Professor of Marketing
In late 1999, India’s second-largest tea company, Tata Tea, was presented with the opportunity of acquiring Tetley’s Tea, the world’s second largest tea brand. Tata Tea is a part of the Tata group of companies; one of the largest and most highly regarded family-owned conglomerates in India.The group’s tentacles spread across a wide range of industries including chemicals, electricity and steel, through telecommunications, hotels, and financial services, to watches, cars, tea, coffee and spices. The group consists of 80 companies, some of which are privately held by Tata Sons, the group holding company (e.g., Tata Consultancy Services, India’s largest software services company), while others, like Tata Tea, Tata Motors, Tata Steel, and Tata Chemicals, are listed.The Tata name is used as a corporate brand across the vast majority of the group’s companies. Exceptions include Voltas, Indian Hotels Company (Taj group), Rallis India, VSNL and Titan Industries. Tata Tea has a strong presence in India, its home market, based on a value proposition of guaranteed freshness and quality stemming from its control of the supply chain from tea bush to teacup. Tata Tea has expertise in plantation management and tea cultivation. It sells mainly to the mass market in India. Internationally, the company sells bulk tea that is blended and sold by branded tea marketers.Tetley’s Tea, the world’s second-largest tea brand, enjoys strong market positions in the UK, US, Canada, and Australia, and seeks to expand into other Western European markets and emerging regions. The company does not own tea plantations but has built its expertise in sourcing and blending tea from different origins.Having been one of the first companies to sell tea bags, Tetley has made key innovations in the development of packaging for its different black and specialty teas. Based on extensive marketing, the Tetley brand is very popular in its key markets. Several industry developments play a role in Tata Tea’s consideration of whether to go international or not, and, if so, whether to acquire an internationally established brand or to try and build on their own brands: • Deregulation of the Indian tea industry and the consequent expectation of intensified international competition.• Image problem of tea in India and many other countries where it has a backward, mass-produced, old- fashioned image, and faces competition from coffee and soft drinks.• Worldwide development of a segment of affluent tea lovers with an increasing interest in specialty teas (high quality, specific origin teas, green teas, herbal teas, etc.).