Tata Tea plans to introduce a range of value added products to spruce up its portfolio of products. Initially, it is looking to market these products in the overseas market.
Tata Tea is the world’s largest integrated tea company and accounts for over 8% of the tea grown in India. The company is the second largest blender/marketer in the domestic packaged tea segment and operates the largest instant tea export oriented unit (EOU) outside USA
On the anvil are ready-to-drink tea, tea cubes, coffee and tea concentrates, decaffeinated tea, fortified tea and high cuppage tea. Tata Tea feels that western markets will easily accept these products, as the markets are mature. These products will be priced at a premium. The company will test market these products in India at a later stage and would introduce them based on the response they get.
This is a positive move and indicates the management's commitment to move away from commodity businesses. The aim is to enter the premium range, which has high realisations. It looks like the second phase of restructuring of business profile at Tata Tea. Earlier, the company has made conscious efforts to brand its products and earn higher margins on products sold.
The company owns a range of tea gardens in India and Sri Lanka, which will help it to continually innovate and come out with premium blends. The company might face the initial entry barriers like intense competition and setting up a distribution network to market its products abroad. But if the Tetley acquisition comes through then it will have a ready access to the foreign markets.
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