1

A project report on
~A STUDY INTO THE FMCG SECTOR IN INDIA
(TEA INDUSTRY)

2 20 01 11 1

SUBMITTED BY
Vishal Tripathi
ROLL NO. 10113

UNDER THE GUIDANCE OF
Dr. Taruna Gautam




Department Of Management
INSTITUTE OF MANAGEMENT EDUCATION, SAHIBABAD



















CERTIFICATE


This is to certiIy that the p pr rj je ec ct t study 990/ ~ ~A STUDY INTO THE FMCG
SECTOR IN INDIA
(TEA INDUSTRY) is a bonaIied work carried out by Vishal Trpathi in
partial IulIillment oI the requirement Ior the award oI Post Graduate Diploma in
Management approved by AICTE under our guidance and direction.



Guided by. Dr. Taruna Gautam


Signature:











ACKNOWLEDGEMENTS



It is my pleasure and honor to present this report and say a Iew heartIelt words
Ior the people who were part oI this report in numerous ways, people who gave
a lot oI support right Irom the stage oI conceiving the project.
I am extremely grateIul to my guided by Dr. Taruna Gautam, who has been a
motivator and source oI inspiration. His uninhibited guidance and valuable tips
have been responsible to put in my best eIIorts in working on this project. My
special thanks to him Ior giving me a direction Ior the project.


























OB1ECTIVES OF THE STUDY

The purpose oI this study is to get Iamiliarized with the Indian Tea Industry and
its marketing to International markets. In order to accomplish this objective, the
present project covers the Iollowing objectives:

O To highlight the present Market Scenario oI India Tea Industry.

O To examine the prospects oI India Tea Industry in the International
Market

O To identiIy the problems oI India Tea Industry Export to the International
Market.
O To know the scenario oI World Tea Market.
O To recommend some corrective measures to resolve the problems

























METHODOLOGY OF THE STUDY


This research is an elaborate study to enable us to understand the whole scenario
oI India Tea Industry to the International market. Collected data and
inIormation were tabulated, processed and analyzed critically in order to make
the study more inIormative, IruitIul and purposeIul.
In preparing this report I have used secondary data and inIormation .Most oI the
data have been collected Irom secondary sources. The secondary inIormation is
collected Irom various, articles related with the Tea Plantation, Tea Marketing,
Newspapers, India Tea Board, and Web portal, International Tea Boards, EPB,
Food and Agricultural Organization (FAO) etc.

























Content


















PARTICULARS PAGE No.
1.
1. INTRODUCTION
7
Policies and Iood Laws
10
Key players in India
11
2.
. History OI tea
1
Global tea industry
Global competition
Characteristics oI tea Industry
SWOT Analysis oI Indian Tea industry
1
0
1

3.
Top Players in tea industry and their SWOT
analysis
1
Recommendation to improve their market share
1
4.
ReIerences

5.
Conclusion

7


















CHAPTER 1
FAST MOVING CONSUMER GOODS (FMCG)





















We regularly talk about things like tea, butter, potato chips, toothpastes, razors,
household care products, packaged Iood and beverages, etc. But do we know
under which category these things come? They are called FMCGs. FMCG is an
acronym Ior Fast Moving Consumer Goods, which reIer to things that we buy
Irom local supermarkets on daily basis, the things that have high turnover and
are relatively cheaper and there cost is relatively low.
FMCG industry, alternatively called as CPG (Consumer packaged goods)
industry primarily deals with the production, distribution and marketing oI
consumer packaged goods. The Fast Moving Consumer Goods (FMCG) is those
consumables which are normally consumed by the consumers at a regular
interval. Some oI the prime activities oI FMCG industry are selling, marketing,
Iinancing, purchasing, etc. The industry also engaged in operations, supply
chain, production and general management. This project helps us understand
the Tea Markets as part oI the FMCG industry.


Key Segments:

The FMCG sector consists oI Iour product categories, each with its own hosts oI
products that have relatively quick turnover and low costs:























Household Care

Fabric wash (laundry soaps and
synthetic detergents);
Household Cleaners(dish/utensil
cleaners, Iloor cleaners, toilet
cleaners, air Iresheners,
insecticides and mosquito
repellents, metal polish and
Iurniture polish)




Personal Care

Oral care, hair care, skin
care, personal wash
(soaps); cosmetics and
toiletries; deodorants;
perIumes; Ieminine
hygiene; paper products.



Food & Beverage

Health beverages; Tea; soIt
drinks; products (biscuits,
bread, cakes); snack Iood;
chocolates; ice cream; coIIee;
soIt drinks; processed Iruits,
vegetables; dairy products;
bottled water; branded











10

POLICIES:

India has enacted policies aimed at attaining international competitiveness
through liIting oI the
quantitative restrictions, reduced excise duties, automatic Ioreign investment
and Iood laws
resulting in an environment that Iosters growth. 100 per cent export oriented
units can be set up
by government approval and use oI Ioreign brand names is now Ireely
permitted.


Food laws:

Consumer protection against adulterated Iood has been brought to the Iore by
"The Prevention oIFood Adulteration Act (PFA), 1", which applies to
domestic and imported Iood commodities, encompassing Iood colour and
preservatives, pesticide residues, packaging, labeling and
Regulation oI sales

















11


KEY PLAYERS IN THE INDIAN FMCG INDUSTRY IN INDIA:

Company
1. Hindustan Unilever Ltd.
. ITC (Indian Tobacco Company)
. Nestle India
. GCMMF (AMUL)
. Dabur India Ltd
. Asian Paints (India)
7. Cadbury India
. Britannia Industries Ltd.
. Procter & Gamble Hygiene and Health Care
10. Marico Industries Ltd


























1




















CHAPTER 2
HISTORY OF TEA

















1



Little did Chinese Emperor Shen Nung realize that in 77 B.C., when dried
leaves blew into his cup oI hot water, the beverage he discovered would cause
sensations around the world. During this time, water was always boiled Ior
hygienic reasons. The pleasant aroma and reIreshing taste enchanted him and
soon everyone in the realm was drinking tea.
Japan was introduced to tea by Yensei, a returning Buddhist priest residing in
China at the time oI the discovery. Tea was immediately embraced by Japanese
society and resulted in the creation oI the intricate Japanese Tea Ceremony,
elevating tea to an art Iorm.
Tea continued to travel throughout the Orient and it was during the time oI the
Europe annex plorers tea made its cultural broad jump. The East India Tea
Company brought tea into Holland but its prohibitive cost oI $100 per pound
kept tea as a rich man's beverage until so much was imported that tea prices Iell
and was sold in small Iood shops.
In 10, Peter Stuyvesant brought tea to the American colonists in New
Amsterdam, later called
New York. Soon the colonists were drinking more tea than all England.
In England, tea gardens, ornate outdoor events with Iancy Iood and tea,
Iireworks and gambling, seemed to sprout up overnight as entertainment centers
oI the day and many British enjoyed the Iestivities oIIered there.
Russia discovered tea when ornate chests oI the dried leaves were sent to Czar
Alexis by the Chinese Embassy in Moscow in 11. It became Russian custom
to sip heavily sweetened tea Irom a glass in a silver holder. Russians also
enjoyed honey or strawberry jam stirred into tea as their ethnic contribution.
Even today, vodka and tea are the national beverages oI Russia.
To recover extensive expenses Irom the French and Indian War, England levied
a huge tax on tea




1



Imported to the colonies, mistakenly believing the colonists were so hooked on
it they'd pay anything to keep their supply coming in. One night the men oI
Boston dressed as Indians, reminiscent oI the French and Indian War stole
aboard the ships docked in the Boston harbor and threw the expensive tea cargo
overboard and into the harbor. England reacted by having a raging Iit, closing
Boston's port and sending Royal troops into occupation oI Boston. Because oI
this, colonists met to discuss these events and declared a revolution.
At one point, England even gave The John Company the power to not only
import tea but to coin
its own money, make peace, declare war and other privileges previously only
held by countries.
In the 10's, America came to the IoreIront as the biggest importer oI tea due
to Iaster clipper
ships and the ability to pay its debts in gold.
A tea plantation owner introduced iced tea to the St. Louis World's Fair in 10.
It was an extremely warm day and his hot tea booth was being passed up by the
crowds in Iavor oI cold drinks. As desperate measure, since he was out time and
money Ior even coming to the Fair, headed ice to the vats oI liquid hot tea and
in the process made it one oI the highlights oI the 10World's Fair.
The tea bag came along as a surprise. Samples oI tea at the turn oI the twentieth
century were given out in small silk bags and instead oI opening the bags, the tea
bag in its entirety was being dropped into hot water by consumers. Quickly, a tea
company sprang into action and patented the tea bag. Thomas J. Lipton was
responsible Ior designing a Iour-sided tea he dubbed the 'Ilo-thru' tea bag, which
allowed tea to steep more quickly in the cup than the customary two-sided bag.
Today tea is grown on tea estates and70 oI the tea we drink is grown in Sri
Lanka, India, Indonesia, Kenya, Argentina and China.





1


The best climates Ior growing tea are those that are tropical or semi-tropical and
tea can be grown on soil that is not Iit Ior growing much oI anything else.
Today there are three basic types oI tea: black, oolong and green and Irom these
three types spring over ,000 cultivated varieties. The leaves are picked at just
the right moment designated by the tea estate manager, then crushed to start the
oxidation process.




























1


GLOBAL TEA INDUSTRY

The global tea industry is largely dominated by India the second largest
producer and the largest consumer oI tea. India is succeeded China and Iollowed
by Kenya Sri Lanka, Vietnam and Indonesia in the production hierarchy oI
countries.
The tea industry is peculiar, the soil characteristics, the climate and the rainIall
determine the character oI the tea and its taste. Tea aIIects the taste buds;
thereIore, it is diIIicult to replace a particular variety with a substitute. This
explains why certain types are Iavored by certain countries: Ior example, the
CIS (commonwealth oI independent states i.e. Russia) countries Iavor Indian
and Sri Lankan teas. UK and Pakistan Iavor Kenyan teas.
India accounts Ior per cent oI world's production. While Sri Lanka, Kenya
and Indonesia are the other leading producers; their combined production is
lower than that oI India. What makes India an interesting object oI study is that
its size is no millstone around its neck; its production growth between 1 and
1 at . per cent was way ahead oI the increase in world production oI one
per cent only.
In 00, world tea production reached over .7 million tones. Producing 1.1
billion kilos (.billion pounds) oI tea per year, China is the number one
source Ior tea on the planet.
At 0million kilos (.1 billion pounds), India stands at number two. Kenya
and Sri Lanka Iollow.
When it comes to exports, China ships out 7 million kilos (.7 million
pounds) oI all types
oI tea whereas India, with primarily black tea, moves 0 million kilos (.
million pounds).




17


This ranking is Iairly recent. Prior to the 10s, India was the top producer and
exporter. For example, in 1, India shipped out 1 million kilos
(.77 million pounds) oI her total production oI 01 million kilos (.
million pounds). The Iierce rivalry with Sri Lanka sawthe two jockeying back
and Iorth Ior top exporter position Irom the 10s through the 0s. Butin 11,
Sri Lanka surpassed India Ior good with 11 million kilos (.1 million
pounds).

China caught up in 1 with 01 million kilos (.1 million pounds) to
India`s 17 (.1million pounds). Kenya`s exports exceeded India`s that
same year with 1 million kilos (1.7million pounds). For total production,
India has taken second place to China since 00. (All Iigures come Irom
respective countries' tea boards.)
So, while other sources are ever more aggressive in their outputs, India seems to
be lagging. It is no surprise that China has made Iast gains on the rest oI the
pack, given the increases the country has made in its other industries. But why
is this happening in tea, speciIically?
What is the Iundamental reason, iI there is one, Ior India`s slip in tea
supremacy? In my presentation and during the lively question-and-answer that
Iollowed, I oIIered a Iew ideas that seemed to catch the audience`s attention.
The Iollow table shows the amount oI tea production (in tones) by leading
countries in recent year











1

INDIA TEA HISTORY:

The tea industry in India is about 17 years old. It occupies an important place
and plays a very useIul part in the national economy. Robert Bruce in 1
discovered tea plants growing wild in upper Brahmaputra Valley. In 1 the
Iirst Indian tea Irom Assam was sent to United Kingdom Ior public sale.
ThereaIter, it was extended to other parts oI the country between 0's and 0's
oI the last century. However, owing to certain speciIic soil and climatic
requirements its cultivation was conIined to only certain parts oI the
country.Tea is an agro-based commodity and is subjected to vagaries oI 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 oI Indian tea production during the last one
decade. Tea is an essential item oI 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 gainIul direct employment
to more than a million workers mainly drawn Irom the backward and socially
weaker section oI the society. It is also a substantial Ioreign exchange earner
and provides sizeable amount oI revenue to the State and Central Exchequer.
The total turnover oI the Indian tea industry is in the vicinity oI Rs.000 Crs.
Presently, Indian tea industry is having (as on 1.1.00)

1 registered Tea ManuIacturers,
00 registered Tea Exporters,
number oI registered tea buyers,
Nine tea Auction centers.





1


The tea industry in India is about 17 years old. It occupies an important place
and plays a very useIul part in the national economy. Robert Bruce in 1
discovered tea plants growing wild in upper Brahmaputra Valley. In 1 the
Iirst Indian tea Irom Assam was sent to United Kingdom Ior public sale.
ThereaIter, it was extended to other parts oI the country between 0's and 0's
oI the last century. However, owing to certain speciIic soil and climatic
requirements its cultivation was conIined to only certain parts oI the country.


Major Tea Growing Regions:

Tea plantations in India are mainly located in rural hills and backward areas oI
North-eastern and Southern States. Major tea growing areas oI the country are
concentrated in Assam, West Bengal, Tamil Nadu and Kerala. The other areas
where tea is grown to a small extent are Karnataka, Tripura, Himachal Pradesh,
Uttaranchal, Arunachal Pradesh, Manipur, Sikkim, Nagaland, Meghalaya,
Mizoram, Bihar and Orissa. Unlike most other tea producing and exporting
countries, India has dual manuIacturing base. India produces both CTC (Crush,
Tear, Curl) and Orthodox teas in addition to green tea. The weight age lies with
the Iormer due to domestic consumers preIerence. Orthodox tea production is
balanced basically with the export demand. Production oI green tea in India is
small. The competitors to India in tea export are Sri Lanka, Kenya, China,
Indonesia and Vietnam.










0


Global competition

The major competitive countries in tea in the world are Sri Lanka, Kenya, China
and Indonesia. China is the major producer oI green tea while Sri Lanka and
Indonesia are producing mainly orthodox varieties oI tea. Kenya is basically a
CTC tea producing country. While India is Iacing competition Irom Sri Lanka
and Indonesia with regard to export oI orthodox teas and Irom China with
regard to green tea export, it is Iacing competition Irom Kenya and Irom other
AIrican countries in exporting CTC teas. Because oI absence oI large domestic
base and due to comparatively small range oI exportable items, Sri Lanka and
Kenya have an edge over India to oIIload their teas in any international markets.
This is one oI the reasons oI higher volume oI export by Sri Lanka and Kenya
compared to India. Another important point is that, U.K has substantial interest
in tea cultivation in Kenya. Most oI the sterling companies, aIter Indianisation
due to implementation oI FERA Act started tea cultivation in Kenya. So, it
makes business sense Ior U.K. to buy tea Irom Kenya and Kenya became the
largest supplier oI tea to U.K
















1




CHARACTERISTICS OF THE INDIA TEA INDUSTRY:


1) Productivity and quality: The art oI plucking, Iine-tuned over the last 00
years, requires two Iresh leaves and a bud to
be plucked manually. Tea productivity can be measured as per unit oI labor
(man year) and per unit oI land (hectare). Mechanized plucking (when labor is
in short supply or expensive) enhances productivity, but with compromise on
quality, as coarse leaves also get plucked. When tea is in short supply, some
producers increase productivity by allowing plucking oI coarse leaves with
Iresh ones. When premium Ior quality rises, producers improve the quality by
compromising on productivity. The productivity also depends on the age oI tea
bushes, genetic material, irrigation, Iertilizer, cultivation techniques, etc.
Replantation (typically oI crop pa) to replace old bushes is done to improve
productivity.

) Labor intensity: This industry is very labor intensive. Labor cost is
generally Iixed and thereIore lower production would result in higher unit cost
oI production. The proportion oI variable elements
in labor cost depends on labor legislation and extent oI casual and temporary
workers employed. II the production suIIers on account oI bad weather or pests,
the per unit cost oI production goes up signiIicantly


3) Long gestation: Tea bushes mature Ior commercial exploitation in -7 years
and remain productive Ior an average 0 to 0 years. Major part oI capital
expenditure is to be incurred in Iirst Iive years, which then yields return over the
next 100 years.











4) Commodity nature: Tea prices Iluctuate widely with demand supply
imbalances. The commodity is perishable and demand is relatively inelastic to
price. While demand has a secular growth rate, supply can vary depending on
climatic conditions in the major tea growing countries. Unlike other
commodities, tea price cycles have no linkage with the general economic cycles,
but with agro-climatic conditions.

5) I nconvenient but healthy drink: Tea is a very inconvenient drink to
brew. The tendency to Iorm a creamy layer oI caIIeine -tannin adds to the
inconvenience. Tea besides having properties oI Iatigue amelioration has
chemicals, which help in maintaining cholesterol levels and in preventing
cancer. However, research work on the subject is not conclusive.

) Organized industry: Tea industry is an organized agro industry. This
implies that labor laws exist and since the dominant mode oI tea trade is through
auctions, a large number oI small producers get Iair prices.

7) Domestic Competition: The major share oI tea market is dominated by
unorganized players. There are about 1000 oI tea brands in India, oI which 0
oI the brands are represented by regional players while the balance oI the 10
is dominated by Tata Tea, Hul, Wag Bakri Chai, Godrej, Sapat International and
others. With the growing shiIt Irom loose to branded tea, regional players are
now expanding their reach and also getting premium with their oIIerings.

Special Features of India Tea Industry:
Production dependent oI agro-climatic conditions
Same plant and same agro-practices give variations in quality in diIIerent
regions
Product LiIe is Ior limited period
Labor intensive
High Cost due to high input cost
No priority Ior ScientiIic Cost Management
Huge proportion old tea & Low Productivity




SWOT ANALYSIS OF TEA INDUSTRY OF INDIA:

Strength:
Demand Ior tea has been growing at some per annum and should
accelerate Iurther
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 Iurther.

Weaknesses:
Labor intensive industry: The second generation labors are reluctant to join
this industry
hence it could pose a problem oI skilled labour in the near Iuture.
No EIIective Cost Management system adopted by companies and other
regulatory
bodies.
Supply Irom more eIIicient players like Kenya, China, Sri lanka
Declining Export oI India over the years.

Opportunities:
Export Potential iI India can increase its production capacity
To make tea more acceptable and Iashionable like coIIee
To come up with new Ilavors/Iormulation oI the tea, tea houses etc to
popularize the concept oI tea in India.
Large untapped rural market Ior branded tea companies lile Hul and Tata
Tea












Threats:
Global competition
Low Cost in some countries like China, Sri Lanka and Kenya.
Import oI Tea Irom other countries.
Cost escalation on account oI increase in the cost oI production



PRESENT MARKET SCENARIO OF INDIAN TEA INDUSTRY:
The tea industry occupies a place oI considerable importance in the Indian
economy, producing a Iourth oI the world`s annual tea output among them some
gardens producing high quality teas - and employing around 1. million people
at tea plantations and 10 million persons derive their livelihood Irom tea. In
Northeast India alone, the tea industry employs around 00,000persons on
permanent rolls.
With domestic demand at an estimated million kg (MKg) as oI 00, India
is one oI the largest consumers oI tea globally. However, as domestic demand
accounts Ior over oI the country`s tea output and since tea imports are
permitted only Ior re-export, India`s share oI the global tea trade is on the lower
side. Nevertheless, exports have a critical role to play in maintaining the
demand-supply balance in the domestic market. Although tea is produced in
1States in India, Iive oI themAssam and West Bengal in North India, and
Tamil Nadu, Kerala and Karnataka in South India account Ior over oI
India`s tea production. Within that, North India alone accounts Ior around7
oI India`s total tea production, oI which-0 is consumed in the domestic
market. The balance, much oI it oI high quality, is exported. Tea is among the
most labor-intensive oI all plantation crops. On an average, around oI the
cost oI production is incurred on labor.





The recent buoyancy in tea prices, which started Irom 00, has come as a relieI
Ior bulk tea players, who have had to cope with depressed prices Ior almost a
decade since 1. Tea prices, aIter reaching a peak in 1, went into a steady
decline thereaIter, with average domestic prices dwindling Irom around
Rs.7. per kg in 1 to a low oI around Rs. .0 per kg in 00(ReIer
Chart Ior trend in tea prices over the period 1-00). Although global tea
prices 1 onwards, driven primarily by oversupply, the decline in average
prices was sharper and oI a longer duration Ior Indian teas vis-a-vis the teas
Irom Kenya and Sri Lanka, India`s two main rivals in the exports market. This
was on account oI a number oI Iactors: lack oI marketing initiative by the Indian
players to look Ior export markets beyond the CIS1countries; proliIeration oI
small growers and bought-out leaI Iactories (which led to a decline quality oI
tea produced), and Iailure to check spurious varieties oI tea Irom being traded as
premium tea (which aIIected the image oI Indian teas in the export market);
higher cost oI
production oI tea in India (as compared with that in Sri Lanka and Kenya) on
account oI the higher social costs here; and existence oI certain non-tariII
barriers like residual-pesticide (intea) speciIications imposed by a number oI
importing countries. All these Iactors led to the lossoI key export markets,
which in turn increased supplies in the domestic market, thereby bringinga
downward pressure on prices. This apart, tea prices also came to be aIIected by
the qualityIactor, which came into play during the early part oI the current
decade when the delay oI re-plantation activities in the latter halI oI the 10s
began to tell on quality and hence on prices. Most players had deIerred re-
plantation during the latter halI oI the 10s to cash in on the buoyancy in tea
prices during 17-, but when the sharp price decline happened subsequently,
their Iinancial position got so weakened that they were unable to make the
required investments in their tea estates. Increasing domestic consumption,
and exports to an extent, behind current buoyancy in
Prices








INDIA Vs OTHER TOP TEA PRODUCING COUNTRIES:

Major tea exporting countries oI the world are Kenya, Sri Lanka, China, India
and Indonesia. However, prior to evaluation oI export perIormance oI major tea
exporting countries oI the world, it is necessary to analyze the production and
domestic demand oI tea in these countries. On the production Iront India is the
second major producer oI the tea in the world .Other countries include China,
Sri Lanka, Kenya and Indonesia. During 11-0, India around 0 percent oI
world production, declined to per cent in 00.The declining trend can be
observed in case oI Sri Lanka as well. Only China and Kenya are able to
increase their share in world production considerably. The share oI China and
Kenya during 11-0 was1. per cent and .7 per cent respectively,
increased to 1 per cent and per cent in 00.Inrecent years China emerged as
major tea producer in the world. Fig-1 shows, during 00 and00, China
became number one tea producer in the world pushing India into number two
position. India had doubted China`s emergence as a top raking producer, citing
limitations inIield level statistics and under reporting oI the tea production in
India. Tea board oI India was then engaged in revising the production.
Since 1, even though China`s area under tea cultivation is lower than earlier
period due to improvement in yield, production increased by . per cent per
annum during 1-, by .1 per cent per annum during 1-0.In India
production increased by 1. percent per annum and 1.07 per cent per annum
respectively during the same period. In Kenya, production increased by . per
cent per annum and .1 per cent per annum respectively during the same
period.





7



Production in Sri Lanka and Indonesia also increased during this period with
improvement in supply conditions in Kenya, China and Indonesia, India`s share
in world production declined even though its total production increased.
Domestic consumption is calculated by deducting export Irom production. In
case oI India, there
is continuous increase in share oI domestic consumption in production, it
increased Irom .0
per cent during 11-0 to . per cent in 11-0, Iurther increased to7.
per cent in
001-0. We can observe that, whatever additional production is taking place, it
is almost
entirely consumed internally leaving export surplus to remain stagnant and
sometimes export even shows declining trend. In contrast, Kenya`s domestic
consumption share in production is very low and declined over a period oI time
shows that except Ior a Iew years, the increase inproduction oI tea in Kenya is
almost entirely used Ior export. In Sri Lanka, domestic consumption in
production is very low and is declining. In 001-0,
around per cent oI tea production in Sri Lanka is used Ior export. In recent
years, tea export and production are almost same in Sri Lanka .In china, share oI
export in production oI tea increased over a period oI time. From Fig .1 one can
observe that in China, production, export and consumption shown increasing
trend. In Indonesia, share oI consumption in production increased, but it is
lower than India.














Reasons for decline in exports:

1) Fall oI Soviet Union, main trading partner oI India. Tea exports have come
down by70 percent Irom Mn/Kg in 000 to 1. Mn/Kg in 00.
2) Exports to trading ally Iraq, Iran and AIghanistan was aIIected during the
same period due to tension and war in middle-east. Exports came down by
roughly70 percent between 000 and 00.
3) Quality has always been the biggest consideration in tea exports. Other
emerging countries like Sri Lanka and Kenya are scoring high due to modern
methods oI production and branding. Whereas, India is on continuous slippage
in terms oI quality and branding thereby giving share oI exports.
4) Concern over quality has resulted in exports oI high margins value added tea
(Tea Bags and Branded Tea) come down Irom percent oI total tea exports in
1 to percent in 00 (value terms). In volume terms, came down
Irom. Mn/Kg in 1 to . Mn/Kg in 00.
Global tea industry has witnessed a paradigm shiIt with emergence oI stronger
countries like Sri Lanka and Kenya. These countries captured large shares in
global tea exports at the cost oI older players like India. In Iact, these countries
are eating away the premium grade tea export market and value added tea
export market on platIorm oI superior quality and aggressive branding. Impact
on India is evident Irom Sri Lanka`s tea exports which increased Irom .
Mn/Kg in 1 to . Mn / Kg in 00 whereas India`s reduced Irom
11.7 Mn/Kg to 1 Mn/Kg during the same period. Sri Lanka and Kenya are
able to increase their productivity at constant pace which helped it divert higher
produce in the export markets. Higher exports were achieved by these
economies as a result oI persistent eIIorts towards quality betterment and brand
building. This exercise actually helped economies towards driving high margin
value-added tea exports.






It is witnessed, Indian tea is increasingly been displaced by tea oI other
Asian and AIrican countries. Trend indicates that although land under
cultivation in India has increased at CAGR oI1 percent in last years, yield has
actually come down Irom 17 Kg/Hectare in 0 to 11Kg/Hectare in 00.
Sri Lanka witnessed a complete reversal to India with yield increasing by
0Kg/Hectare between 00 and 00 with no increase in land under
cultivation. Even in Kenya yield increased more than 10 percent or
Kg/Hectare in the same time period. Although, Indiais regarded as Goliath oI
tea industry its position is slipping to smaller countries like Sri Lanka and
Kenya on quality and productivity parameters.
Middle-east countries like Iran, Iraq, AIghanistan and UAE were India`s main
trading ally and contributed percent (volume-based) oI total Indian tea
exports. But, /11 terrorist attacks and war in AIghanistan and Iraq led to sharp
decline in tea exports to these nations.


















0


RECOMMENDATIONS FOR IMPROVEMENT

The Iact which emerges Irom the present crisis is that Indian tea has not been
globallycompetitive. It has concentrated more on building up its large estates
what it should do isit should given less attention to processing and improving
the quality by proper blendingand marketingIor higher price realization oI
their products.

Unlike its key competitors, India does not have any powerIul brand to support
itspromotion drive in the international market.To win back the conIidence oI
lost Ioreignmarkets, Indian tea producers have to identiIy the need to revitalize
the image oI Indiantea in that international market.A vigorous campaign which
include Indian tea logos andmaking Indian brands acceptable in those most
major markets.

Further, an inspection agency should be appointed to keep a quality check on
the tea that is exported, and the major thrust should be made to improve quality
Ior the long term sustainability oI tea industry oI India.


There is an urgent need Ior reducing the unit cost oI production through
productivity gains, capacity building oI small growers, streamlining marketing
channels, improving inIrastructure, tailoring marketing activities to individual
country`s demand, propagating health beneIits oI tea and promotion oI organic
tea using the tea mark. This is exactly what the domestic tea companies should
do Ior their long term survival







1

















CHAPTER 3

TOP 2 PLAYERS IN INDIAN TEA INDUSTRY:
















TATA TEA


Company Profile
Tata Tea Limited, also known as Tata-Tetley, is the world's second largest
manuIacturer and distributor oI tea. Tata Tea is the largest vertically integrated
tea Iirm in the world, Irom 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 manuIacture oI black tea and instant tea, tea
buying/blending, and sale oI tea in bulk or value added Iorm. It oIIers tea
primarily under the Iollowing brand names:
TATA TEA
Tata Tea
Tetley
Kanan
Chakra Gold
Premium
Gold
Agni
Devan
Tata Tea Limited owns approximately 1 tea estates in the states oI Assam,
West Bengal, andKerala in India. It also has operations in Australia, the Middle
East, west Asia, North AIrica,Poland, Russia, and Kazakhstan. The company
was Iounded in 1 and is headquartered inKolkata, India.
Set up in 1 as a joint venture with UK based James Finlay and Company to
develop value-added tea, the Tata Tea Group has now product and brand
presence in 0 countries. It is one oIIndia's Iirst multinational companies.

The operations oI Tata Tea and its subsidiaries Iocus on branded product
oIIerings in tea, but with a signiIicant presence in plantation activity in India


and Sri Lanka. The consolidated worldwide branded tea business oI the Tata
Tea Group contributes to around per cent proIit Irom branded tea sales while
the remaining 1 per cent coming Irom bulk tea, coIIee and investment income.
Tata tea Brand is ranked the second most trusted beverage brand in brand equity

SWOT Analysis Tata Tea:

Strengths:

Market Leader: With a value share oI . in November, Tata Tea is now
the market leader in the Rs7,000-crore branded teas market, having
overtaken peer Hindustan
Unilever (HUL) which has a value share oI 1. (Source: AC Nielsen).

Resources & Capabilities: Tata Tea Limited owns approximately 1 tea
estates in the states oI Assam, West Bengal, and Kerala in India. The crop at
each oI this plantation imbibes the characteristics oI the region where it grows.
In that respect, tea is much likewise. Having plantations in varied agro-climatic
zones enables Tata Tea to cultivate distinct tea leaves.


BrandName: Tata tea Brand is ranked the second most trusted beverage brand
in brand
equity. The company's best-selling brand is Agni which caters to the mass
segment and
other brands include Tata Tea Gold, Chakra, Gemini and Kanan Devan.






Experience: Tata Tea has been one oI the oldest companies in India and has the
advantage oI skill and experience on their side.
Weakness:



No product differentiation: One oI the major problems Tata Tea Iaces is the
lack oI much product diIIerentiation hence loyalty oI consumers is a major area
oI concern.

Branding: Due to lack oI branding activitied my the organized palyers amdlow
switching cost oI consumers retaining consumers becomes a challenge as they
switch over to cheaper brands.

Distribution Network: The distribution network oI Tata Tea comprises on 1.
lakh distributers this is not much when you compare to HUL who have the
strongest dealer network in the country
Opportunities:

New Product Development: The Company can integrate into Iruit & herbal
teas. This segment has not yet been tapped by any oI the tea companies yet and
this could give Tata tea the Iirst mover`s advantage iI they decide to enter this
segment.


Rural Market: There is a large untapped rural market which needs to be
exploited. Although Tata Tea has made it s presence Ielt in the rural markets
this sector is characterized by a large un organized sector and local players rule
the rusts oI the day in these markets.

Export Potential: Tata tea is present in 0 countries around the world. There
are a lot more opportunities it can exploit iI they can increase their production
capacity to exploit these untapped world markets all over the world.

Mergers and Acquisitions: There are more than 1000 tea companies in India.
Tata tea can increase its market share and penetration by acquiring these small
companies and
also Iorming mergers with other big MNC`s like it did Ior Tetley Tea, Good
Earth etc

Threats:

Low Barriers:There are not too many entry barriers put by policy makers this
makes the Indian Tea market extremely Iragmented and unorganized. There


are many regionalplayers who hold small chunks oI markets. By imposing Entry
barriers the existingplayers will be in a better position to exploit the existing
situation.

Globalization: India is opening it s doors to MNC s and with that comes the
threat oI
globalization oI the economy. The small and regional players will Iace intense
competitions Irom big MNC s.



INTERNAL ENVIORNMENT ANALYSIS:

1)Resour ces:
O 1 tea estates in states oI Assam, West Bengal, Tamil Nadu, Kerela.
O Area oI ,00 hectares under tea cultivation.
O Produces about 0 million kg oI black tea annually.
O Subsidiaries & Associated companies Overseas business

2) Capabilities
O Distribution system.
O Strong and trusted management.
O Research and development.
O Marketing.

BUSINESS LEVEL STRATEGIES:
Bought leaI Iactories & co-operatives to change the structure oI green leaI
production
IdentiIied branded tea as its thrust area
To exit the beverage retailing business to Iocus on branded products
Tata CoIIee sold oII its stake in Barista, no plans oI re-entering the
business
Introducing drinks like TiON, all over India
Jaago Re campaign Iollowed by the 'Aaj Se Khilana Bandh, Pilana
Shuru'campaign to
target the youth Ior voting and work against corruption
Focus on brands like Chakra Gold, Gemini and Kanan Devan in regions
where they are


strong.


MARKETING STRATEGY:
In spite oI a global presence, the brands are distributed diIIerently depending on
the location. As Tata tea is Iar better known in India and a powerIul brand there,
it is pushed on this market and countries with a large Indian population.
ThereIore Tetley is the company's global Iace and the largest markets Iocus on
the Tetley brand. Where both brands co-exist in one market, Tetley is positioned
as the premium brand


PROMOTIONAL STRATEGY:
The new campaign will migrate Tata Tea Irom being a physically and
emotionally revitalizing tea experience to one that will challenge the
consumer`s intellect to awaken to what is around them. It will motivate people
to internalize the tea experience and externalize their social awakening. It is
probably the Iirst time that any brand is taking on the mantle oI
social responsibility in such a manner. The campaign will also provide a
poignant platIorm Ior connection with the youth. The campaign in keeping
with the magnitude oI the strategy also plans to deploy a mega approach to
connect with the consumer at all possible touch points. Television will be the
lynchpin oI the campaign. There will be one main commercial and six short
duration commercials. Each oI the commercials will touch upon one relevant
social issue. As part oI the campaign Tata Tea brand has also tied up with the
Jaago India Ioundation. The Ioundation and Tata Tea have launched a website
that each month will cover a socially relevant issue. The site will provide all
the required inIormation on the issue, will allow consumers to interact and
provide solutions. To generate interest and create empathy the site will Ieature
Iour short Iilm on the topic oI the month. Other than television and the website
the campaign will also use radio,
press, shop level visibility and the new outdoor medium oI malls and
7

multiplexes to drive home the message oI Jaago Re. Many oI the
communication tools being planned at the malls and multiplexes will be used
Ior the Iirst time in the country.



HINDUSTAN UNILEVER LIMITED:
Company Profile:
Unilever owns two oI the most widely recognized product lines Lipton and
Brooke Bond. The major competition Iacing Lever at present is Irom Wagh
Bakri Chai Tea, who is truly a market challenger.
Lipton comprises oI Yellow Label which is designed Ior upper middle, upper
lower and upper middle class, which is a market leader in the industry, it comes
in all the packages including hard packs, jars, and teabags. Lipton yellow label
although the direct competitor oI Brooke Bond Supreme comes in the Iamily oI
Unilever so it is prone to its competing attacks. Lipton Iollows a massive
promotion scheme to hold its share. Rich bru is designed Ior middle and lower
upperclasses, and Pearl dust is designed Ior rural areas, mostly districts oI Sindh
where consumption oI dust is extensive.

Brooke Bond comprises oI:
Brooke Bond
Supreme
Taj Mahel
Roses
Red Label
A1 Karak Tea









SWOT Analysis for (HUL):

Strength:

Bra ndNa me: According to Brand Equity, HUL has the largest number oI
brands in the Most
Trusted Brands List.HUL has a very strong Brand name in the Indian market.
Its brands are strength Ior the company.

Strong Distribution Network: Hindustan Unilever's distribution covers over 1
million retails outlets across India directly and its products are available in over
. million outlets in India, i.e., nearly0 oI the retail outlets in India. It has
Iactories in the country. Two out oI three Indians use the company`s
products and HUL products have the largest consumer reach being available in
over0 per cent oI consumer homes across India.

Unique sizes have been introduced Ior various segments including teabags, stir
ready.

Product Range: Wider product range with technological superiority, e.g.
Brooke Bond`s hot tea can


Weakness:
It is a product being introduced in an already existing tea market with
established brands.
No competitive advantage can be brought in this industry. Only massive
advertising and promotional activities may entice consumer Ior trial.

Brand Dilution: Having too many brand extensions can dilute and conIuse
consumer perception and give Iresh and new competitors to seize market
share.

Opportunities:

Alliance with Pepsi to access massive distribution network. Presence oI big,
well known partners drives demand Iurther.
Declining markets Ior other beverages such as soIt drinks



Rural Market: There is a large untapped rural market which needs to be
exploited. Although Tata Tea has made it s presence Ielt in the rural markets
this sectors is characterized by a large un organized sector and local players rule
the rusts oI the day in these markets. Greater awareness oI health beneIits oI tea.


Threats:

A rigorous threat is the increasing number oI branded and unbranded tea in the
market with ample price diIIerence. For that, established companies need to
increase their advertising and promotional budget. There is a need to get a better
shelI space and more retailer patronization Ior the company's brand.
Unilever presently pays0 as taxes on imported tea. This rise in import duty
on tea by government is intended to discourage it's consumption, which possess
to be a threat as it has resulted in higher prices Ior the consumers.

Low Barriers: There are not too many entry barriers put my policy makers this
makes the Indian Tea market extremely Iragmented and unorganized. There are
many regional players who hold small chunks oI markets. By imposing Entry
barriers the existing players will be in a better position to exploit the existing
situation. Presence oI other major players such as Coca-Cola and Nestle leading
to tough competition

PRESENT STRATEGY:

Ownership:
The owner oI the premium Brooke Bond and Lipton tea brands in India,
Hindustan Unilever Ltd(HUL), has taken a decisive step towards regaining
absolute market leadership Irom Tata Tea Ltd by entering the so-called
economy segment oI the market as well.




Value Leadership:
0

HUL already leads the domestic tea market in terms oI value and has been
narrowing the gap in volume sales, where Tata Tea's economy brand Agni,
priced at around Rsl0 per kg, gives it the edge.

New Variants:
HUL launched its Brooke Bond Sehatmand tea in Madhya Pradesh,
Chhattisgarh and Bihar in late January, using non-governmental organizations
among other channels in a low-proIile promotional campaign.
The new tea, priced at Rs.l70-10 per kg, includes Iolic acid, calcium and other
vitamins as part
oI its ingredients.
HUL expects Brooke Bond Sehatmand to create a new segment in the0
million tones (mt) a
year tea industry. OI this, packaged tea accounts Ior less than 0mt






















1

RECOMMENDATIONS TO TOP 2 PLAYERS TO INCREASE
MARKET SHARE:

Increase number of service outlets: In recent times there have been numerous
coIIee shops springing up in Tier A cities like Mumbai, Delhi, Bangalore etc
Tea house shpul be set up in a similar Iashion and premium quality tea`s should
be served at these outlets.

Strategic alliance: Tie up with their own range oI Iive star hotels to supply
premium quality tea and coIIee as also with lower end three star hotel n also
local eateries (Udipi joints etc). Tie-up with airlines, rajdhani, shatabdi, caterers
etc to promote their tea coIIee also mineral water brands

Own Depots: To start own depots oI Tata Tea and HUL tea so that they can sell
loose tea thus reducing cost oI packing which will also reduce the Vat &
additional charges. Thus masses Irom lower income group would be eIIectively
targeted.

Penetration: Deeper penetration in rural markets by using selI help women
groups Ior door to door selling.

Profit margins for retailers: Increase proIit margins Ior retailers to achieve
higher sales volume as they are the main inIluencing Iactors in lower income
group people.

Promotional activities: More number oI ads which are equally eIIective as
middle class people Irom towns get inIluenced by ads to a large extent g) Jago
Re campaign.












Product Innovation: Enter new market segment with product innovation like
tea Ilavored ice-creams, tea wine, tea chewing gums etc

Flavors: Launching oI Ilavored teas bamboo cups in china bring it to India too.
Launching oI more Ilavors in India. (lemon tea, black tea).

Related Diversification: Future strategy oI entering children`s drinks like
Complan, Bournvita, Horlicks.

Bundling: Providing a bundle pack like a small tea sachet Iree with 100 Gms
pack oI biscuits.

New Markets: Explore new and untapped markets not only in India but also in
diIIerent countries.

Branding: The top players i.e. Tata Tea & HUL should Iocus their attention
on proper
branding oI their products and should try to create a brand loyalty among the
consumers
oI their products
































Chapter -
ReIerences

















WEBSITES

http://www1.american.edu/TED/indiatea.htm

http://beacononline.wordpress.com/00/10//marketing-problem-Iaced-by-
the-tea-
industry/

www.gmsworldnet.com/.../vision00reinventingindianteaindustry

http://www.Iinancialexpress.com/news/tata-tea-hul-war-brews-in-tea-
mkt/1/

www.hindustantimes.com

http://www.indiatea.org/teascenario/teascenario.html (Financial)

www.naukrihub.com

www.teaboard.gov.in

http://www.scribd.com/doc//FMCG-Project

http://www.scribd.com/doc/17/Lipton-Yellow-Label-tea-survey

www.wikipedia.com

teaboard.gov.in/pdI/teastatistics/TeaStatistics1.pdI

http://www.thehindubusinessline.com


















Chapter-
Conclusion

















From this project we come across that there is much competition in the FMCG
sector. All the companies are making their strategy to sustain in the market with
good proIit. Here we see the two players oI tea industry and their strategy.
We can say that even iI the company goes strong aIter that it has to be ware with
the changing environment oI the market, iI the company want to gain proIit in
the market and also to get good position in the market. Each company have to
identiIy its strength and weakness Irom that only accompany can survive in the
market.