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With falling margins in the tea business, Tata Global Beverages is looking at value-added products such as infusions and powders which use less tea as a commodity. It plans to reduce commodity-dependent formats in the tea segment.
Mr Percy Siganporia, Deputy CEO, Tata Global Beverages, said: “We want higher margins per serving of tea and believe that categories such as infusions are going to give us that.'' The company has turned its focus to markets like Canada where infusions as a category has a better chance than in India. “We want people to get addicted to infusions and powders but execution of such value-added categories has to be different.''
Currently, it is the mass packaged brands such as Tata Agni that use the highest amount of tea as an ingredient. “The degree of tea used as a commodity goes down from packaged tea to tea bags to powders and infusions. In our case, the tea component is the highest for Tata Agni. In fact, packaged tea is the most commodity-dependent category, at almost 95 per cent,'' added Mr Siganporia.
Value-added products
The company has been trying to increase its range of value-added tea products such as the premium trim green tea bags. It also has Tion, a cold drink with tea extracts, fruit juice and ginseng.
With tea prices rising, Tata Global Beverages has taken the lead in raising prices in the UK, Canada and India. “We have taken the lead in pricing in the UK and others have followed us,” said Mr Siganporia.
Its largest selling brand Tetley continues to grow in single digit. “With price increases, there is an impact on volumes but Tetley's topline has been growing in single digit, added Mr Siganporia.
Coffee
Hardening commodity costs in the coffee category has put pressure on its 8 o' clock brand in the US market.
“The 8 O'Clock brand of coffee faces pressure and we have not managed to take the lead in pricing in the coffee category in the US market. It is only in the UK, Canadian and Indian markets that we have strength and brand share, he added. With volume growth returning in the stagnant tea category, Tata Global Beverages is looking to better times ahead. As Mr Siganporia adds, “All this time we did not have volume growth in the tea category. But now from a period of stagnancy, growth is coming back.''
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