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| Tata Tea's new gambit |
| Viveat Susan Pinto / Mumbai Apr 26, 2010, 00:36 IST |
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The tie-up with Pepsi is aimed at leveraging the US giant’s skills in the beverage business.
Tion, the cold beverage from Tata Tea, which has extracts of tea, ginseng and fruit, was launched with much fanfare last year. But a year on, the product exists in two states only — Tamil Nadu and Kerala.
Sangeeta Talwar, executive director, marketing & regional president, South Asia, Tata Tea, says the product is doing well and will see a phased rollout across the country in time. “The response from the marketplace has been good,” she says. “We recently launched an orange flavour, which complements our portfolio of apple, peach and mango,” she adds.
But in a competitive segment such as fruit drinks, estimated to be Rs 2,500 crore in size, and growing at a steady clip, is that enough? Not really, say experts. You need to have the wherewithal, the muscle power and the strength to carry on in a competitive segment such as this, they say.
Even if one were to take into account the practice of launching a product selectively in a few regions before going in for a full-blown national launch, Tata Tea’s Tion appears to be tad slow on that count, not to mention that it is hardly visible in the marketplace.
This piecemeal approach to the brand, say experts, lies in the company’s inability to compete with the likes of PepsiCo and Coca-Cola in a segment that they clearly dominate.
Sample this: Nimbooz, a lemon-flavoured drink launched by PepsiCo last year, is said to be clocking sales of over 200,000 bottles per day or 7 million bottles per month. Coca-Cola’s Minute Maid Nimbu Fresh, launched a few months earlier, is also doing sales of about 2.5 million bottles per month, according to industry sources.
Tion, a year on, is now doing sales of about 2 million per month in the 250-ml segment, while the larger 400-ml variant is small, with sales of about 200,000 bottles per month.
So what do you do in a scenario like this? Tie up with your competitor, as Tata Tea did recently with PepsiCo, announcing it had signed a memorandum of understanding with the latter for a new non-carbonated beverage entity.
“Products under the entity will be on the health and wellness platform,” says Talwar. She declines indicating though whether Tion will be part of this venture over time. “Only the initial agreement has been signed,” she says. “We are still working out the finer details.”
Tying up with PepsiCo will allow Tata Tea to leverage the latter’s skills in the non-carbonated beverage business - something it needs to do badly if it has to emerge as a well-rounded beverage major.
Tata Tea has articulated off and on its keenness to go beyond tea and coffee. Its acquisitions in the last few years have echoed this sentiment. Whether it be the buyout of Mount Everest Mineral Water (MEMW), which owns the Himalayan brand of packaged water, or Energy Brands in the US, the 30 per cent stake of which was subsequently sold to Coca-Cola in 2007, Tata Tea has been looking to diversify its product portfolio for long.
Health and wellness is a market too hard to resist given that overall beverage consumption is moving there, whether in India or abroad. According to a recent report prepared by the Tata Strategic Management Group, health and wellness beverages in India are likely to grow at 22 per cent year-on-year to touch Rs 17,350 crore by financial year 2014-15. The market at the moment is about Rs 6,200 crore in size including fruit juices, fruit drinks, energy and sports drinks etc. Worldwide, the health & wellness market (includes both food & beverages) is already over $460 billion in size.
PepsiCo knows well the implications of playing in this market. It already has a $10 billion health-drink business worldwide.
The company’s global chairman and chief executive officer Indra Nooyi, in fact, has said recently that she is looking to triple PepsiCo’s health-drink business over the next 10 years as she sees huge growth areas for its ‘good for you’ drinks. Tieups in the area are likely to help further the cause as PepsiCo looks to shed its image as a maker of cola drinks alone. Nooyi has also laid out a roadmap to reduce salt, saturated fats and added sugar in the company's products in the next few years. She hopes to cut sodium by a quarter in the next five years, while sugar and saturated fat will be brought down in ten years. The MoU with Tata then in the Indian market is yet another step in this direction.
So Tion and other products like it do have a future in the end.
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