Tata Tea managing director, SM Kidwai aired his views on the competitive positioning of Indian tea, deterrent government policies and the company's plans to move ahead once the Tetley deal is through. All this in an interview with Nandini Goswami of FE (Calcutta).On the state of Indian tea post WTO.
There is no reason to get perturbed once the import tariffs are relaxed. No drastic movement in prices is expected as imports, if any, will depend on the amount and quality standards of tea coming in. There will be a tendency for prices to get flattened out. Moreover, countries wanting to export will have to vet the economics of sending their tea to a new country.
On the main problems faced post WTO
The only worrying factor will be the rising costs of production which have been going up faster than they should have. It is difficult to survive with average yields at 1,600 kg per hectare in a state like Assam. The industry should urgently address the problem of stagnant yields which have to be increased to 2,500-2600 kgs per hectare at least.
On the entry of Tetley's products if the acquisition fructifies.
The first product would definitely be the tea bag in which Tetleys have been pioneers. The drawstring tea bags are expected to catch on in the current Indian market.
On entry of tea in the ready-to-drink category.
This sector will still take time to grow in India. With the cola thirst yet to be fully satiated among the Indian population, the switch to iced or flavoured tea is a distant option. Moreover, positioning costs are estimated to be very high.
On plans to increase the packet tea share substantially by the company.
The whole idea is to provide a sharper focus to tea in every segment and to this end we will be shaping our plans incorporating all categories right from the premium segment to the lower-end types.
On performance of your recent brands.
Tata Tea packs almost 75 per cent of its tea in packets. The Agni brand launched recently has been able to achieve substantial volumes. The economy segment or the loose tea convertor segment is the fastest growing segment and hence focussing here is warranted.
The whole idea is not to woo away consumers from the existing brands in a particular segment but to bring in more consumers from the loose tea segment into this particular brand.
On Tata Tea's increasing dependence on auction tea in the future.
We have plans to consolidate our position further in the value-added segment. Higher volumes would require auction tea definitely.
Provided the Tata-Tetley deal works out, what do you intend to leverage on the most?
By buying a global label, the distribution system of the company will receive a huge fillip. "Tetley Tea" from the house of Tatas will catapult Tata Tea into the international branded market in a big way.
On major policy decisions that have affected the tea industry.
Interventionist government policies time and again have had their effects on the tea industry in a major way.
Moreover, one has had to pay the price of getting protected by the government by way of paying excise duties and keeping the prices low.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.