05-04-2012, 12:42 PM
ANALYSIS OF TATA TEA IN INDIAN TEA INDUSTRY AND ITS COMPARISON WITH HUL
Indian Tea Industry:
The tea industry in India is about 170 years old. It occupies an important place and plays a very
useful part in the national economy. India produces 30% of the total tea supply of world. The total
turnover of Indian tea industry is around 8000 crores. India produced around 945 Kilo tonnes of tea in
2008 rising from 850 kilo tonnes in 1999
HERFINDAHL INDEX OF INDIAN TEA INDUSTRY
Herfindahl index of Indian tea industry is 0.07. This value is very small and it shows a highly
competitive monopolistic competitive market. The competition in the industry is mainly based on
product differentiation. Each company tries to differentiate its product to cater different customers.
Eg. Masala tea, leaf tea, dust tea, etc.There are a large number of companies in the market
Economic Analysis of Tata Tea
Tata Tea has a market share of around 15% and it lies at second place in the market in terms of value.
HUL is the market leader with 20.2% market share while Mcleod Russel lies at 8%. (Figure 3)
Tata Tea also suffered in the period 2000-03 due to slowdown in the Indian Tea Industry. Its sales
went down and profit became negligent. But Tata Tea came back strongly in 2004 while still other
companies were fighting to survive.
COMPARISON OF TATA TEA WITH HUL
HUL is the market leader in the industry with 20.2% of market share (value). It operates under its
two brands, Lipton and Brooke Bond under which it has several sub-brands like Taaza, TajMahal,
Green Label, etc. Apart from producing tea from its own estates, HUL also purchases finished goods
from third party vendors at cheap rates. The average price at which HUL sells its products is Rs.
170/kg which is around Rs. 8 higher than that of Tata Tea which is one of the reasons why HUL has
greater revenue than Tata Tea.
CONCLUSION
Indian Tea Industry is a growth industry and its domestic demand/consumption is increasing.
India is consuming 75% of its total production in domestic market. Although the exports are on the
lower side, but they are showing signs of improvement. (Figure 8)
The war between both tea giants will continue to be there with both companies making strategies to be
the market leader. HUL has entered into low end segment with its new product “Sehatmand” thus
covering whole of tea market. It has also started aggressive counter advertisement.
Tata Tea is planning to keep working on its “Jaago Re” campaign. It is targeting rural markets where
there is large scope of growth as none of the brands is a lot penetrated in the rural market. Tata Tea is
also working to control its costs and so far it has succeeded to some extent. Another move is that it is
planning to integrate its coffee and bottling business with tea business to achieve economies of scale.
We have to wait and watch who wins this war for market leadership in tea industry.