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Anand Ram

BUSINESS LINE spoke to Mr Homi R. Khusrokhan, Managing Director, Tata Tea, on its strategies to ride out the rough patch. The first part of the interview appeared last week.

Excerpts from the interview:

How does the branding exercise take away from the fact the business you operate in is still primarily at a commodity level? Depends on how you look at the true profitability from branding. Look at branding as the traditional value one captures over auction-equivalent prices of teas — which is the correct way of looking at the brand operation. I think it does not make any difference whether you grow your own teas or buy them. Because for everything, the starting point is the auction equivalent price of your tea.

We do not let the marketing team get burdened with plantation costs. They are given teas at auction equivalent prices. Value is then factored in to this.

You made a reference to non-substitutable components in blends. What are they?

As I said, key components in a blend pertain to particular kinds of teas that grow in particular seasons. Certain high-quality teas that are produced only in certain parts. And these you can pick up from your own estates and hold them in stock. Otherwise you have to go shopping for them later in the year. So, from your own plantations you can keep them in stock so that you can use them later in blends.

Is there a move towards promoting single estate teas? In other words, can Tata Tea position premium brands like Temptation tea on the strength of the estates you own?

It is a niche market. So I do not think you can make a huge business out of it. What you can do is for your plantation marks to be known better in auctions. If you have consistent quality coming out of certain plantations, those marks start commanding a premium price at auctions. Again while the average auction price is sliding, if you look at the auction prices of top-end teas, they are not falling as much as the average teas. So if you stick to positioning your plantation marks at the top-end of the auction market, there again you can get a differential price. In other words, these select plantation teas are positioned at the auction level than at the retail level?

A majority of the tea sold is through blends. Preferences do turn to a particular taste or a flavour or out of a particular plantation though such affinities are largely regional.

Instead, you have to take such a brand catering to a select audience to a pan-Indian consumer.

Do you see any merit in extending the `emotive' experience of Tetley into a parlour drink?

Yes, it could certainly be used in tea parlours. Whether we ourselves would set up parlours... I do not think we are ready to take a decision on that. And we would be supplementing this offering with flavoured teas shortly.

Do you see Tata Tea's active involvement in international markets for promoting Tetley (Brand exercises and so on)?

The involvement will be more in developing geographies. Wherever they are already present, Tetley knows the business best.

Is a part of Tetley's processing being handled by Tata Tea?

Some manufacturing is located within the Tata Group. Tata Tetley Cochin services the East European markets for Tetley. Mostly tea bags. Because most of Tetley's sales are in the tea bag segment.

Statistics show that Iraq is now a major importer. How big is your participation in this market?

We do export to Iraq. A lot of our bulk tea exports are to Iraq, one of the traditional buyers of Indian tea. Iran too was once a big importer, but dropped off during the Iran-Iraq war and is now a small market for us. Russia, of course, always has potential but we have lost out the market to Sri Lankan and Kenyan competition.

How about organic teas?

The market for organic teas is small. We do have two plantations in the South that produce organic teas. We do not brand organic teas but sell them to other exporters who retail them.

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