Hindustan Unilever's (HUL's) beverage portfolio has been an outlier in a slowing market. Brands like Taaza, 3 Roses, Brooke Bond, Taj Mahal and Bru give the company nearly 12 per cent of its Rs 25,810-crore revenue. While Bru, its brand of instant coffee, is estimated by the market to be around Rs 400-500 crore, most of its tea brands, comprising the rest 85 per cent, have grown in double digits in a segment crowded with national and regional players.
"The penetration of categories such as tea much like soaps and detergents is high, which is why topline growth has been in single-digits. But that in no way means that the brands haven't delivered. In tea, for instance, we have seen growth in the mass, mid and premium ends of the market," R Sridhar, chief financial officer, HUL, says.
Analysts agree that the performance of beverages as a whole could have been worse if it was not for individual brands in HUL's portfolio.
The Rs 2-lakh-crore FMCG market, according to industry estimates, grew in the region of about 5-6 per cent only in the December, 2013 quarter. Categories such as coffee saw negative growth, while tea grew in single digits, say market experts.
In the December, 2013 quarter, HUL's beverage brands cumulatively delivered a topline growth of 7.2 per cent. While this was lower than in the previous quarters (16.1 per cent in Q2 of FY-14 and 15.8 per cent in Q1 of FY-14), the individual brands bucked their industry trends. Not just HUL's tea brands, Bru that competes with Nestle's Nescafe, saw single digit growth. In the September and June quarters, growth was in double digits for Bru.
Beverages have performed well because of HUL's drive to fend off competition - from Tata Global Beverages (Tata) and Twinings - in tea who have stepped up their marketing.
Tata, for instance, has upped the ante in the green tea segment, appointing Bollywood actor Kareena Kapoor to endorse its Tetley range. The campaign featuring Kapoor began last week.
HUL has used both Lipton and Taj Mahal to take on rivals Tetley and Twinings, especially in green tea, a segment that is rapidly growing in India. Actor Anushka Sharma endorses Lipton's green tea.
Lipton competes with Tetley and Twinings in many markets beyond India. The competition is fierce in the UK, where the three brands originate. The use of Taj Mahal, in contrast, say experts, is a clever strategy to not only flank Lipton, but also ensure that each end of the green tea market, both upper and lower, is covered. The green tea range under Taj Mahal was first launched in 2011, which HUL has consistently built on over the years.
At the same time, the country's largest FMCG company has focused on identifying new trends in beverage consumption. One such has been its endeavour to build consumption of tea bags in a market that has been used to consuming tea loose. "We have always believed in investing in the categories of the future," says Sridhar. He explains that tea bags is one such area in tea much like liquid detergents is in the detergents category. "By investing in the development of tea bags, it has helped in the growth of our (premium) brands, both in black and green tea," he says.
In terms of product launches, HUL has consistently added to its portfolio in a bid to drive excitement. For instance, in the December quarter, the company launched a new variant in green tea (Lipton Clear Green) in packs of 100 tea bags as well as cartons. In the September quarter, it focused on flavoured tea besides green tea. In the June quarter, the company relaunched its mass-market tea brand Taaza, giving it a new lease of life. The company also added a new range to its Taj Mahal portfolio and aggressively pushed Brooke Bond, its mid-market tea brand, on the health platform.
HUL has not been silent in the face of its coffee rival's heavy spending either. Nestle has been pushing its Nescafe brand endorser Deepika Padukone through high-decibel TV and multi-media campaigns for quite some time. All in an effort to make coffee consumption look cool, aided in part by the cafe culture that is growing in India.
Bru, as a result, has seen a refresh as well, with a new set of brand ambassadors endorsing its premium brand, Bru Gold - actors Imran Khan and Sharma, who've replaced Shahid Kapur and Priyanka Chopra. The new campaign has been on air for a few months now. HUL is expected to get even more aggressive in the coming months with Bru's advertising.
Beverage has grown for the FMCG company consistently in the last few quarters even as segments such as soaps and detergents and personal care products (which give HUL nearly 50 and 30 per cent of revenues, respectively) have been more volatile in the face of a consumer slowdown. In the December quarter, they have fared better.