with Sri Lanka saw the two jockeying back and forth for top exporter position from the 1960s through the 80s. But in 1991, Sri Lanka surpassed India for good with 211 million kilos (465.12 million pounds). China caught up in 1993 with 201 million kilos (443.13 million pounds) to Indias 175 (385.81million pounds). Kenyas exports exceeded Indias that same year with 188 million kilos (414.47million pounds). For total production, India has taken second place to China since 2006. (All figures come from respective countries' tea boards.)

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So, while other sources are ever more aggressive in their outputs, India seems to be lagging. It is no surprise that China has made fast gains on the rest of the pack, given the increases the country has made in its other industries. But why is this happening in tea, specifically? What is the fundamental reason, if there is one, for Indias slip in tea supremacy? In my presentation and during the lively question-and-answer that followed, I offered a few ideas that seemed to catch the audiences attention.

INDIAS SHARE IN WORLD PRODUCTION

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SWOT ANALYSIS OF TEA INDUSTRY OF INDIA:Strength: Demand for tea has been growing at some 2% per annum and should accelerate further. Technical & Manpower Skill: Due to a huge population base in India Technical & Manpower Skill is available in abundant. Good Research Support by tea growers has will help industry grow further. Weaknesses: Labour intensive industry: The second generation labours are reluctant to join this industry hence it could pose a problem of skilled labour in the near future. No Effective Cost Management system adopted by companies and other regulatory bodies. Supply from more efficient players like Kenya, China, Srilanka Declining Export of India over the years. Opportunities: Export Potential if India can increase its production capacity To make tea more acceptable and fashionable like coffee To come up with new flavours/formulation of the tea, tea houses etc to popularize the concept of tea in India.

Large untapped rural market for branded tea companies like Hindustan Unilever (HUL) and Tata Tea. Threats: Global competition Low Cost in some countries like China, Sri Lanka and Kenya. Import of Tea from other countries. Cost escalation on account of increase in the cost of production

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PORTER'S FIVE FORCES:threats of new competitors

bargaining power supplier

competitive rivalry

bargaining power of customer

threat of substitute product

Industry Rivalry (High): There are approximately700 tea companies in India hence there is intense rivalry amongst them. Market is dominated by a large number of unorganized players. Industry growth is slow. There are low switching costs.

Bargaining Power of Buyers (High): There is a large numbers of buyers purchasing the product. The bargaining power of buyers is extremely high as the buyers have many options available. Not much product differentiation in terms of taste also low switching cost. Buyers purchase a large proportion of the industrys total output.

Bargaining Power of suppliers (Low) There is large number of producers of tea in India. There are substitute like coffee available. Suppliers product creates low switching cost.

Threat of substitutes (Moderate) Substitutes coffee, cold drinks, juice (young generation new to tea) Existing consumers are loyal. Substitutes price may be lower.

Threats of new entrance (high) Large untapped rural market for branded tea segment in rural India and Indian tea in global markets. Encouraging government policies like food and beverage cost.

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Special Features of Indian Tea Industry: Production dependent of agro-climatic conditions. Same plant and same agro-practices give variations in quality in different regions. Product Life is for limited period. Labour intensive. High Cost due to high input cost. No priority for Scientific Cost Management. Huge proportion old tea & Low Productivity. Low investment in Development Programme

TOP 2 PLAYERS IN INDIAN TEA INDUSTRY

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TATA TEA

HUL

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Company Profile:Tata Tea Limited, also known as Tata-Tetley, is the world's second largest manufacturer and distributor of tea. Tata Tea is the largest vertically integrated tea firm in the world, from its plantation activity through to its packaging and marketing initiatives. Tata Tea Limited, together with its subsidiaries, engages in processing, producing, marketing, and distributing tea products primarily in India. It also involves in the cultivation and manufacture of black tea and instant tea, tea buying/blending, and sale of tea in bulk or value added form. It offers tea primarily un