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Tea giants plans to introduce small packs to increase market share

07-December-2002
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Tea giants plans to introduce small packs to increase market share

Smaller pack sizes and niche products in the branded tea segment seems to be the only succour in a market plagued by low prices and increasing local brands and loose tea. The low-end, low margin economy segment seems to have provided some resistance in the declining tea sales.

According to analysts, the small pack sizes and niche products seem to have met with reasonable success in a market that has been witnessing very slow increase in domestic tea consumption.

Moreover, there have been no price increases in the packaged tea category since January 2002 due to resistance from consumers.

Hindustan Lever Ltd (HLL) and Tata Tea, the top players in the branded tea segment, have introduced smaller pack sizes and niche products. The marketing gambit appears to have met with reasonable success.

According to estimates, the packet tea market fell about 13.7 per cent on the year over year basis till September 2002.

Volumes in the packet tea market of HLL declined 19.7 per cent, while it lost 120 basis points in September 2002 on a monthly basis over its previous month (August) against the market’s 33.3 per cent decline. HLL has focused on profitable growth and implemented a strategy of margin expansion at the cost of market share.

However, Tata Tea managed to hold the decline in volumes at a more creditable 3.8 per cent and increased its share in the packet tea market to 20.1 per cent, during the same period.

The Indian tea industry has been passing through an extremely difficult period in the past four to six quarters both on volume as well as price fronts. The tea industry leaders have been losing share to smaller regional and local branded products and to the loose tea market.

Also, consumption demand and demand growth in the consumer market continued to remain weak. This has led marketing experts to decide that the key growth volume drivers in the current scenario will be the high-volume, low-margin economy segment.

Tata Tea has taken one initiative on this front by launching Agni Sholay, which will be run by its sales team as a regional or local brand to effectively fight competition.

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