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Ice tea market in India still in a very nascent stage

Ice tea market in India still in a very nascent stage

Author | Malini Menon | Monday, Jun 13,2005 7:51 AM

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Ice tea market in India still in a very nascent stage

The tea market in India is going through a “cold wave.” The two prominent players in the Indian market, Nestle and Lipton-Pepsi tie-up, are reaching out to consumers to beat the sweltering heat with ice tea. However, the question that looms large is whether Indians are ready to tea-off or not?

It’s a known fact that unlike the USA, where 80 to 85 per cent of tea consumption is in the form of iced tea, in India there is still a strong inclination towards hot beverages. “Indians have a strong tea and coffee culture, predominantly the hot variety. While the cold coffee culture has managed to make a mark in certain circles due to high media spends by Nescafe during summers, iced tea is still at its very nascent stage,” said Nilakshi Sengupta, Project Director, Synovate India.

Sengupta reasons that there are various factors that are affecting the growth of ice tea. “Unfamiliar taste is taking its time to develop a footing for this beverage. This is coupled with inadequate distribution because of which only a select few metros get to taste the product. Also, there are generic variety that is consumed predominantly in restaurants and pubs,” she said. Sengupta added that the most significant factor that affects the ice tea growth is the “lack of spends from branded players to create the category saliency.”

However, marketers debate that it is a viable business option for them. HLL spokesperson said, “Although the market is still very small, it’s a growing one. It makes perfect business sense because there is considerable growth projected from this business. Alternate soft beverage is something that consumers are really looking forward to.” Nestle spokesperson said, “In Modern India, consumer preference for beverages is evolving with the changing lifestyles.”

The summer is sizzling with competition between Nestea and Lipton ice tea. Nestea is making its way through vending machines (Ready to Drink), sachets and packets (powdered pre mixture form). Other than the vending machines, Lipton is available in Ready To Drink 1 litre carton, 250 ml glass bottle, can form and in powdered pre mixture form, it is accessible in different size packets. However, Nestle considers that Lipton entering into the iced tea space is good competition. “This is a nascent market and we expect that entry of other players will help to expand it,” he said.

The dealers have a mixed response on who is doing better. Most of them claim that between the two, Lipton with its new “Buy two Save too” offer in 1 litre packages have found more takers. Also, with Lipton introducing ice tea in bottles, there has been a pull in consumption. However, one of the Lipton dealers said the concern that they face is of low margins. Meanwhile, the Nestea dealers said that the Ready to Drink form is a bigger hit and that Nestea vending machines are doing very well.

Asked if HLL is looking at penetrating further with more vending machines, the spokesperson said, “We have about 15,000 vending machines right now, out of which a significant number of them are focused on hot beverages like tea and coffee. We do have plans of coming up with a comprehensive offering of vending machines at a later stage for ice tea too. However, as of now, the focus will remain on bottles and carton form.”

Meanwhile, Nestle is exploring the options of assessing the market and adding other out of home locations for the vending machines.

What is working in favour of the iced tea seems to be the health platform. The fact that iced tea is healthier than carbonated soft drinks, is higher on coolness quotient and has a high preference over carbonated soft drinks is benefiting the players.

However, whether India is ready for the ‘iced-chai’ or not is yet to be seen. As Sengupta said, “Despite a growing trend in preference among the ‘cool’ younger crowd the category is a long way from taking off in a big manner in India due to inadequate distribution and marketing spends in building category relevance.”

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