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Market Analysis

Porter’s 5 Forces:
Porter’s 5 forces help understand the business competitiveness. It can be explained by below five
forces:

(Source: Porter, 1997)

Porter’s five forces model for Tata Global Beverages


The Porter’s five forces analysis studies the industry of operation and helps the company find new
sources of competitive advantage. The analysis surveys an industry through five major questions:

1. What composes a threat of substitute products and services?


2. Is there a threat of new competitors entering the market?
3. What is the intensity of competitive rivalry?
4. How big is the bargaining power of buyers?
5. How significant is the bargaining power of suppliers?

Once Porter’s five forces analysis is done, a company can make a strategy that places itself in the
best position among the competitors and also makes it immune to shifts in the future market trends
(Porter, 1997).
Threat of new entrants
1. Economies of scale
2. Cost disadvantage
3. Untapped rural market
4. 100%FDI

Bargaining power of
Suppliers Rivalry among Bargaining power of
1. Large number of existing firms Buyers
suppliers
1. Many competitors 1. Large number of buyers
2. Fragmented
2. Low industry growth 2. less threat of backward
environment
rate integration
3. Low switching cost
3. Lacks differentiation 3. other available options
4. Threat of forward
integration

Threat of Substitutes
1. Increasing health
concerns
2. Changing
consumption patterns
3. Customer expectations
4. Energy drinks

Competition: HIGH Threat of New Entrants: HIGH

Bargaining Power of Suppliers: LOW Bargaining Power of Buyers: High

Threat of Substitute Products: Moderate

1) Rivalry among existing Firms

In the FMCG sector, the rivalry among competitors is very high. There is large number of customers
because the industry is highly saturated and the competitors try to increase their share in the
market. Market Players use all sorts of tactics and activities from intensive advertisement campaigns
to promotional stuff and price wars etc. Hence the intensity of rivalry is very high in FMCG sector.
Tata Tea faces competition from the local brands, Lipton, Brooke Bond Taj Mahal, Wagh Bakri, Red
Label Special in the segment it targets. This is combated by emotionally appealing, incredible
promotional and social campaigns and advertising.

Recently there has been a boom in tea cafes. With competitors like Chai Point, Chaayos and small
retail ventures by HUL and Wagh Bakri group, TGBL has come up with four chai cafes in Bengaluru
and plans to expand further.

TGB is the overall market leader in teas with a 25 per cent share. It lacks adequate share in
Maharashtra, Rajasthan and Gujarat. Tata Tea Gold Maharashtra was recently launched in
Maharashtra.

TGB is addressing threat from the Patanjali group by filling the gap in its portfolio with a new
ayurvedic variants under Tata Tea Teaveda.

In Ready To Drink category, a new brand under Fruski has been created with green tea as a base
along with different fruit based flavours

2) Threat of new entrants

FMCG Industry does not have any measures which can control the entry of new firms.

 Economies of Scale:

TGBL has moved some of its operations such as global information systems, HR, finance and
commercial in various regions including India, the UK and US, Canada and Australia to the
managed services of Tata Consultancy Services in Kolkata. The company recorded 6.55% fall
in consolidated net profit in the April-June quarter 2018.

Domestic growth has been impressive, but in foreign markets, TGBL has been facing
headwinds. It has already exited small operations in markets such as China, Russia and Sri
Lanka.

Growth in international markets has suffered because of its marginal presence in many
countries.

 Untapped Rural Market:

Tata Tea tried tapping into the rural areas through the ‘Gaaon Chalo’ campaign, an initiative
to improve its rural distribution. In this campaign, people were asked to sell Tata Tea to
other villagers. This helped in boasting rural income and rural distribution in 2008.
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medium=text&utm_campaign=cppst

3) Threat of Substitutes

There are complex and never ending consumer needs and no firm can satisfy all sorts of needs
alone. There are plenty of substitute goods available in the market that can be re-placed if
consumers are not satisfied with one. The wide range of choices and needs give a sufficient room for
new product development that can replace existing goods. This leads to higher consumer’s
expectation. However the changing consumption pattern is a major concern in the sector.

Various categories that cater to rejuvenation and freshness such as coffee, aerated drinks and
energy drink act as substitute products to Tata Global Beverages products like tea and coffee.

To deal with this kind of competition, Tata Global Beverages keep on launching similar but
improvised products.
4) Bargaining power of Suppliers

The bargaining power of suppliers of raw materials and intermediate goods is not very high. There is
ample number of substitute suppliers available and the raw materials are also readily available and
most of the raw materials are homogeneous. There is no monopoly situation in the supplier side
because the suppliers are also competing among themselves but there are chances of forward
integration.

The wide array of options available in the market, offering at lower prices has facilitated the
growing bargaining power. This threat is subsided by the brand communication strategy and
superior quality of the product.

5) Bargaining power of Buyers

Bargaining power of consumers is also very high. This is because in FMCG industry, the switching
cost of most of the goods is very low and there is no threat of buying one product over other.
Customers are never reluctant to buy or try new things off the shelf.

With a large number of producers in the tea industry offering a range of benefits to the supplier and
low switching costs, the suppliers have increased bargaining power. This threat is minimised by
selling the tea packages via various suppliers and some themselves too.

“Sustainability of its Competitive Advantage”


Sustainability at TGB revolves around five pillars – Ethical Sourcing, Water Management, Climate
Change Management, Waste Management and Community Development.
Sustainability is at the center of their plans for long success. The corporate has already created
spectacular progress. TGB is a vigorous member of the moral Tea Partnership (ETP). The ETP is
functioning with the forest Alliance (RA) to assist tea estates bring home the bacon RA certification
and improve social and environmental property. Tetley currently sources twenty million kilograms of
tea (50 % of its total tea purchased) from RA-certified farms every year. The Bharat property Tea
Programme — TrustTea, launched by the Tea Board of Bharat — is Associate in Nursing initiative to
sustainably remodel the Indian tea business. TGB can participate within the development and
implementation of the programme, and supply money and technical support. TGB was rated as No1
within the shopper staples sector in Bharat on the Climate revealing Leadership Index for 2013. They
monitor their carbon footprint in over seventy totally different sites in Asia, Africa, Europe, North
America and Australia. They partnered with Water Footprint Network Netherlands and Tata
property cluster for the Water Footprint Assessment of TGB to grasp a way to sustainably and
equitably use water in their operations.

Technology could be a key pillar for their growth. They leverage technology extensively across
functions to create business potency. Use of SAP systems has allowed easier world integration and
provided access to correct and timely data for decision-making. The CA Clarity tool for project and
portfolio management permits North American nation to expeditiously track business edges
delivered by comes. Advanced coming up with computer hardware is AN optimiser answer
employed by their tea shopping for and mixing operate. It takes into consideration numerous factors
to figure out the foremost optimum recipes, that area unit fed into SAP systems to change shopping
for and mixing for the recipes.

 Tata Global Beverages has made a string of overseas acquisitions since its first buy in 2000
 It was in January 2013 that the Rs 8,159-crore Tata Global Beverages (TGB) moved its base to
Mumbai after being headquartered in London for five years
 Constant progress in the last 15 years, starting from TGB's (then Tata Tea) acquisition of
Tetley, it has grown from a Rs 1,500-crore company to a Rs 8,159-crore entity. The net profit
in 2013/14 rose to Rs 522 crore from Rs 473 crore in the previous year. Almost 66 per cent
of its revenue comes from global operations. In India, 70 per cent of its revenue is from the
tea business; coffee and water businesses contribute 20 per cent and 10 per cent,
respectively. In 2012, the company even dislodged Hindustan Unilever to become the leader
of India's branded tea market by volume as well as value.
 And so after anchoring itself in Mumbai, the company announced an ambitious target of
becoming a Rs 30,000-crore entity by 2020 and push its India growth with focus on three
verticals - tea, coffee and water.