‘Innovations have fuelled trend of premiumisation’

The category is changing, with newer, ‘healthier’ options like green tea. Is there a trend of ‘upgrade’? What are the other trends in the category?

 

Health and wellness is clearly one of the trends which is not just growing in India but worldwide. We anticipated this seven or eight years ago when we launched Tetley Green Tea. We were the pioneers in launching the first green tea in India. The segment is growing and has reached a point of inflection where it is becoming more broad-based, which is why we’re hearing more about it. This is why we launched a more mass-based campaign with Kareena Kapoor as brand ambassador, so that we can grow that segment more and move it beyond the niche category.

 

The other trend is about indulgence. Given the growing economy and hence the growing spending power, people are looking at indulgence. This is where Starbucks plays a big role. We have ‘Tetley Chai Latte’ in Australia which is a frothy spice-based milk tea. In India, we have tea bags for masala tea, ginger tea. So yes, it is a trend, but it is seen more in the western markets. In India, tea continues to remain a day-to-day drink. And just because of the widely spread consumer base, tea in India has about 90 per cent penetration. Look at what tea means to India! After water, tea is your everyday drink.

 

Where has this ‘upgraded’ consumer base been cultivated from?

 

This is something that keeps cropping up (and not just in India) - on whether consumption is on the upswing or decline. There hasn’t been a change in the black tea consumption in India and it is growing at the same rate of 3 to 4 per cent annually. It clearly means that people are not going out of the category. This is actually a good growth rate given the kind of penetration that the category already has.

 

We have always maintained that we are seeing additional beverage consumption rather than people replacing their beverage. There is out-of-home consumption, consumption of other beverages, consumption of green tea. It is about more occasions of consumption that have come in, rather than replacing one occasion. So people still continue to have their regular fill at home, at almost all times of the day.

 

It essentially is the same consumer, and more about the number of drinks that one is having. People still continue to have their usual cup of tea at home, in office or after work but between these a person might go to Starbucks to have a latte or a cappuccino in office, for example. It’s a myth that tea consumption happens only at home.

 

How do the Tata Tea brands {Tata Tea (Agni, Gold, Chakra Gold, Gemini), Tetley, Kannan Devan Tea} stack up and what is the role of each in the portfolio?

 

We can’t share numbers, but Tata Tea Premium is our flagship brand in terms of overall contribution to the top line and bottom line. The important thing, which is a critical part of the company’s growth in India, is that we have been able to create a portfolio of brands.

 

Tata Tea Premium, since 2000-2001, was trying to straddle both the upper end of the market and also trying to take on the competition in the economy end. We realised that for us to do a good job we needed to create a portfolio and that is how we’ve had Tata Tea Gold (2003). In 2005, we brought Tata Tea Agni under the Tata Tea portfolio. So now we have a clear product-price strategy in terms of placement in the market.

 

Gold is the premium offering and is based on aroma and flavour and has long leaves. It is followed by Premium which is in the belly or mass of the market and is positioned on taste. Agni plays in the economy end of the market, positioned on strength.

 

Then you have the regional brands that have a very critical role to play, because of historical reasons and because different regions consume different kinds of tea. Tata Tea Chakra Gold, in the premium end, is a dominant brand in Tamil Nadu and Andhra Pradesh and parts of Karnataka. Tata Tea Kannan Devan is the market leader in Kerala. Then there’s Gemini, which is a dominant brand in parts of Andhra Pradesh.

 

How would you categorise the different buckets within tea in the domestic market (leaf, dust, green, etc.)? How is each growing? Which of these would be the focus areas for growth?

 

One of the things we believe is a distinct advantage is our understanding of the consumer and regularly being in touch with them.

 

We develop products on the basis of what the consumer wants at that point rather than what we can provide them. We don’t necessarily see them as a leaf market or a dust market, as they are essentially different grades of the same thing. We are in constant touch with our consumer base and we continuously check how our products perform vis-a-vis competition blends. And we will also try and see if there are any changes in trends.

 

Whenever we feel it is an opportune time to dial up or dial down, we will do it accordingly. But this depends from one market to another.

 

TGB mentioned in a recent statement (ET, 10 June) that coffee contributes 20 per cent while tea brings in 70 per cent of the revenue (Is Starbucks factored into this figure?) Do you see the share of coffee growing? What are the efforts to secure growth in coffee?

 

These are global numbers which include major contributions from our US operations, where Eight O’Clock Coffee is a dominant brand.

 

In India, we have a much smaller play in the branded coffee business. But we are focused and believe that it would be an important segment. Starbucks has a very important role to play and we are committed to that but in terms of numbers, as of now coffee is a very small part of our portfolio.

 

Our strategic intent is clear. We will concentrate on natural beverages which are tea, coffee and water. Tea is our primary strength. Coffee is a market that we are working on. We’re seeing what would be the right kind of products to bring as we have a very small play in coffee now, restricted mainly to southern India. Then we have the water business, where we have a JV with Pepsico (Nourishco) to grow that.  And a JV with Starbucks that we’ve already spoken about, to grow the out-of-home market. It’s a multi-pronged strategy.

 

Campaigns like Jaago Re and Choti Shuruvaat have drawn critical acclaim and captured popular imagination. What is the role of such campaigns and how do you measure their efficacy? How does the resultant brand equity translate into sales?

 

When we started the Jaago Re campaign in 2008, it was a brand campaign, not a CSR activity.

 

Till 2008, we had individual brands and positioning for every product in our portfolio. The idea behind the campaign was to create one unifying mother brand, Tata Tea. The challenge was to have a campaign which cut across segments both in terms of the socio-economic class and geography. The challenge for the marketing and advertising teams was to have a Tata Tea consumer in South India look at one of our ads and say ‘That’s my Tata Tea’ and for the same to apply to a consumer in, say, Pratapgarh in Uttar Pradesh - irrespective of which brand they preferred from our portfolio.

 

We needed something that would bind all our consumers, given the size of the portfolio. The other challenge was to make the brand a little edgy and youth-centric, given that we were creating this mother brand. We realised that we needed to make individuals feel that they need to do something more - beyond what they would normally. The Jaago Re campaign started off with an ad of the youth challenging a politician about his qualifications. The whole idea is to have people look within themselves and not about the brand trying to do something.

 

In case of ‘Power of 49’, it has again not been about talking down to people and telling them what to do, but about the brand exhorting people to do something from within. It has always been a message to the consumer on a one-on-one basis asking him or her to do something. There is a very beautiful connect there with the fact that tea is rejuvenating. We have never faced feedback where consumers said the campaign comes across as CSR.

 

If you look at it from a theoretical marketing construct it looks like a beautiful campaign which has a great social message and is a mission-driven brand campaign. But from a consumer point of view, it works, as it integrates the product and highlights its qualities along with telling the consumer what to do.

 

At the crux of the campaign was a business/marketing-driven task. We do tracking exercises regularly and measure effectiveness of the advertisements, communication and investment. Advertising is not the only means for sales to happen but is critical - there are other things like distribution, pricing and product quality which will eventually translate into sales. Having said that, we are happy that the ads are effective and are doing the job they’re supposed to.

 

Can you take us through Tata Tea’s rural reach and connect initiatives? How are rural and urban contribution to sales growing?

 

Rural has been a strong focus area for us. ‘Gaon Chalo’ is a very interesting concept where for the last mile we tie up with NGOs and use the people that the NGOs work with on a commission basis to distribute and sell our tea products. It’s the economy bracket products, say Rs 5 or Rs 10 packs, that do well in these areas. Although we have a good presence, we do initiate activities which are pushing us deeper into the rural market.

 

What is the role of digital in a category like tea? How is Tata Tea leveraging this?

 

We started using digital in a big way in the 2008-09 campaign because we wanted the campaign to be concentrated on youth and to make the brand edgy. At that time, there were very few brands that were using the digital platform in a big way.

 

We realised there were a lot of myths floating around about voting so we actually worked with an NGO. We set up the Jaago Re website where we put up the registration forms, answered queries, worked with MapmyIndia to direct you to the nearest election office and busted many myths around the registration process. All of this could only be done through the digital medium. It works both ways as the youth goes to the digital platform and there is a lot more interaction. It gave a lot of traction to the brands, allowing us to reach certain segments that would otherwise not reach out to the brand. We continue to use the digital platform. A big part of engagement with our consumer base happens across the specifically created sites for Jaago Re or Power of 49 and also across platforms like Twitter, Facebook and YouTube.

 

Across FMCG, there have been reports on pressure on sales (volume), impact of inflation on inputs cost and SKUs, etc. What has been the Tata Tea experience?

 

I go back to the point that tea in India is a mass-based product that people do and will continue to consume despite the market conditions. In developed markets such as the US and UK, we did see consumers downgrading in the tea and coffee categories. People moved to private labels or lower priced products. This happened across categories (here) but we didn’t face that problem to that great an extent.

 

Consumers have shifted back to their original preferences now. But there have been innovations during this period that have fuelled a clear trend towards premiumisation of the upwardly mobile consumer. The other group of consumers who seek value for money is also growing. Both these categories have led to the middle segment being squeezed and that trend is set to continue.

 

While Starbucks takes care of the on-premise consumption opportunity in coffee, is there an opportunity for tea?

 

In India, we have the small, hot tea stalls that have existed for years and they are a big part of our social culture. ‘Shops’ like these were never in the modern, premium format that we now see the coffee shops in. This transformation was achieved by coffee brands and not by tea brands. Having said that, there is a clear trend globally in terms of tea boutiques - they are growing and are starting to gather mass. It’s pretty big in the US and Canada with brands that offer an experience and we see that as a growing trend. But it’s not as big in India right now.

 

How is Himalayan, the water brand, doing? Has its price point been a disadvantage?

 

Himalayan as a brand is still growing. I wouldn’t say that the price point affects it adversely as it has been positioned as a product in the premium category.

 

It is a conscious decision on our part to stay with that positioning for Himalayan.