Hindustan Lever Ltd (HLL) is all set to concentrate on certain aspects of its tea business. Brooke Bond, its power brand, which delivered six per cent growth in 2003 and revitalised its beverage business, will continue to be under focus. MS Banga, chairman, HLL said that the company would also focus on its Lipton brand and the out-of-home channel to boost the tea business. Observers, however, have mixed views about the prospects of tea business in 2004. Jagdeep Kapoor, chairman and managing director, Samsika Marketing Consultants, feels that with proper brand strategy, Brooke Bond can definitely achieve growth, possibly higher than the previous year. Others aver that organised big players like HLL and Tata Tea will have a tough time competing amongst themselves, as well as with smaller brands and the unorganised market. At present, the big brands seem to be dominant only in the metros and mini metros. HLL’s tea business may not grow more than 4-5 per cent.
Mr Kapoor feels that the out-of-home focus of HLL will make a big difference with increasing on-premises consumption of tea, boosted by easy availability and more varieties. The arrival of vending machines (HLL has 15,000), according to Mr Kapoor, is like mobile phones revolutionising the telecom industry, even though landlines have been around for a long time.
Some analysts, however, feel that out-of-home somehow does not seem to be working in India, in spite of this being a tea drinkers’ country, except in the bigger offices, where Tata Tea and HLL both have presence.
Mr Banga had said that 2003 has been a good year for HLL’s tea business in spite of it being a bad year for tea industry in general. Apart from the relaunch of Brooke Bond, the company has also introduced affordably priced pack sizes at Rs 2, Rs 3, Rs 5 and Rs 10 for 3 Roses, Taaza and Red Label and Rs 20 for Taj Mahal. Analysts say that the tea industry is highly commoditised and it is difficult to project growth rates, which anyway will not be higher than the GDP growth rate. But Mr Kapoor envisages an 8-10 per cent growth for the industry. Analysts say that tea industry is demand inelastic and branding can effectively work only in the very high-end segment. Nonetheless, Lipton can be an effective tool to lure the young tea drinkers. Mr Kapoor adds that if the consumer is given more perceived value, he/she is willing to pay more and that can take care of the high costs.