MARKET TRENDS & OPPORTUNITIES Pakistan imported about 8178.88 metric tonnes (MT) of black tea worth $16.1 million during March 2009, as compared with 9096.48 metric tonnes in March 2008 worth $18.5 million. According to these numbers provided by PTA, imports witnessed a decline of 10 percent. The apparent reason for the decreasing value of decline was a hike in the prices of commodities and petrol prices in general; it is significant to mention over here that the international tea prices also witnessed their peak in the past few months. Probably that is the reason why the existing importers in the country could not import the expected quantity of tea. This decline did not really affect the consumption pattern of the population as people consumed tea like they did in the past; the change in consumption pattern did not show a descending trend because of the existence of smuggled tea. Pakistan’s per capita consumption of tea is 1 kg per annum, but the country relies almost completely on imported tea. Its import volume is third highest behind Russia and the United Kingdom. Pakistan imports tea from 21 countries and the major portion is imported from Kenya. During March, 58.81 percent of the total quantity of imported tea was bought from Kenya as compared with 49.63 percent imported in the corresponding period last year. According to an interview given to Daily Times by the President of Pakistan Tea Association (PTA) Hanif Janoo, legal importers of the commodity are facing a critical situation because of increase in smuggling over the past few years. The country’s annual consumption of tea stood at 170-175 million kg, the third highest in the world. Mr. Hanif Janoo also stated that only 100 million kg of tea is brought into the country through legal process while the rest is smuggled under the garb of Afghan Transit Trade.
It is to be noted that the government is annually losing Rs 5 billion to Rs 5.5 billion revenue due to smuggling. This loss could easily be neutralized by making the legal trade regime easy and by placing minimum duties on regular imports as is the practice in almost all the tea-importing countries. The set of solutions suggested by Mr. Janoo included the reduction of import duty from 10 percent to zero, placing the black tea in negative list or putting a quantity quota like India-Nepal agreement. Other than the suggestions mentioned above regarding the steps that could be taken by the government, it is imperative to mention that in-house production and cultivation of tea leaves would also help us add more money to our local exchequer. If we spend approximately Rs. 20 million just for the cause of importing tea every month, we can easily calculate the amount we would save by initiating the local production in the coming few years. The import quantity would hence only increase with the increasing population.
PEST ANALYSIS: The external macro environment in which a firm operates can be expressed in terms of the following factors Political Economic Social Technological PEST analysis is used to describe a framework for the analysis of these macro environment factors. POLITICAL FACTORS:
These factors and government interventions can make or break the industry. The political factors have played a very benign role for the tea industy. The political arena has a huge influence upon the regulations of the businesses, and spending power of consumers and other businesses. The political environment of Pakistan is relatively unstable in the current situation. The
investors are not willing to invest in Pakistan. However, WTO and trade policies encourage the import of raw materials for Tea industry. Tea Import Quota It is an important consideration. Each year there is a certain quota on tea import in total imports of Pakistan. Each player is given quota to import and manufacture so one can say that it is a very regulated industry. Diplomatic Relations The relations with the tea producing nations and Pakistan play a vital role as large part of imports comes from Kenya, but now Pakistan is also importing tea from India. Unstable Geographic Conditions Pakistan is situated at a very critical and geographically strategic location. Due to the uncertainty new investors are not ready to invest in Pakistan. ECONOMIC FACTORS:
Economic conditions of an environment have a direct impact on the development of any industry. The recent economic recession in the world has had an impact on Pakistan’s economy as well. Pakistan's
economy
mainly
encompasses textiles, chemicals, food
processing, agriculture and other industries. In 2005, it was the third fastest growing economy in Asia. Since the beginning of 2008, Pakistan's economic outlook has taken a dramatic downturn. Security concerns stemming from the nation's role in the War on Terror have created great instability and led to a decline in FDI from a height of approximately $8 bn to $3.5bn for the current fiscal year. Concurrently, the insurgency has forced massive capital flight from Pakistan to the Gulf. Combined with high global commodity prices, the dual impact has shocked Pakistan's economy, with gaping trade deficits, high inflation and a crash in the value of the Rupee, which has fallen from 60-1 USD to over 80-1 USD in a few months. For the first time in years, it may have to seek external funding as Balance of Payments support.
Inflation Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 7.9% in 2006. In 2008, following the surge in global petrol prices inflation in Pakistan has reached as high as 25.0%. The central bank is pursuing tighter monetary policy while trying to preserve growth. Foreign
exchange reserves
are
bolstered
by
steady
worker
remittances, but a growing current account deficit - driven by a widening trade gap as import growth outstrips export expansion - could draw down reserves and dampen GDP growth in the medium term. Social Factors The social and cultural influences on business vary from country to country. It is very important that such factors are considered. People are socializing more may it be events or casual visits to friends and family. Tea has always been an integral part of Pakistani culture and rituals. It is understood that tea would be present at all events. Changing Trends As work environment is becoming more stressful, people require different forms of refreshment and intakes to increase their energy levels. This further increase the intake of tea at workplaces, tea is not only just available to the employees when needed but is also served twice a day in order to keep them going. On the other hand, media expansion, growth of advertising as a separate industry has resulted in greater exposure of all the brands and masses. Hence social factors and changing mindsets have positively affected this industry Tea has always been acceptable in all social classes because of its usage. Green tea has recently gained a lot of popularity due to health reasons and is largely consumed. Another factor is the emergence of ice tea which is indirectly competing with soft drinks. TECHNOLOGICAL FACTORS:
Technology is important to gain an edge over competitors and it drives globalization. Technology helps companies to reduce cost and achieve economies of scale. Technology also leads to the development of new products and sometimes even segments. Tea manufacturers like Unilever and Tapal already manufacture tea of the highest quality and they achieve it by the state of the art production facility that they have. Lipton has also installed its own plant of Danedar tea production.
PORTER’S FIVE FORCES: Micahel Porter provided a framework that models an industry as being influenced by five factors. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry in context in which the firm operates
C O
MPE
TI
TIVE
RIVALRY
The intensity of competition in the tea industry is fairly high. There are few established names like Lipton and Brooke Bond in the market. Now Tetley has also been introduced in the market. So Tapal is competing with all of these and also “Khulli Chai” as well. Talking about Lipton and Brooke Bond they are brands of Unilever which is known to be a giant in the FMCG industry. It seemed impossible that any local brand would even survive when competing with them but Tapal proved them wrong through smart advertising and high quality product it has already given Brooke Bond a run for its money and now facing Lipton. The rivalry can be observed when we look at the ad spend of these companies. All of them advertise heavily to gain a competitive advantage over the other. THREAT OF NEW ENTRANTS
Threat of new entrants is high. This is evident by the immense growth in the industry and government policies are also encouraging new Tea houses to emerge on the scene. The taxes on import of tea are reduced thereby decreasing the cost of production. It can be taken as positive sign by a prospect player. Initially it was thought that no company would survive against the giants of Unilever but since Tapal people have started thinking that local brands can do well and new players might decide to come into this market. THREAT OF SUBSTITUTES
In this case tea will always remain an integral part of our culture. Having said that there is a low switching cost associated with the trade off of substitutes. In case of tea substitute is coffee and even cold drinks in some case. It can easily be assumed that the demand for tea is nothing but increasing. Currently majority of the consumers have not developed the taste for coffee so it cannot be seen as a potential threat. Change in patterns can be observed because consumers are shifting from normal tea to green tea but again the broad category of the product remains the same.
BARGAINING POWER OF BUYERS
The bargaining power of buyers is low because of the high demand. Although due to increased competition prices remain competitive but buyers have little or no bargaining power. In case of tea an element of brand loyalty is also associated so a consumer would want to use a same brand which gives in his bargaining power. Also with tea people prefer quality over its price. BARGAINING POWER OF SUPPLIERS
Bargaining Power of supplier is high because there are few suppliers of tea. The reason why there are few is because there is a specific taste of tea that consumers like so the manufacturers are forced to choose from few options. In Pakistan tea is imported majorly from Kenya and Srilanka so the supplier is at power to influence the price due to the limited availability of the raw tea. In Pakistan recent plantation of tea farms may favor the local manufacturers and foreign suppliers may find a reduction in their bargaining power.
BCG MATRIX:
STARS: Lipton and Tapal have been placed as stars because they not only have higher market shares as compared to the rest of the brands but also because their business growth rate is higher and they believe in continuously investing in their businesses for expansion purposes.
CASH COW: Supreme is a cash cow because business growth wise, its progress is pretty slow but as far as the market share is concerned, it absolutely has a greater market share than Tetley or Vital for that matter; but at the same time its share is not comparable to that of Tapal or Lipton. Therefore the option for them to invest further in the business is also limited hence limiting their growth opportunities.
QUESTION MARKS: Tetley and Vital, both have the worst cash nightmares because they have the least market share with demand still existing which could be met. The low market share is an issue at their end and if they do not work on improving it they might end up in the dog category in the near future. It is important for them to further diversify their businesses if they want to sustain themselves in the current market scenario.
CUSTOMER NEEDS TARGET MARKET The broad category of target market for Tapal would be all tea lovers. However their diversified product line caters to various segments of consumer who have varied taste preferences. The most generic product can be the Tapal family mixture and specific would be “Tapal Tez Dum” which is for the consumers who like strong color and
flavor. Tapal Danedar provides the finest quality and is for the people who like quality tea. On the other hand Tapal Green Tea is for the health conscious consumers. So we can say that Tapal is catering to almost all categories of Tea drinkers. Their recent addition is Tapal iced tea which has not been very successful because the consumers have not developed the taste for it. In order to further understand the target market and their characteristics below is the AIOD framework which provides a comprehensive overview:
AIOD FRAMEWORK
NEED/BENEFIT
ACTIVITY
INTEREST
OPINION
DEMOGRAPHICS
COMPETITION
Refreshment
Business
TV shows,
Friends,
Age 18 onwards
Brooke Bond,
, Sports,
Magazine
Relatives
Gender: Male & Lipton
Shoppin
s,
g
Communit
Sports,
y TV shows,
Health
Age
Club
Family
magazin
onwards
member
Oriented,
es,
Gender: Male &
s, Job
Communit friends
Female
College
y Family,
Age 16 onwards
going
Communit Families
Gender: Male & Lipton
y
and
Female
services,
magazin
Eating out
es
Health
Energy
Female
Friends,
40
and
Tetley
and Lipton
and
Tetley
Brooke Bond, and
Tetley, Vital
Socialization
Social
Magazine
events,
s, Fashion, Families,
Gender: Male & Lipton
Parties,
Picnic TV
Female
Club
Relatives, Age 20 onwards Friends,
Brooke Bond, and
Tetley
Futuristic
member s
COMPETITIVE LANDSCAPE COMPETITION: LIPTON TEA
Lipton is one of the world's best-known and best-selling brands of both hot leaf and ready-to-drink tea. It is currently owned by Unilever. Being one of the world's greatest tea brands, making a big splash in the global beverages market; it is the epitome of international quality. Lipton Yellow Label's assurance of quality has helped it become the world's largest selling tea brand.
Lipton is the global market leader in both leaf and ready-to-drink tea, giving a global share of all tea-based beverages. In total non-alcoholic beverages, Lipton is the global number two brand in terms of volume consumed per annum. Due to its size, Lipton is also a dominant player in tea expertise in the world. The company's Lipton Institute of Tea researches tea's various health and mental benefits, as well as tea growing, processing and tasting. Apart from black leaf teas (with the long-standing Lipton Yellow Label brand), the company also markets a large range of other varieties, both in leaf tea as well as ready-to-drink format. These include green teas, black flavoured teas, (herbal) infusions, Lipton Linea ('slimming tea') in Europe and Lipton Milk Tea in various Asian markets. Apart from Lipton Ice Tea, none of their products are available for retail in the United Kingdom. In a number of markets, including Japan, Russia and Australia, the company is advertising the benefits of theanine (which is naturally present in Lipton teas), which is said to have psychoactive properties. LIPTON PRODUCTS: Lipton's main pillar brands are Lipton Yellow Label and Lipton Iced Tea. Lipton Yellow Label has been sold since 1890 and is sold in 150 countries. Lipton Iced Tea has been sold since 1972 and is available in more than 60 countries. Its ready to drink canned and bottled varieties are marketed through two joint-ventures with Pepsico International. In 2008 the brand launched Lipton Linea in Western Europe, a green tea variety with a higher level of catechins, which the company claims can help one to lose weight.
Lipton Yellow Label sachet
Lipton Yellow Label pack
Jar
Lipton green tea
VITAL TEA:
Vital tea is a key brand of Eastern products Pvt.ltd. The company was established in 1991 by Haji Mohammad Yasin. It began with a small tea factory and has developed into a local giant on the bane of a single promise, which is consistent quality. At the core of the group’s success is the sincerity and dedication of its team of highly qualified technical, financial and marketing expert. Vital Tea is increasingly becoming popular among tea-drinkers in Pakistan due to its quality and comparatively lower prices. Its product range only includes black tea. The mission of the company is to produce the most reliable and valuable products and services and to build core competency in the blending and packaging technology. To increase sales in the existing markets, they are focusing on providing customers with better value and to penetrate new strategic business areas.
BROOKE BOND SUPREME:
Tea drinking is a social occasion in the context of Pakistani culture, traditionally enjoyed with family and friends. It is the universal panacea which relaxes and refreshes at the same time. The success of Brooke Bond Supreme is based on this very insight, since tea is a part of the social fabric of Pakistanis. Brooke Bond Supreme was launched in Pakistan in 1984. The brand was extremely successful from its very inception due to its outstanding blend quality. Since then Brooke Bond Supreme has never looked back and today, is the largest selling tea brand in Pakistan. On average, 30 million cups of Supreme are consumed daily by people from all walks of life. TETLEY TEA:
Tetley, a fully-owned subsidiary of Tata Tea Limited, is the world's second largest manufacturer and distributor of tea. Owned by India's Tata Group, Tetley's manufacturing and distribution business is spread across 40 countries and sells over 60 branded tea bags. It is the largest tea company in the United Kingdom and Canada and the second largest in the United States by volume. After Tetley was purchased by the Tata Group in 2000, most of its business in Asia has been integrated with Tata Tea and the company plans to completely integrate its worldwide business with Tata Tea by 2006. The new merged group, Tata Tea Group, is the second largest tea brand in the world after Unilever. SWOT ANALYSIS:
Strengths
Weaknesses Opportunities 1. 1. Relying 1.Decrease
1. Strong brand name 2. Strong distribution network
on
cultivating tea on
market
their
share
sales some
4. Consistent
portfolio; “Gulbahar
quality
lands
locally
Tea,
customer
Chenak
rs
gaining in
other provinces
e.g.
2. Marketing
Green
in
Tea”, Jasmine Green
5. Loyal
rural
areas
2.
Due
the
Dust
to
black
market,
etc.
3. Overseas
in
Sindh 6. Pioneers
own
of the brands in the
product line
base
imports
Sindh
by
1.Competito
excessively
2.Neglecting
3. Extensive
Threats in
in
soft packaging
smuggled
Growth
tea
through
available at
increasing
cheaper
export
of
Tapal
in
prices
many countries 4. Sponsorshi ps
LIPTON
1. Global brand
1.Reduction in R & D
1. Changing
5.
consumer
recognition 2. Strong
1.Decrease in revenue
preferences 2. Increasing need
relationship
2.Tougher
for
with
business
products
retailers 3. Economies of scale
healthy
climate
is
FINANCIAL REVIEW COMPANY PERFORMANCE: During the year 2008, Tapal’s market share has increased. The market share has risen as Tapal has won customers due to its strong taste and aroma backed by innovative products, for instance, in the same year; Safari was relaunched with the aim of ‘revolutionizing the taste buds of consumers with a stronger blend of tea’1. Tapal has engaged in extensive promotion of its products. Another factor driving sales is relatively less prices.
The increase in market share is evident from its increase in sales. Tapal has shown an increase of about 29% in sale revenue. This has been primarily 1
Daily News, Tapal tea brand safari launched in Pakistan, Available from www at
brought about by the rise in the sales volume. The gross profits will be affected by import duties and taxes. The international increase in tea prices will hit the cost of production. Similarly, the costs will rise due to higher cost of electricity and fuel. Since Tapal engages in quite a few marketing campaigns, the operating costs will include a higher outlay for advertising and promotion. Apart from this, Tapal is continuously innovating so the R&D expenditure will jack up operating expenses. Further, distribution costs will be another major expenditure. All this will determine the profits for the year which may be moderate due to increased sales revenue and might even show an increase compared to the previous year’s profit.
PRODUCT PERFORMANCE: The performance of Tapal’s products can be gauged from the fact that they are independent and established brands bringing in revenues for the company from their respective target markets. More than the price, the brands are driven by the quality of tea. Though the prices are comparatively less, there is no compromise on quality. After Tapal’s unique Family Mixture became Karachi’s largest selling brand, the company was encouraged to innovate further. As a result an entirely new category brand called Danedar was created and launched. Tapal Danedar became the country’s largest selling tea brand with a loyal following, which shows that Tapal has been successful in creating a strong Brand Image amongst its consumers. Tapal’s Iced Tea was, however, not an instant success. People were not inclined towards the taste and concept of iced tea. Still the company continues to invest hope in the product line and has recently introduced an iced powder tea. As opposed to this, Green Tea has been a massive success mainly because people are getting health conscious. Perhaps this aspect of a
shift towards a healthier lifestyle is what has driven Tapal to invest more resources in the Iced Tea segment. Tapal also ensures that there is greater availability of its products which will then ensure satisfied customers (due to convenience provided) and smooth sales. Thus the company caters to its customers by providing Tapal Danedar and Family Mixtures to more than 140,000 outlets in Pakistan, which include superstores, department stores, general stores, medical stores, paan walas, grocery stores, merchants, etc. grocery stores and merchants. Together these provide 80% volume of the tea sales2.
CORPORATE STRATEGY Company Introduction At the time of partition in 1947, Mr. Adam Ali Tapal bought a tea store in Jodia Bazar from a Hindu who was then migrating to India. At the time of establishment, Tapal faced furious competition in the industry from Lipton, Brook Bond, M. Isphany and loose tea available in Jodia Bazar. However Mr. Adam Ali Tapal stood steadfast against this tough competition and uncertainty (such as change in government setup, quota system, tea not grown here, import restrictions etc) in the market because he saw an opportunity for his company in the market. The shop in Jodia Bazar existed until the 1970 when the third generation of the Tapal family, Mr. Aftab Tapal, the current CEO joined the company. After studying abroad, Aftab Tapal returned to Pakistan to introduce professional management and unique production ideas to the business. A well trained tea 2
Report on Tapal Tea, Available at
taster and tea specialist himself, Aftab Tapal introduced new tea concepts and developed a wide range of tea blends catering specifically to the tastes of people throughout Pakistan. He believed that they should reach out to the customers instead of the customers coming to them. Making a modest beginning over half a century back, today Tapal has become the largest, 100%; Pakistani owned Tea Company in the country. It has modern tea blending and packaging factories, warehouses equipped with state-of-the-art equipment and a team of highly dynamic professionals headed by Aftab Tapal himself. He was the first to introduce soft packs in the country. He developed an entirely new brand and category- Tapal’s Family Mixture (the mixture of tea & dust). Mr. Aftab Tapal was the first to invent the highly successful brand Danedar Leaf Blend. 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. Again in December 2000, Tapal acquired the ISO-9001: 2000 certification, making it one of the first few companies in the world to achieve this milestone. In addition to the standard requirements, the ISO-9001: 2000 certification system includes requirements for environment improvement, concepts of TQM (continuous improvement) with major emphasis on consumer requirements and satisfaction. Even today, the company looks out for opportunities prevailing in the market. Very recently, they decided to diversify into cold beverages and seek to make this a separate business unit of the company. VALUES AT TAPAL: As far as creativity is concerned, Tapal has been able to fulfill its commitment because of introducing the creative products like Ice Tea and Ice Tea Powder. By doing so they sure have also diversified into a business that actually compliments their core business: Tea. Quality wise Tapal’s products have
always excelled within their range of competitors and they have been able to sustain quite a lot of loyal customers. In pursuit of commitment, there are asset of shared values that the employees of Tapal adopt so as to fulfill their commitment to their vision & mission. •
Trust in each other
•
Outstanding quality
•
Passion for creativity
•
Leadership
•
Together everyone achieves more
A commitment to quality3 "Never compromise on quality" has been the motto at Tapal since the very beginning. This commitment to quality has resulted in a high level of customer satisfaction and unflinching brand loyalty. 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. Again in December 2000, Tapal acquired the ISO9001: 2000 certification, making it one of the first few companies in the world to achieve this milestone. In addition to the standard requirements, the ISO9001: 2000 certification system includes requirements for environment improvement, concepts of TQM
(continuous
improvement)
with
major
emphasis
on
consumer
requirements and satisfaction.
TAPAL'S QUALITY POLICY The Management and the employees of Tapal Tea (Pvt.) Ltd. are committed: To produce products that meet the customer's requirements & expectations. 3
http://www.pdfcoke.com/word/full/13768143?access_key=key-2lzsu8nbokcw4cp95tzg
To fulfill the requirements and effectiveness of the quality management system through continual improvements. By constantly reviewing / updating the relevant quality objectives of products & processes. To participate as teams or individually towards the improvement of processes, personnel, environment & ethical values. Leader in innovation Always on the move, Tapal Tea is honored to have taken the lead in a number of areas in the tea industry. Tapal has been: The first to introduce soft packs in the country. The first tea company to introduce metal-free tea bags. The first to develop an entirely new blend and category-Tapal Family Mixture (the mixture of leaf & dust). The first to invent the highly successful brand Danedar Leaf Blend. The first to market Kenya teas in Pakistan. The first tea company to be awarded the ISO 9001/2000 Quality Certification Their commitment to quality and leadership skills can hence be judged from the analysis presented above; Tapal is no doubt a national brand which has been able to come up to the expectations of not only the consumers but the management as well.
VISION
“To satisfy our stakeholders and as a guiding principle to our business; be a benchmark for quality, creativity and ethical values. To achieve leadership in all categories of our core business and diversify in areas which compliment the core business.” ANALYSIS:
The vision of Tapal clearly states its desire and commitment to innovation and improvement in company practices and also in the way they serve their customers. The core business of Tapal is manufacturing and selling of tea products. They want to achieve excellence in all the markets in which their products are competing. This shows their commitment to their focused business area in which they want to achieve fineness and excellence. CONS: The vision of Tapal tea does not state the company’s commitment to satisfy its consumers through the provision of quality products in the market. It does not explicitly explain the company’s mission to become the most popular tea brand in the industry. The vision could also have stated that it is a truly Pakistani company and thus remains committed to its Pakistani consumers living in the country and abroad as well.
GROWTH PLANS From its modest beginning as a family-owned retail outlet in Jodia Bazaar Karachi, the biggest commodities market in the country, Tapal Tea (Private) Limited today is the largest wholly-owned Pakistani tea packaging and marketing company. PHENOMENAL GROWTH Tapal tea company has enjoyed a phenomenal growth rate particularly during the last decade to expand its base in the branded market which for long were dominated by multinational competitors. Tapal today enjoys over 17 per cent or 22 million kilogram share of the total tea market annually up from 10 million kilogram in 1990. Tapal's envious growth has come at the expense of its multinational competitors, Brooke Bond and Lipton brands, whose combined market share has shrunk from 60 million kg to 45 million kg during the same period according to the General Manager Finance and Corporate Services of Tapal Y.H. Thara told PAGE.
Tapal Tea looks forward to even greater progress and innovation in the years to come. It will remain committed to providing its consumers with the highest quality products and improving their lives in whatever little way possible. INCREASE IN PRODUCT LINE: Tapal has always been keen on introducing new products (tea) in the market. The wide variety of teas available under the umbrella of Tapal are a sure proof of this. Recently Tapal Iced tea in Lemon & lime and peach flavour was introduced in the market. As the product line of Tapal is wider than any of its competitors; Lipton, Brooke Bond Tetley and Vital tea; Tapal should be able to keep up with this pace of innovation in order to stay ahead of competition in the industry. INCREASE IN PROMOTIONAL ACTIVITIES: Tapal has always been proactive in marketing its products to its consumers and hence the popularity of the brand. However with the increase in competition and an increase in tea consumption the promotional activities targeted directly at the consumers should be increased proportionately. Marketing should be increased and the quality should be improved in the form of Sales promotions, sponsorship of events etc. INCREASE IN EXPORTS: Tapal is already exporting tea to a number of countries and is recognized as a quality brand internationally. However expanding its exports to many other countries would bring substantial revenue to the company as well as bringing global recognition to the company and its brands. Tapal is already in the process of venturing into more foreign markets, particularly those which have a sizeable population of Pakistani expatriates. UAE and Dubai have proved to be profitable potential markets for the brand as both these countries have huge numbers of Pakistan nationals living there. The company is targeting many other markets in America and Europe which show great demand for a brand of strong tea as such Tapal.
CULTIVATION PROJECT Tapal leased about 5 acres of land for five years for the purpose of setting up cultivation areas for tea in the year 2000. The land is located in the vicinity of National Tea Research Institute (NTRI) Shinkiari, Mansehra. The company paid the rent and bore the costs of developing these land the technical support for which was provided by a company known as NTRI. Once the land is developed, Tapal will hand the land back to the participating farmers and treat development costs as interest-free loans to be payable over the next five years. This project will encourage cultivation of tea locally and will result in substantial cost cutting for the company. At present a huge amount of Rs 10 billion is spent in foreign exchange on tea import. The project will certainly help reduce the tea import bill. Tapal intends to increase the area of tea cultivation in the future.
PRODUCT STRATEGY PRODUCT FINANCIAL PLANS The financial plans for Tapal for the net three quarters of the year 2009 as forecasted by the group are given below:
Sales by Tapal in The market shares for both Unilever and Tapal are available for 2007
2007 while the actual sales for Unilever are obtained from its financial statements of 2008. Sales for Tapal and Unilever are assumed to be in the same proportion as their market shares; sales for Tapal in 2007 have been derived by using the market shares of the two companies and the stated sales figure for Unilever.
Sales by Tapal in Since the performance of Tapal has picked up, its market share 2008
for 2008 has risen by 2 percent. Contrary to this, the share of Unilever has decreased.
Forecasted Quarterly
In order to forecast Tapal’s revenue-based performance for the Sales year 2009, the quarterly sales are estimated according to the
for Tapal in 2009
prior data and apt seasonal demand. The sales figure for the first quarter of year 2008 for Unilever is 3,130,276,000 which are 27% of the entire sales for the same year. Accordingly this percentage is applied on the sales revenue of Tapal for the year
2008 and quarterly sales for the first year of the last quarter turn out to be 3,238,576,329.
The base for quarterly sales is derived from the sales estimated and calculated for the four quarters of the year 2008. Due to fluctuations in seasonal demand, it is deduced that the share of sales in the first quarter of year 2008 is 27% while in the second quarter this share is estimated to fall to 25% with the arrival of summers. However, as Tapal has iced tea brands, the share does not fall significantly. During the third quarter, the share of sales is. It is assumed that the same share of 27% will continue in the last quarter as the consumption of tea increases during winters. It has been borne in mind that the habitual trend in sales will continue because there are loyal customers of Tapal who consume tea regardless of the seasonal change.
In order to forecast sales for the first quarter of year 2009, it is assumed that the previous quarter’s sales would increase by 2% due to Tapal’s inherent competencies and the winter season. In the second quarter, it is predicted that the sales will rise by 4% since Tapal has introduced a new product especially apt for the summer season: Tapal Ice Tea Powder. It is supposedly aimed at health conscious individuals who can enjoy a refreshing and nutritional drink. The sales will experience a greater growth in this
quarter
as
people
would
purchase
the
product
unprecedented in the market. The initial purchases will drive sales growth. In the third quarter the sale percentage of 21% increases by 5%. The sale growth is not phenomenal as it is assumed that the product will not have consistent and increased sales as earlier Iced Drinks have not been readily accepted by customers. The customers have still not developed taste for iced drink as they cannot relate to tea in that context. In addition to this, tea consumption somewhat decreases during Ramadan. The
last quarter is predicted to witness a rise of 7% in sales. This will be attributed to the winter season. These increases are added to the proportionate sales of the quarters for the year 2008. These quarterly sales for 2008 are obtained from the earlier shares of sales deduced for the same year. The overall increase is lower than that of previous year as it is being assumed that with more competition in the form of Tetley, the growth will not continue as had in the past.
ASSUMPTIONS The above financial plans ave been formulated keeping in mind some assumptions which are h=given as below:
Demand for tea is expected to rise. It is assumed that the prominent change in the sales is due to the difference in sales volume rather than sale prices. Unilever and Tapal are compared as they take up a major chunk of the market and jointly own the biggest share of the branded market. This is evident from published data: 60 million kg out of the 70 million kg of the branded tea market during 20004. Market share is taken as the basis for predicting sales for the year 2009.
4
A. M. Syed, Tapal Holds Strong Market Position, Available from world wide web at
UNIQUE SELLING PROPOSITION The main reason behind tapal’s success is that it has localized its taste. It manufactures its product according to the taste and requirements of the market it is catering. Another reason behind Tapal’s success in catching the hearts of the consumers is that, it has always been close to them. This has been possible because of its strong Brand Activation Activities. These activities have added a new dimension to their marketing activities making them more attractive, exciting and interactive as possible. These activities not only reinforce Tapal as a national company but also assist all its other brands in having their desired impact wherever required. These activities are customized according the brand requirements to achieve maximum results. Not only this, these activities also provide the consumer with a 360-degree product experience, which not only helps in educating the consumer but also engages them to the brand. These activities cover Outdoor Billboards, Event Marketing, Road Shows i.e. floats, mobile kitchens etc, Rural Development Programs, Weekly Bazaars, and Merchandizing of the products.
PRODUCTS, THEMES & PRICING PRODUCT:
Tapal has introduced new tea concepts and developed under its product range, a wide range of tea blends catering specifically to the tastes of people throughout Pakistan. Today Tapal has become the largest, 100% Pakistani owned Tea Company in the country. The saga of Tapal tea started with its formulation of a unique tea blend, which was later named Tapal family mixture, that led to the brand
name of Tapal tea becoming a hot favorite, and eventually the largest selling tea brand in Pakistan. The current product line of Tapal consists of the following brands:
TAPAL DANEDAR: As evident by its name the blend consists of well made premium quality Kenyan BP1s (granules). Each component of Danedar blend is carefully selected to provide a lovely looking leaf appearance that is neat, black, grainy and fairly even. Danedar blend is an excellent combination of lively taste and distinct flavor of world’s best high grown teas, which produces satisfying cup of tea for the consumers who like aromatic/flavor tea. The most important feature of this top quality Danedar brand is that the characteristics of a brewed cup remain intact even after a long time. Simply, Danedar is a powerful brand and a great value product and there is no real substitute of it. TAPAL FAMILY MIXTURE: Family mixture is a blend of high grown Kenyan primary leaf and dust grades awhich are carefully selected for their rich colour, distinct flavor and a light golden appearance. The leaf and dust grades enhance a faster infusion guaranteeing the consumer a rich flavoury cup within a quick brewing time. Only tea leaves which are low in moisture content is selected for Family mixture in order to guarantee a long shelf life and a longer liveliness period of the brewed tea. CHENAK DUST: Chenak dust is an economy tea embracing high grown flavoured teas which are proportionally blended with medium grown Kenyan golden leaves. This gives an all round cup of tea at a reasonably lower price.
Chenak Dust infuses quickly and gives a strong cup of tea within a very short time. This brand is popular with actual tea lovers who love drinking tea several times a day because of its low price. TAPAL GREEN TEA: Tapal Shades of Green is an aromatic combination of the finest carefully selected tea leaves and the tantalizing freshness of natural Jasmine, Elaichi and Lemon. •Jasmine Green tea Infused with Jasmine flowers, Jasmine Green Tea opens a new window to your mind. Its vibrant essence breathes new life into your sense with a distinct soothing effect. Jasmine Green Tea is a winning combination of alluring fragrance and health. •
Elaichi Green tea
The earthy flavour of Elaichi Green Tea has a pulsating nature that lifts your body to a new level of clarity giving you more revitalization. •
Lemon Green tea
Lemon Green Tea with its rich taste regenerates your soul. It is your perfect soul mate to indulge in a rejuvenating experience of its refreshing essence.
TAPAL MEZBAN: Tapal Mezban Dust has an attractive neat, black and grainy appearance. It is the finest quality dust blend which is carefully selected for its quick liquoring characteristics.
Only high grown Kenyan teas are used for this blend due to their high concentration of flavour and strength. Mezban Dust has a smooth, thick and full cup with an irresistible aroma making it a perfect cup at any time of the day. A small quantity of Mezban Dust makes several cups of tea, which makes it both suitable for domestic use but even more for the hot tea shop consumers who prefer a quick and strong cup of tea. TEZDUM: Tapal Tezdum with the fine looking leaf appearance is specially designed for those consumers who like strong and aromatic and full of flavour cups. A superior blend of high liquoring premium quality Pekoe Fanning Tea that produces quick liquoring, thick and coloury cups. GULBAHAR TEA Tapal Gulbahar, the Chinese premium quality Green Tea blend is the favorite green tea among all age group. Due to its numerous health benefits, Gulbahar has become the best selling Green Tea brand in Pakistan. Tapal Gulbahar is also the first choice for the popular Kashmiri Tea consumers. TAPAL SPECIAL TEABAGS The unique flavor of high grown leaves especially selected from the finest tea gardens in the world make Tapal Special Teabags a treat at any time. The combination of an extra strong blend with the convenience of environmental friendly metal-free tea bags has made Tapal Special an instant hit with consumers. TAPAL SAFARI Tapal Safari is a tea which has been serving its consumers for almost a decade. It is made from the finest Kenya leaf teas and provides extra
cuppage of great tasting tea to its consumers. Tapal Safari chai is basically aimed at adventurous and brave people. TAPAL ICED TEA: The super market culture has changed consumer purchase habits and the youth today has ample choices in front of them, even when compared to 5 years ago. Increasingly they are becoming a huge market on their own. Tapal wants to increasingly cater to the youth market and has done so with the launch of Tapal Ice Tea. With Tapal ice tea, Tapal has literally set a new precedent in the market. Tapal Ice Tea is not a new product but it is a first of its kind in Pakistan. Tapal ice tea is made for today's generation which loves to enjoy their life at its fullest and chill out. Thirst-quenching and delicious, Ice Tea is pure and satisfying. Made from real tea, it combines the goodness of tea antioxidants with no preservatives, no artificial colors and only a small percentage of sugar which is less than most regular soft drinks. Thus tapal Ice tea is a refreshing addition to TAPAL’s popular product line of traditional teas.
PRICE: Tapal never wanted to compromise on its quality so they adopted a value based pricing and low price strategy. As Tapal specifically catering to different segments of the market so its prices are based on its effective value to customers relative to other products. Also the prices are different for different SKU’s. PRICING STRUCTURE: The pricing structure for Tapal products as quoted by local general stores is given below:
PACKAGE SIZE
PRICE (RS.)
Hard Package (100gms)
Rs. 45
Hard Package (200gms)
Rs. 85
Hard Package (400gms)
Rs. 180
Hard Package (500gms)
Rs. 205
Hard Package (1000gms)
Rs. 415
PROMOTIONS Tapal has been very active in advertising for each of its products in the product-line. It has been using both BTL(Below the line) and ATL(Above the line) for the purpose of promotion. Through BTL Tapal is focusing on display racks, sign boards etc. mainly placed to different retailers for heavy promotion against their competitors. The specific term used by TAPAL is the MODERN TRADE so that they have an eye contact of the product with the customer. In this they are using shelves to display their product in big stores like METRO and MAKRO. Through ATL Tapal is focusing on broadcast and print media promotion by placing ads on T.V and placing newspapers ads as well. The success of Tapal’s promotion can be gauged by the fact that red which was originally associated with Brooke Bond is now associated with Tapal. Through their packaging and promotion they have simply taken the color from Brooke Bond.
PLACEMENT:
CHANNELS OF DISTRIBUTION
The channel of distributions according to this brand Tapal Danedar is simply as shown by the diagram as manufacturer to distributors who vary according to geographical dispersion and then to retailer to final consumer. Tapal has a great channel of distribution not only to this brand but also all other brands that vary geographically according to consumer needs. TAPAL has 5 main warehouses in Pakistan which are located in the following cities. Karachi Hyderabad Sukkur Multan Raiwind From these warehouses the product move to the distributors as only in north they have 207 distribution channels. And from these distributors the product move to the next, which is retailer and then to the consumer. This is also one of their strengths that they have a strong distribution channels. Tapal has a countrywide sales & distribution network; the company has over 400 distributors from Karachi to Khyber operating nationwide. In the beginning the company sole aim was to capture the tea market of Karachi, as they were already in tea business here, only and then strategically build there network to other cities of Pakistan. Tapal caters to its customers by providing Tapal Danedar and Family Mixtures to more than 140,000 outlets in Pakistan, which include superstores, department stores, general stores, medical stores, paan walas, grocery stores, merchants, etc. Grocery stores and merchants together provide 80 percent; volume of the tea sales.
PRODUCT ROADMAPS & RELEASES SALES SCHEDULES The sales for the next three quarters of 2009 have already been discussed in the product strategy section. The sales schedules for Tapal have been forecasted to be as follows: SALES FOR TAPAL DURING 2007-2009
2007
2008 Q1
Market Share Sales
Unilever 43% 9,782,641,000
Tapal 41% 9,327,634,442
Unilever 42% 11,715,780,000
Tapal 43% 11,994,727,143
3,303,347,855
QUARTERLY SALES FOR TAPAL DURING 2008-2009
Q2
3,118,629,057
2009 Q3 Tapal 2,644,837,335
Q4
3,465,276,672
Total
12,532,090,919
Sales in Q1 of 2008 for Unilever Percentage of Total Sales
Q1 Q2 Q4 Q3
Q1 Q2 Q3 Q4
3130276000 27%
Quarterly Sales for Tapal in 2008 27% 25% 27% 21%
3,238,576,329 2,998,681,786 2,518,892,700 3,238,576,329
Forecasted Quarterly Sales for 2009 Percentage Increases 2% 4% 5% 7%
3303347855 3118629057 2644837335 3465276672
ASSUMED SALES IN REGIONS As discussed earlier Tapal has five warehouses in different cities. It is assumed that majority of their sales come from the area of Sind reason being that it is a Karachi based company and the concept of Danedar originated from Sind. This fact can further be substantiated by the fact that 3 of their 5 warehouses are located in Sind. So we have assumed the distribution as follows:
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