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Amul likely to enter tea, coffee markets - Views on News from Equitymaster
According to reports in a leading financial daily, the National Dairy Development Board (NDDB) is planning to enter tea and coffee segments, in keeping with its strategy of becoming a multi-product food conglomerate.
NDDB's Amul range of butter and cheese dominate their own respective segments. The Amul brand has also been extended to chocolates, ice creams, shrikhand etc. NDDB has a presence in the edible oils segment with 'Dhara'. The company is known for its marketing successes pertaining to the launch of butter, edible oils and cheese.
The company plans to extend the Amul brand name to both its coffee and tea products. For procuring tea, it is negotiating with Indcoserve, the largest tea cooperative in India, while for coffee, NDDB is in discussions with the Coffee Board of India.
If Amul does enter tea and coffee segments, it will mean increased competition for industry majors like Nestle, Hindustan Lever and Tata Tea. The market will get more price competitive and margins will get squeezed. The company's distribution and marketing strengths will also help it in grabbing market share.
But the going will not be smooth for the butter major. Amul will have to incur large investments in order to streamline its distribution network. Also, Amul is essentially known for milk related products. How the consumers will react to an Amul tea or coffee is unknown. It will not have the first mover advantage that it enjoys in butter and cheese segments. The company will have to start from scratch, whereas industry majors like Tata Tea and Nestle have already their systems in place. The tea and coffee segments are highly competitive with a number of players vying with each other.
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