Tea Industry Sec-C Group11

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PGP1-Term III- AY 2010 11

STRATEGIC MANAGEMENT II

Tea Industry AnalysisInstructor Prof. Saroj Kumar PaniSubmitted byGROUP 11

Section: CArul Sood K S Santosh PoojaAgarwal PriyanjaliVashisht RishabhAgarwal SuneelNanduri YogeshYadav

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TEA INDUSTRY ......................................................................................................................................... 4 Indian Tea Industry Features ................................................................................................................ 4 Market Trends ..................................................................................................................................... 4 Special Features of India Tea Industry: ................................................................................................. 5 Industry Size ........................................................................................................................................ 6 Market Growth Rate ............................................................................................................................ 6 Supply Determinants........................................................................................................................ 8 Major Tea Growing Regions: ................................................................................................................ 8 Characteristics of Indian Tea Industry .................................................................................................. 9 Competitive Structure ........................................................................................................................ 10 SWOT Analysis of Indian Tea Industry ................................................................................................ 11 PORTER'S 5 Forces Analysis of Indian Tea Industry ............................................................................. 12 Major Events ..................................................................................................................................... 13 TATA TEA LTD ........................................................................................................................................ 14 Global Footprints ............................................................................................................................... 15 Major Acquitions ............................................................................................................................... 15 Value Chain Analysis of Tata Tea ........................................................................................................ 16 Profitability Analysis of Tata Tea ........................................................................................................ 16 SWOT Analysis of Tata Tea: ................................................................................................................ 18 Present Business Strategy of Tata Tea ................................................................................................ 19 Problems at hand for Tata Tea ........................................................................................................... 20 Suggested Business Strategies for Tata Tea to follow ......................................................................... 20 Tata Tea s new Business Strategy ....................................................................................................... 20 Tata Tea Core Competency ................................................................................................................ 21 HINDUSTAN UNILEVER LIMITED ............................................................................................................. 21 Major events for HUL ......................................................................................................................... 21 Brands of HUL .................................................................................................................................... 22 HUL Segmentation of Indian Tea Market ............................................................................................ 22 Profitability Analysis of HUL ............................................................................................................... 23 SWOT Analysis for HUL: ..................................................................................................................... 24 2

Present Business Strategy of HUL ....................................................................................................... 25 Core Competency of HUL ................................................................................................................... 26 Recommendations: ............................................................................................................................ 26 Comparing the current market position of Tata Tea and HUL ................................................................. 27 References: ........................................................................................................................................... 28

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TEA INDUSTRYTea plays a vital role in the lives of millions of Indians. They take it as a refreshing drink as part of daily ritual. Tea offers livelihood to millions of people who are associated with this industry. India produces some of the world s finest quality and also the largest variety of tea. Among the famous specialtyflavors are Darjeeling tea, Assam tea and Nilgiri tea, which are grown in the Bengal, Assam and Tamil Nadu. Tea is normally classified based on the processing, leaf size and grade. Fermentation creates two major classifications, black and green tea. Black tea is further classified into CTC (cut, tear and curl) and orthodox tea.

Indian Tea Industry Featuresy y y y y y y y India is one of the largest producer and consumer of tea in the world, accounting for around 23% of world demand Tea is currently the second biggest in beverage category after the carbonated soft drink market Total turnover of package tea was approximately Rs 10,000 crores in 2009-10 In the packaged tea category, the unorganized sector accounted for over Rs 1500 crore The labor intensive tea industry directly employs over 1.1 million workers and generates income for another 10 million people approximately. Women constitute 50% of the workforce. Maximum production has been during July-Oct almost every year and lowest production during Jan-Feb Tea is an agro-based commodity and is subjected to vagaries of nature Tea trading in the domestic market is done in two ways - auction and private selling

Market TrendsThe tea market in India is witnessing a sea change in recent times. Changes in the life style of Indians have influenced tea consumption pattern. In particular, it has caused the growth of the so-called branded or packaged tea category. Earlier, tea was mostly sold in a commodity form. However, now-adays the branded form has gained popularity and led to the entry of packaged tea and tea bags. Out of the 750 million kg of tea consumed in India, around 300 million kgwas sold in the branded form. The branded tea is now estimated to account for 60% of the annual turnover of the tea industry, valued at Rs 6400 crores. The major players in the branded tea business have been undergoing a restructuring process. Not long back, 80% of Tata Tea s income used to come from its plantations, but now the emphasis has almost reversed. After Tata Tea sold its tea plantations to its wholly owned subsidiaries, plantations contributed just 14% to the company s turnover. It is also making efforts to strengthen its brands, and its acquisition of Tetley in 2000 has helped a lot in this regard. Following a similar step, HUL had quit plantations business and concentrated on the branded segment alone. After the sale of Tea Estates India Ltd, HUL has totally withdrawn from the plantation activity. Unlike Tata Tea and HUL who sold off their plantations, smaller players are still holding their plantations business.

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TYPES OF TEA

HERBAL TEA

BLACK TEA

GREEN TEA

CTC

ORTHODOX TEA

Black Teas are oxidized and fermented during processing, to give them their distinctive flavors. Black tea has a full, rich taste. Oolong Tea is tea that falls between a black and a green tea. It only undergoes a small amount of fermentation during processing Green Tea undergoes less processing than black teas, and have a much lighter flavor. The health benefits of green tea are seemingly endless. Since the leaves are not fermented, the taste is pleasantly fresh and herbal White Tea comes from the Camellia sinensis plant. But the leaves are picked and harvested before the leaves open fully, when the buds are still covered by fine white hair, hence the name. White tea is scarcer than the other traditional teas, and quite a bit more expensive. Loose Teas are typically whole leaves or at least large pieces of leaves Tea bag is a small, porous paper, silk or plastic sealed bag containing tea leaves for brewing tea

Special Features of India Tea Industry:y y y y y y y Production dependent of agro-climatic conditions Same plant and same agro-practices give variations in quality in different regions Product Life is for limited period Labor intensive High Cost due to high input cost No priority for Scientific Cost Management Huge proportion old tea & Low Productivity

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Industry SizeIndian tea industry stood at 979 million kg as of 2009, with the share to global supply accounting for 25 %. It is currently the second largest producer of tea in the world, following China which overtook it since 2006. In 2009, the size of the Indian tea industry was estimated at Rs 140 bill