A Case Study On Pakistans Tea Industry Marketing

Essay
ukessays.com /essays/marketing/a-case-study-on-pakistans-tea-industry-marketing-essay.php
Tea is considered to be an essential consumption item in many countries of the world, including
Pakistan. The history of tea drinking in the subcontinent can be traced far back. Over a period of time,
the colonials improved the quality and taste of tea. At present there are two kinds of tea available in the
market: branded and unbranded (loose) tea, the ratio is (54:46) respectively. Bulk importers sell tea to
retailers in loose form, while the second category of bulk importers sell packaged tea under brand
names.
All tea in Pakistan is imported. Therefore, tea, a traditional hospitality item in Pakistan, consumes a
large amount of foreign exchange. Pakistan mainly imports tea from Kenya and other African countries
like Uganda, Burundi and Tanzania, while multinational companies in Pakistan also import tea from Sri
Lanka, Indonesia and Bangladesh. The current tea imports are approximately 150,000 tons.
There are unlimited quantities of smuggled tea flooding the market. The main problem at present is that
smuggled tea has now taken over the market, simply because of the high duty and taxes levied by the
government on branded tea. Smuggled tea escapes all duties and levies, and therefore can be sold
cheaply, as loose tea.
Unilever Pakistan
Today Unilever is a multi billion-dollar global company whose products are distributed in some 140
countries, including Pakistan. Pakistan Unilever markets toiletries; oral care products, edible oils, tea
and other consumer goods.
Unilever have been distributing products in Pakistan since 1948. Now Lever Pakistan is a highly
competitive company and its main competition is with the imported products and some other Pakistani
products. Consumer response to the Levers products in Pakistan has been excellent.

Lipton Yellow Label

Lipton was first introduced in Pakistan in 1948. Tea was sold in tin packs at the time. The tea giant
Lipton was merged with Lever Brothers that year in Pakistan, five years after the international takeover
of the Lipton Company by Unilever Lipton Yellow Label's main feature is that it is tea of the "finest
blend" available.

Brooke Bond Supreme

In 1997, Brook Bond, another leading player in the tea business in Pakistan, was merged with Levers,
so that Lipton and Brooke Bond, once fierce competitors in the local market now belonged to the same
parent company.
Tapal
Tapal is a well known name in Pakistan. Making a modest beginning over half a century back, today
Tapal has become the largest, 100% Pakistani owned Tea Company in the country. In December 1997,
Tapal Tea became the first Pakistani Tea Company to earn the ISO-9001 certification: a symbol of the
highest international quality standards. Tapals success has left many astounded. The most of the
greatest achievement is the best marketers award received by Aftab F. Tapal on October 2, 2004 by
21st Century Business Club.

Tetley Tea
Tetley Tea is a product of Tetley Clover Private Limited. They were hoping to capture 6 to 8 percent of
the market share when they had a launch. Due to certain shortcomings in its marketing procedures and
Advertisement strategies they had a product failure. The thematic advertising and launch of different
brands at one time are some of the reasons. Right now they had a market share of about 3 percent and
restricted to urban market.
The tea market is very much dependant on Political & Legal forces. The price of the tea is to great
extent dependent on taxes. Tea industry is very much dependant on suppliers. Suppliers are
considered to be the heart of the Tea Industry. All the companies like Tapal, Unilever and Tetley keep
good terms with their supplier since the shortages might be harmful for the company.
Labor unions are present in Unilever, Tapal and Tetley. Tea is basically blended and packed in these
companies. The success of tea industry to a great extent lies in the hand of distributors. Tapal,
Supreme, Brooke Bond & Tetley share a very much similar policies with the distributor.
The report compares of six companies in all out of which three were studied in the last session by
another group (Tapal, Uniliver{Lipton, Supreme}& Tetly) and three new players are added in current
session ( Vital Tea, Kohinoor & Alpha)
Industry Overview

Overview of Tea Industry

Tea is considered to be an essential consumption item in many countries of the world, including
Pakistan. The history of tea drinking in the subcontinent can be traced far back. It is said, that tea was
introduced with the arrival of the British in the Subcontinent and became popular in the region during
the British rule. The British people were clever enough to use a powerful slogan, which remained in the
minds of the people. They said, In winters it provides warmth and in summers, it gives freshness.
Over a period of time, the colonials improved the quality and taste of tea. Mr. Thomas Lipton was the
key person who introduced the aromatic soothing leaves, to the common man at affordable prices. This
is one of the main reasons why Lipton even now is one of the most well known brands of tea in this
part of the world.
At present there are two kinds of tea available in the market: branded and unbranded (loose) tea, the
ratio is (55:45) respectively. Therefore, the importers are also of two types, though both import tea from
the same countries. Bulk importers sell tea to retailers in loose form, while the second category of bulk
importers sell packaged tea under brand names.

Branded VS Unbranded
Branded
55%
Unbranded
45%
Branded
Unbranded

Source: Tapal Tea Pvt. Ltd

All tea in Pakistan is imported. Therefore, tea, a traditional hospitality item in Pakistan, consumes a
large amount of foreign exchange. Tea imports through legal route account for about 200 million US
dollars per year and is growing. Another 60 million kilograms of tea or nearly half as much of total
consumption of tea is smuggled, that is imported illegally
Pakistan mainly imports tea from Kenya and other African countries like Uganda, Burundi and
Tanzania, while multinational companies in Pakistan also import tea from Sri Lanka, Indonesia and
Bangladesh. The current tea imports are 139,000 tons. Out of which 115,000 tons is Legal import and
24,000 tons is through illegal channels.
There are unlimited quantities of smuggled tea flooding the market. The main problem at present is that
smuggled tea has now taken over the market, simply because of the high duty and taxes levied by the
government on branded tea. Smuggled tea escapes all duties and levies, and therefore can be sold
cheaply, as loose tea.
Now the scenario has changed as the import taxes are reduced up to 10% by the government. The
share is slightly increasing towards branded tea (Legal imports).

Share of Throat:
Traditional Tea consumption has very strong g grounds through out the world. Especially in North
Eastern part of Europe and Central Asia is most attractive Tea Market. The statistics for Tea
consumption is shown in the following graph.
Tea Leaf Market:
There are different types of tea leaves imported from different gardens of the world. East African belt is
well known for its diverse tea leaf market. Grade PF1 and CTC BP grade Tea is highly in demand. The
shares of different Tea Leaf are shown in the following graph.
Tea Market - By Pack Formats
There are different packaging standards followed by different companies. Tapal, Lipton, Supreme and
Tetley are some how using similar Packaging standards for their different brands. Following is the given
percentage for packaging standards.
Usage of Tea on Different Occasions:
The Tea consumption in Pakistan is 0.95 kg i.e. 3 cups per day. This has been consumed in different
time slots of the day. Following is the usage of tea in different time periods of the day.
Breakfast 94%
Evening 70%
After Dinner 29%
Before Breakfast 22%
Major Tea Producing Countries of the World:
China is the largest producer of Tea at the time and then comes India on the second ranking. But major
imports are being done from Kenya because of its quality and diversified Tea Leaf Market. The others
are being listed below.
SiriLanka

Bangladesh
Indonesia
Rawand
Burandi
Tanzania
Malawi
Veitnam
Uganda
Available Tea Market Rural/Urban
According to the current market research the available Tea Market in Pakistan is 34.65% in Urban Area
and the rural market is 65.35%.The Urban Sector is slightly increasing due to promotional efforts of the
industry players.
Industry Attractiveness

Assessment of Industry Attractiveness

Threat of New Entrants
Major players enjoy significant economies of scale due to large sales volumes and have strong brand
identity.
Large capital requirements are required for setting up distribution channels and heavy advertising for
new entrants, to compete against major well-established brands. Hence, threat from new entrants is
minimum.
However, in Tetleys case, capital requirements were met and global credibility was present. We believe
that after WTO the market dynamics may therefore change drastically quid pro quo.

Bargaining Power of Customers

Generally, retailers in Pakistan are not large volume buyers. Therefore, they are not able to bargain for
proper discounts.
Upper class consumers have strong brand loyalty, while low-middle class has become increasingly
price conscious and is therefore, not very brand loyal.
Retailers are likely to stock smuggled tea due to higher margins, and for the same reason, consumers
are inclined to buy it, as it is still cheaper for them.

Rivalry among Existing Competitors

Devaluation and import duties make domestically produced consumer goods, including tea, more
expensive than smuggled products.
Smuggling of tea has hampered development and growth in the local tea industry.
There is an oligopoly as there are only a handful of local competitors in the tea industry.

Bargaining Power of Suppliers

High differentiation of input for the tea industry, due to consumer preference for East African tea.
Pakistan is one of the largest consumers of tea and a major market for Kenyan tea exporters.

Threat of Substitutes
Coffee is a substitute for tea, but consumer propensity for it is low.
Societal & Task Environment
Societal Environment

Social and Cultural Forces

Society and culture plays an important role in determining the marketing plan and business strategy of
the organization. Though Unilever, Tapal are big names and enjoy a very good market share but still
these forces sometimes play a major impact. Recently when Muslims planned to resist against the
foreign made goods it could have greatly affected the sales of Supreme & Lipton Yellow Label but at
the same time this situation could have been good for Tapal. These forces not always play a negative
role but can sometimes be really helpful. Tetley entering this market as a new product can also be
effected by these social and cultural forces. In Asia society and culture does make an impact.
Following Factors contribute in social trends.
Tea is taken as traditional drink
Hi-Tea parties in Hotels
Offices
Institutions
Average consumption of Soft Drinks in U.S. is 365 bottles / anum
Pakistan 20 bottles/ anum

Political and Legal Forces

The tea market is very much dependant on Political & Legal forces. In other words we can say that
Political & Legal forces can dictate the sales and profitability of the Tea selling firms. Taxes and Excise
duty are of real importance to these organizations. The price of the tea is to great extent dependent on
taxes. On the other hand there are several other requirements that the Tea selling firms need to fulfill.
For new entrant specially Tetley there would me many Political and legal barriers
Political Factors:
Govt. Policies
Import Taxes reduced up to 10% which reduces the share of smuggled tea.
Prices are reduced increasing branded tea market.
15% GST is an hurdle for end consumer
Govt. encouraged private sector to grow local tea at Shinkiari Tea gardens.

Technological Forces

As far as Tea is concerned the Technological forces that may apply are good machinery for refining and
packaging. Tapal is considered to be the pioneer in soft packing. Unilever is also up to the task as far
as packaging goes. Unilever and in my opinion Tetley will always have an upper hand and would be
able to sustain the pressure of bringing in new technological changes as they are financially strong and
have employees who love technological changes on the other hand Tapal may initially cope up with
these foreign firms but in long run it wont be able to make constant technological changes. Some of the
Technological Turns taken by the industry are as follows
Advent of new Blending & Packaging Machines has increased the efficiency.( Dilatometers & Q.C.
Machines)
Use of Digital Scales for Quality Blending
Use of Palm tops in monitoring primary and secondary sales management and trend analysis

Economic Conditions
Being a third world country and trying to progress Pakistan still faces the problem of economic stability,
recently it is believed that Pakistan has been able to maintain economic stability.
Fiscal year 2002-03 has been frustrating for global economic recovery. However, the following key
macroeconomic events took place in 2002-03:
Real GDP at factor cost grew by 5.1% (target: 4.5%)
Contribution of manufacturing & services: 5.3%
Inflation (as measured by change in CPI) stood at 3.3%
Monetary policy showed expansionary stance by lowering the weighed average lending rates from 14
to 8.2%
KSE has risen to the order of 5,000 pts
Sharp decline in public debt
Various tax reforms
Growth in exports: 20.8%
Lower income & daily wage earners go for sachets which has increased the share of sachet up to 19%
in the total brand split.
Demand for mini packs has increased in small towns and rural market
Economic conditions play a major impact on tea industry. Like most of the other industries are
dependant on economy, tea is also one of the industry that can be greatly effected by economic
instability.
Whether the economy is in a recession or in a boom, it affects the activities of Tea industry in a way
that it influences the demand of their product. In a boom the demand of the product increases. Similarly,
in a recession the demand of a product falls since the buyers consume less of the product due to falling
incomes. Though fluctuations in the demand do occur, these are not major fluctuations as demand for
tea is inelastic in relation to price.
Inflation plays a major role on the marketing strategies used by a company due to two main reasons.
Firstly, inflation affects the consumers psychology and they become more selective in their purchases.

Secondly, inflation results in rising prices for the raw materials purchased by Tea selling firms, which in
turn increases the cost of production. This factor plays a major role especially if the increase in cost
cannot be transferred to the consumers in the form of raised prices.
Task Environment

Suppliers
Tea industry is very much dependant on suppliers. Suppliers are considered to be the heart of the Tea
Industry. All the companies like Tapal, Unilever and Tetley keep good terms with their supplier since the
shortages might be harmful for the company. These companies have various suppliers and are not
dependant on any single supplier but still the supply chain needs to be very strong in order to be in this
competitive business.

Employees and Labor Unions:

Employees and labor unions need to be tackled with great care. Labor unions are present in Unilever,
Tapal and Tetley. All these companies follow Industrial Ordinance that includes labor laws etc. Tea is
basically blended and packed in these companies. After suppliers labors play a very important role in
the progress of these organizations. Great care is taken to provide laborers a good healthy working
condition. At Unilever there is a sports club for the workers. Tapal has plans to open up sports and
recreation club for their laborers.

Distributors & Sales

The success of tea industry to a great extent lies in the hand of distributors. Tapal, Supreme, Brooke
Bond & Tetley share a very much similar policies with the distributor. Unilever has the same distributors
for most of their product. The main distributors of Unilever are M.Saya and Gizri Corporation. Tapal in
Karachi has a very big distribution network; it deals with ten different distributors for the sale of its tea
some of the distributors are Qiji Enterprise and Sales Promoter. Teltey main distributors are Consumer
Channel & Express.

Competitors
Life if full of uncertainties take good care of your customer before the competitor does. Tapal faces
tough competition from Lipton, Brooke Bond and vice versa. Now Tetley has also joined this rivalry. All
these three tea blendes face a lot of threat from the lose tea which is sometimes cheaper. Coffee is a
substitute in general and is a threat to tea. Soft drink has also become a threat to tea since the
teenagers prefer soft drinks over tea.

Creditors and Financial

These are considered to be the back bone of the company. All these three companies Unilever, Tapal
and Tetley have a good reputation and can get loans both short term and long term as when wanted.
Teltey has a backing of Lakson group which is one of the biggest and strongest business group in the
country. Unilever will have an edge over all the other firms in getting cheap loans and better service
followed by Tetley and Tapal.

Government
The success of the Tea Industry at macro level depends on the policies and budget decisions of the
government. Taxes and General sales tax are in the hand of the government, which are a major threat
to tea Industry. If the government can control the smuggling of tea a lot can be done to improve the
sales of the legal tea.

Functional Analysis
Structure
Culture
Information Systems

Commentary on Structure
Tapal
The company is trying to adopt a diversified culture like multi-national and all top organization but still
seth like values prevail.
There is a centralized authority structure. The seth is involved in almost all decision making. The top
management is very seldom allowed to take the decision on its own.
The company has an average Dcor, it is not like multi National companies having extra ordinary office.
Factory and head office both are at the same location.
Transportation and food provided to all management and non management staff
Mostly male staff
Not much spending on training and development. The employees mostly get on job training
The top managers are pretty cautious about sharing the companys information.

Unilever
Unilever enjoys the benefit of open door policy. The company has a very friendly and motivating
environment.
Credo: Throw in the deep end of the pool
Empowerment through opportunity
The authority is decentralized. The line of action and area for each manager in certain circumstances
are clearly defined.
There is a lot of emphasis on group discussion. Brain storming session often take place, specially
incase of budgeting and Planning.
Extraordinary office and exceptional working environment
Factory and head offices both are located at different locations
The staff mainly comprises of males.
Multi ethnic workforce diversity
Low turnover of employees
Massive investment on training and development

Tetley

Shared values with Lakson group of Companies

Lakson is one of the top most organization in country which is said to have environment pretty much
similar to Multi-Nationals
Open door policy prevails in the organization.
Head office and factory both are at different locations
The dcor, working environment of the organization is exuberant
Entrepreneurial culture prevails in the organization
Decentralized authority, line of action for each manager is properly defined and explained
The organization is in a development a stage as far as Tetley is concerned and suggests late sittings in
order to add value.
Training and development is coming from the best group practices of Lakson
TOWS Matrix

WT STRATEGIES
Increase Sales Force in Punjab
Introduce new & regionally attuned blend variances within the same brands to be in a win-win
situation

ST STRATEGIES
Launch Consumer Promotions
Launch Trade Deals
Increase social awareness against smuggling via Advertising, PR & DM

THREATS (T)
Inflationary price pressure (stability is believed to be unsustainable by some economic experts)
New Entrant (Tetley)
Strong Competition particularly from Supreme
Loose Tea & Smuggled Tea

WO STRATEGIES
Engage DM campaigns to increase interest in the tea market from a growth angle
Increase managerial empowerment
Develop alternative brands using shadow & token endorsement techniques for brand portfolio
architecture building

SO STRATEGIES

Build Exports in US, Europe to ex-pats as well as Indians

Diversify into iced & flavored tea
Innovative possibility: Instant tea powder i.e. powder + warm water = instant tea

OPPORTUNITIES (O)
Increase in Exports opens up international markets
Improvements in relations with India provide new markets
Recent pick up of flavored/iced tea at local restaurants
Improvements in law & order situations and the rise of PR based carnivals/festivals

WEAKNESSES (W)
Low CDI
Seth like culture
Distribution relatively weaker in areas other than Sindh
Highly Dependant on Tapals equity
Relative Technological Backwardness

STRENGTHS (S)
Experienced & Quality Management
Strong Heritage (Emotional Value)
Integrated Production Process
International Exports
Strong Supply Line
Highly Profitable non credit sales (Rel. High BDI)
Strong Financial Position
Highly Innovative

IFA
EFA
TAPAL
WT STRATEGIES
Creative Media Planning to counter the competitor communication
strategies

ST STRATEGIES
Launch Consumer Loyalty Programs
Conduct Taste Tests to create interest in Lipton
THREATS (T)
Inflationary price pressure (stability is believed to be unsustainable by
some economic experts)
New Entrant (Tetley)
Strong Competition particularly from Tapal
WO STRATEGIES
Reduce CPs per annum, instead spend on building brand loyalty
Only include relevant promotions
Develop long term trade relations
Market Development: Introduce Kehwah blends in NWFP
Sustain & build the recently launched repositioning campaign
SO STRATEGIES
Develop new packaging
Develop strong and coherent positioning strategies
Introduce Brand Equity Building PR & DM programs e.g. Lipton Club
Launch Lipton Ice Tea in Pakistan
OPPORTUNITIES (O)
Increase in Exports opens up international markets
Improvements in relations with India provide new markets
Recent pick up of flavored/iced tea at local restaurants
Improvements in law & order situations and the rise of PR based
carnivals/festivals
Youth based loyalty programs e.g. Lipton Club open up new markets

Rural Markets
WEAKNESSES (W)
Heavy Reliance on CP to sustain brand volumes
Low market share in NWFP
Positioning Image Gap
STRENGTHS (S)
Multinational company
Powerful heritage since 1948.
Familiarity with consumer Dynamics.
Largest Ad Spend in Unilever Beverages
Strong brand image and awareness
Largest sales force
Sound and experienced management.
R&D and financial support from parent Unilever.
Very Innovative in Packaging
IFA
EFA
LIPTON
WT STRATEGIES
Do Nothing
ST STRATEGIES
Do Nothing About Tetley
Counter Tapal by a) creative media strategies and b) using a
perpendicular projection strategy
Launch Loyalty Building CP to counter Tapal in the short run

THREATS (T)
Inflationary price pressure (stability is believed to be unsustainable by
some economic experts)
New Entrant (Tetley)
Strong Competition particularly from Tapal
WO STRATEGIES
Activate the brand on ground and differentiate Tapal FM from Supreme
Introduce rewards programs & augment Value Proposition
Launch Supreme in regional & global markets
SO STRATEGIES
Invest in urbanization of the brand yet remain true to the archetype core
(e.g. Levi 501)
Build brand Activation Programs (e.g. Jawad APM)
Increase Ad Spend
Own a Supreme Day e.g. Eid
OPPORTUNITIES (O)
Increase in Exports opens up international markets
Improvements in relations with India provide new markets
Improvements in law & order situations and the rise of PR based
carnivals/festivals
Increased awareness & desire of education opportunity for societal
marketing
WEAKNESSES (W)
Archetype brand
Similarity of positioning with Tapal Family Mixture
Rel. Low market share in Sindh
No International Brand Presence

STRENGTHS (S)
Multinational company
Second largest Ad Spend in Unilever Beverages
Strong brand image and awareness
Coherent & Focused Positioning
Largest sales force
Largest BDI in UPL Beverages
Sound and experienced management.
R&D and financial support from parent Unilever.
Very Innovative in Communication
Primarily sold in suburban & rural markets
IFA
EFA
SUPREME
TETLEY
IFA
EFA
STRENGTHS (S)
Multinational Company
Strong Financial Backing
International Brand Image & Awareness
Sound & Experienced Management
Good mild taste and aroma
Good Packaging
Owned Plantation

WEAKNESSES (W)

Weak Marketing
Weak Distribution
Not generally recommended by retailers and dealers to customers

OPPORTUNITIES (O)
Increase in exports open up international markets
Improvements in relationships with India
Recent pickup of flavored tea at local restaurants
Improvements in law & order situations and the rise of PR based carnivals/festivals

SO STRATEGIES
Launch SKU extensions and Ready to Drink variants
Brand Awareness Campaigns targeting youth along the lines of Nescafe brand ambassador programs

WO STRATEGIES
Build Distribution Networks
Relationship management with trade promotions

THREATS (T)
Inflationary price pressure (stability is believed to be unsustainable by some economic experts)
Strong Competition particularly from Tapal, Lipton & Supreme

ST STRATEGIES
Conduct Taste tests to create interest in Tetley

WT STRATEGIES
Educate the trade channels about the advantages of selling branded tea and build loyaltyInformation
Resources

In house Software house called CRISS

Group Consumer Database
Moderate Consumer Research
No CRM, Call Centers or IVR
Automated Marketing Services
Paper based Supply Chain BP

No local intranet
Central Database
In house Consumer Insights Management
Extensive Consumer Research
Lever Raabta Call Center, CRM & IVR
Automated Marketing Services Management
Automated Supply Chain & Factory Operations
Local Intranet linked to region via radio link
Extensive Best Practices Library
In house IT Dept that engineers and manages various functional
applications
Lipton has its own consumer club which has a web presence at:
http://www.planetlipton.com
Basic MIS infrastructure limited to emails and intranet based repository
In house IT dept
Automated Factory Operations
No Call Centers, CRM etc
In house library and basic AV facilities
Standard software used, minimal customization which is usually
outsourced
Paper based Supply Chain Operations
Tetley
Unilever
Tapal
Portfolio Analysis
BCG MATRIX

NINE CELL GE BUSINESS SCREEN

FIFTEEN CELL
PLC CHART

BCG Matrix
9 Cell CE Business Screen

15 Cell Product Market Evaluation Matrix

Product Lifecycle Matrix