Wagh Bakri: Everyone’s cup of tea?

By: | Published: June 5, 2018 12:57 AM

The history of Wagh Bakri is unlike any other. Narandas Desai, who after leaving two tea estates in Durban (South Africa) after political unrest in the early 1900s, established Gujarat Tea Depot in Ahmedabad in 1919.

wagh bakri, wagh bakri tea, wagh bakri companyWagh Bakri is vying for increased market share by entering new markets and opening more tea lounges

Wagh Bakri is vying for increased market share by entering new markets and opening more tea lounges

Meghna.Sharma@expressindia.com

The history of Wagh Bakri is unlike any other. Narandas Desai, who after leaving two tea estates in Durban (South Africa) after political unrest in the early 1900s, established Gujarat Tea Depot in Ahmedabad in 1919. However, it was only in the 1980s when Wagh Bakri Tea Group — then led by the second generation — tried to replace the erstwhile loose tea business with packaged tea. But it wasn’t an easy ride; government regulations and the external environment posed their own sets of challenges. Wagh Bakri Tea Group’s executive director Parag Desai recalls, “Twenty years later, the third generation once again took up the cause of the packaged tea business and we have been growing since then.”

Today, while the ethos remains the same, the face of the brand is quite different. The company has opened 15 tea lounges keeping in mind the growing popularity of tea cafes in India. “The objective of tea lounges is to provide a common meeting ground to tea lovers and to further popularise tea as a preferred beverage,” says Desai. The lounges are present in Delhi, Ahmedabad, Mumbai and Goa, and will soon be launched in other metro cities.

Brewing the tea

Currently, the top slots and almost 50% of the packaged tea market might be controlled by Tata Global Beverages and Hindustan Unilever, but consumers are trying out many regional and smaller brands as well. As per Euromonitor International, the tea market stood at Rs 12,970 crore in 2017 in India and will grow at a CAGR of 3.6% between 2017-2022. Wagh Bakri is a strong player in West India, in states like Gujarat, Maharashtra, MP and Rajasthan. In the North, it is growing fast in Delhi, Himachal Pradesh, Uttarakhand, Punjab and Haryana, and has
recently launched in Jammu & Kashmir. In the South, its products are available in Goa, Karnataka, Andhra Pradesh, Telangana and Tamil Nadu. “We will be expanding soon in the East as well. Currently, we have 8-9% market share in India,” shares Desai.

Claiming to have teas for everybody — students, travellers, working professionals, sportspersons and so on — the brand spends close to Rs 100 crore annually on marketing. The communication plan varies for each product. For instance, the brand spent around Rs 5 crore on marketing Mili in North India, which is largely targeted at SEC B and C, predominately homemakers. Good Morning is its super premium offering, Mili is the brand’s popular/mass segment brand, and Navchetan caters to the economy segment and is positioned against non-branded tea.

“Wagh Bakri’s product range has been economically priced and prices are not revised/increased based on market dynamics such as a change in procurement price, tax structure or any other factors that increases operations,” says Devchandan Mallick, research analyst — drinks and tobacco, Euromonitor International, adding, “Despite keeping prices of its tea brand economical, it has maintained the quality of tea. Thus, enabling it to maintain and grow its market share over the years.”

Wagh Bakri has a strong liking towards TV shows and BTL events as sponsors that reflect the unique culture of a region. This helps the brand to connect with local audiences and win over their trust, according to Desai.

The company introduced various ranges of green teas and organic teas for health-conscious consumers, and instant tea and ice tea for on-the-go consumers. As for expansion in international markets, the brand feels that there is latent demand for Wagh Bakri Tea in countries where there is a sizeable Indian diaspora and therefore, it has ventured into exports as well.

One sip at a time

To compete with conglomerates as well as local players — organised and unorganised — isn’t an easy task. Hence, the brand invests a lot in research, particularly to ascertain the viability of venturing into a particular geographic region. For example, it offers a different blend for every state — consumers in West and North India like their tea strong. Distribution too plays an important part. “We rely heavily on local expertise. For every new market, we conduct a thorough research prior to entry. This is only after we gain an exhaustive understanding of the consumer psychology based on which we design our distribution strategy,” Desai adds.

But there are challenges too. The company not only faces competition from global giants including Tata Global Beverages (TGB) and Hindustan Unilever but also from private equity funded start-ups who are expanding quickly by increasing their footfalls as well as their product portfolio. “Though the company focusses on gradual expansion, challenges from the economics of scale could be one of the reasons why it avoids rapid expansion,” says Mallick.

Its regional competitors like Amar Tea gained market share in 2016 to reach 2% by widening its distribution reach. Similarly, Girnar too saw an upwards trend and rose to 1% share in 2016 by focussing on OOH and tying up with IndiGo to raise customer awareness. As for unpackaged tea, it continues to see strong sales in rural India and among low-income consumers. Wagh Bakri is seen as an economical brand and though the company is slowly transforming with a new premium portfolio, its premium products lack awareness and marketing compared to its other brands.

@meghna0101

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