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2012 Alejandro Briceno 29/02/2012 Tetley’s Business Strategy
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01 Business Strategy Tetley FINAL - Alejandro

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Page 1: 01 Business Strategy Tetley FINAL - Alejandro

Alejandro Briceno

29/02/2012

2012Tetley’s Business Strategy

Page 2: 01 Business Strategy Tetley FINAL - Alejandro

Content

Executive Summar

y

Vision statement.................................................................................................................- 1 -

Business model...................................................................................................................- 1 -

Goals and Objectives..........................................................................................................- 2 -

Current situation.................................................................................................................- 3 -

Products offered.................................................................................................................- 3 -

Tetley Hot Tea................................................................................................................- 3 -

Tetley Cold Tea..............................................................................................................- 4 -

Infusions.....................................................................................................................- 4 -

How did Tetley get here?...................................................................................................- 5 -

Available options................................................................................................................- 6 -

Tetley’s loose leaf tea.....................................................................................................- 6 -

Breakfast companion......................................................................................................- 7 -

Fitness tea.......................................................................................................................- 8 -

Hot tea Infusion..............................................................................................................- 8 -

Expected Outcomes............................................................................................................- 9 -

Future objetives..................................................................................................................- 9 -

APPENDIX 1 Appendix..................................................................................................- 11 -

Bibliography.....................................................................................................................- 13 -

Page 3: 01 Business Strategy Tetley FINAL - Alejandro

Executive Summary

Tetley Canada Inc. is a subsidiary of Tata Global Beverages (TGB), previously Tata

Tea, since global acquisition of Tetley in 2000. The brand has been present in Canada since

the early 1900s but the company was established in Toronto on the 1960s.

Tetley is the tea industry leader in Canada with 34.4% share of value and 38% in

volume. It offers a variety of hot bagged teas (appendix 1) being the current leader in each

category. Canada currently serves TGB as a launch platform for new products, which

pressures Tetley Canada Inc. to innovate in products and marketing strategies.

TGB current strategy is focused on brands and products development and

improvements, distribution, process, people, and sustainability in order to become the

leader in good for you beverages.

More recently the company has successfully enter the RTD single serving tea

beverages with its Infusions product line gaining 14% market share during the year of

launch. It has also reclaimed leadership in the herbal tea category after an effective

marketing and advertising campaign carried out from 2008 to 2010 in which the company

reinvents its value proposition for the segment.

In order with the global strategy, the goals for the initiatives in this paper are to

increase brand value, awareness and profitability. As well as creating strategies that if

successful can be replicated in other markets.

Products where developed for the segments that are expected to have mayor growth

rate in future years and better correlate with consumer expected demands and current

product offering. Loose leaf premium tea, fitness tea, hot infusions are initiatives that

address consumer’s sophistication, health, and convenience expectations, respective.

Page 4: 01 Business Strategy Tetley FINAL - Alejandro

Vision statement

“Tata Global Beverages is an integrated beverage business with a vision to become

global leader in good-for-you beverages through innovation, strategic acquisition and

organic growth.” (TATA Global Beverages )

In order to make this possible, the group currently base its strategy in six pillars:

brands, distribution, process, product, people, and sustainability.

(TATA Global Beverages, page 9 )

Business model

Tetley operation began in Canada as a global exporter in the early 1900s, when

Hudson Bay Stores made occasional orders to the UK office. By the late 1960s Tetley

Canada Inc. established offices in Toronto, with the objective of solving distribution and to

have a better understanding of the market. Two key elements in the objective of capitalize

on the great brand acceptance in the country.

1

BrandsStrengthening and extending the portfolio of brands with consumer relevant differentiation

DistributionIncreasing penetration of our brands and product portfolio in identified non-stronghold markets such as USA and Russia

ProcessHaving process that work efficiently to deliver our strategic objectives with innovations as a key differentiator

ProductBuilding a portfolio of good-for-you beverage products with a focus on consumer relevant health and wellness, convenience and sustainability

PeopleBuilding an organization with clear differentiating capabilities

SustainabilityCreating competitive advantage and long term value creation through the development of a sustainable business model

Page 5: 01 Business Strategy Tetley FINAL - Alejandro

In the year 2000, Tata Tea, former Tata Global Beverages, acquired Tetley and by

2003, the company started reorganizing worldwide operations. As the economic times

highlighted by that time “This varied market-specific international approach seems to be

paying off” (The Economic Times, par.3)

(Tata Brewing magic in Canada) According to the article, in the year 2005, Tetley

continued the outsourcing business model; having only 10 employees in Canada. As of

today, Tetley Canada Inc. serves as the launch platform for innovative products before they

become available worldwide.

Goals and Objectives

Increase brand value

Increase brand awareness

Position brand in segments with better margins

Avoid product seasonality

Increase use of tea in soft drinks preparations

Develop products that can be successful in USA and/ or Russia

We plan to utilize the available resources, local and global, to expand our leadership in

the Canadian tea market through the development of new products and joint ventures that

will target specific segments. By developing initiatives that will increase market share,

revenues and brand equity, as well as tea consumption in the country relative to soft drinks

consumption.

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Page 6: 01 Business Strategy Tetley FINAL - Alejandro

Current situation

“When the shift toward tea culture started in Canada around 2000, Tetley's mission

was to systematically carve out leadership in every segment of hot tea” (Institute of

Communication Agencies, par. 1)

Tetley is the current market leader in Canada with 34.4% share by retail value, and

38% share in volume (TATA Global Beverages ). The outstanding results in Canada, is a

consequence of intensive research for new products. Effective marketing campaigns have

taken place in the last years maintaining the brand relevant.

Products offered

At the time Tetley offers 36 bagged tea varieties in the Canadian market, with a

product mix that includes: black, green, herbal, red, and white tea variants along with

specialty teas.

Tetley also RTD cold tea and infusions that can be mixed with water. These are

available in four different flavors, that combine green, black or white tea with fruit flavors

for a naturally sweeten experience.

Tetley Hot Tea

Varieties0%

10%20%30%40%50%60%70%80%90%

100%

10

9

6

542

Bagged Tea product mix CanadaWhite TeaRed TeaBlack TeaSpecialty TeaHerbal TeaGreen Tea

(Tetley Canada Website)

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Page 7: 01 Business Strategy Tetley FINAL - Alejandro

Green tea selection is the largest taking 28% of the product mix. This selection is

suited since green tea market is expected to grow in the coming years (reference to Industry

paper)

Black Teas (14%) are stagnant and are mostly consumed by older women.

However, the specialty teas (17%), which are prepared with black tea as a base, currently

outpace regular tea sales by 4.21% (Nielsen).

Red tea (11%) is a relatively new segment for Tetley in Canada but has shown a

great potential base on its unique flavor and health properties.

White tea currently only has two variants in the product mix given slow contracting

demand for the tea in Canadian soil.

Herbal tea (25%) is the second largest selection in Tetley’s offering in the country,

and even when it is a category that has decreased in the last years, it is one that the

company wanted use as a platform for new costumers.

Tetley Cold Tea

InfusionsInfusions are natural brewed tea concentrates, commercialized in individual size to

be mixed with water (Tetley Canada Website). Infusions provide a flavorful alternative to

carbonated beverages. This is a product that has a great potential to introduce younger

audiences to the world of tea.

Tetley’s cold tea options also include RTD presentations in individual size and

family size. By having a selection of natural cold teas, Tetley can continue offering clients

all the healthy benefits of tea during the hot season and maintaining brand awareness all

year long.

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Page 8: 01 Business Strategy Tetley FINAL - Alejandro

How did Tetley get here?

The brand has continued to expand the selection and follow industry trends by

offering customers exotic new flavors like mango and passion fruit, and adding superfruits

like pomegranate or acai to the blends. Tetley enjoys leadership in the black tea and

specialty segments (Tata Analyst report Q3 2011, p. 7), targeting 35 and older female

consumers and appealing to health properties of tea

In 2008 Tetley successfully introduced red tea in the Canadian market,

incorporating four different flavors to their portfolio. This move let the company capitalize

on a market that is shifting from black and white tea consumption.

From 2008 to 2010, the company also focused efforts in gaining leadership in the

herbal tea category. First of all, by better understanding, that consumer in this category

buys according to a specific need and not necessarily for the ingredients or flavors (Institute

of Communication Agencies). This way, Tetley’s herbal tea offering was reintroduced as

Tetley Color Therapy.

Tetley Color Therapy introduction represented a substantial difference in the way

herbal tea was commercialized, by offering clients a diverse selection for every mood.

Accompanied by an incredible campaign, doing conventional, online, and social advertising

to reposition their Herbal tea offering, resulting in gaining leadership in the sector, over

passing Celestial Seasonings, growing 22% in the FY 2010-2011 (TATA Global

Beverages, p. 9)

In addition to the success in the hot teas in Canada, the company expanded their

offering by including Tetley infusions, which are liquid tea concentrates to dissolve in

water and be consumed as an alternative to RTD teas and coffees, carbonated beverages

and powdered teas. Being commercialized first in the Canadian market achieving, the

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Page 9: 01 Business Strategy Tetley FINAL - Alejandro

infusions won 14% market share in the single serve iced tea drink category within the first

year in the market (TATA Global Beverages, p. 13). Tetley is currently expanding Fusions

initial selection, expecting to grow market share in 2012.

The most-recent incursion by the Tetley's research department to reach the market is

Tetley Perk. A variant of the classical orange pekoe that incorporates naturally source

caffeine extracts to deliver the same caffeine proportion per cup as coffee. With this

offering, Tetley creates a more compelling alternative to coffee drinkers. Perk also reduces

switching cost for coffee consumers, at least caffeine wise.

Available options

The growing landscape of the Canadian tea industry offers us the possibility to

compete, not only by stealing market share from competitors, but to position Tetley as an

important player in non-carbonated beverages category.

Given Tetley’s history and brand leadership in Canada, we want the brand to carry

the torch for Tata Global Beverages in the country. With that in mind, we have developed

product strategies that will increase the market and increase the value captured by the

group.

Our strategy focus on: developing products for premium niche markets, associating

the Tetley brand to healthy and sport life, and increasing tea consumption occasions.

Tetley’s loose leaf tea

The Canadian tea consumer is expecting more value than that we can capture by

providing a hot cup of tea. Consumer sophistication is one, if not the most, relevant trend in

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Page 10: 01 Business Strategy Tetley FINAL - Alejandro

the industry. Premium consumers are willing to pay more for an experience associated

with tea that involves: aroma, custom flavors, and quality.

Our Super-premium loose leaf tea product initiative consists of a variety of tea

blends, which will aim to capture this market. Taking advantage of our distribution

agreements throughout the country, we expect to become a more convenient option for this

segment by offering the premium quality, availability, and exclusive selection.

Tetley is already offering loose leaf tea in other countries but in a 32oz package

only available in two varieties. Our initial product offering will consist of 3oz to 5oz

packaging, available in 6 varieties.

With this collection we expect to capture during the first year 10% of the loose leaf

tea market and most important have a top of the line product where Tetley’s most

sophisticated customers can transfer to.

Breakfast companion

By leveraging on current strategic alliances with General Mills, we want to offer

samples of our current and new products along with their cereals. Along with advertising

campaign, this offers us the opportunity to increase brand awareness, attract younger

audiences, and associate tea consumption with breakfast.

This initiative is appealing given low cost associated due to already existing

products and apart from the advertisement effort; the only significant cost associated is the

variable cost according to the samples to be distributed.

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Page 11: 01 Business Strategy Tetley FINAL - Alejandro

The breakfast companion represents a short term strategy that depending on success

rate can be replicated in the future in Canada or other countries.

Fitness tea

Functional beverages are the soft drink segment with mayor growth worldwide.

However, some drinks, have been put to question as not being harmful for teens (Tanner

2011). This offers the opportunity to generate partnerships with mayor functional beverage

players in the industry to integrate the health benefits of tea to their drinks.

The joint ventures will help us generate a product line that combines natural tea

with flavor and added functions. These partnerships are yet to be determined but initial

candidates will include: Red Bull, Gatorade and Canadian producers.

Fitness tea will generate a new consumption occasions, along with the participation

of Tetley in an industry estimated at $577.68MM

2006

2007

2008

2009

2010

2011

Estimated valuesActual value

Value(CAN $ MM) 442,00$ 466,31$ 491,96$ 519,01$ 547,56$ 577,68$ Avg. Growth 5,50%

Estimated values

(Agriculture & Agrifood Canada, par. 7)

Hot tea Infusion

Among the anticipated consumer demands upon the industry, are those of

convenience and individualization (Tea Industry Analysis, Anticipated consumer demands).

Tetley infusions have already proven to be a success in Canada and with this proposal; we

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Page 12: 01 Business Strategy Tetley FINAL - Alejandro

want to target a younger audience that wants to enjoy a hot tea without having to deal with

the tea bag either carrying it on a backpack throughout the day or after preparation.

We expect hot tea infusions to become a star product among young tea drinkers who

want to try tea but don’t what to buy a 20 bag package. At the same time, Tetley will be

offering a more convenient, innovative way to prepare hot tea.

Hot tea infusions offer great synergies potential with the current infusions available

(marketing, advertising, commercialization, and distribution). We are also expecting to

charge a price premium associated with the novelty and individual presentation.

Expected Outcomes

Through the introduction of the product initiatives described above, the following

outcomes are expected within the first five years:

Increase of Tetley brand market share due to the inclusion of younger consumers

Increase of tea consumption compared to coffee by at least 2% by 2016

Increase Tetley’s brand awareness in the RTD cold tea segment and be on par with

Lipton iced tea (Appendix 1)

Future objetives

By taking action in the initiatives described, we are opening a door for future

products and alliances that can increment and in some cases disrupt Tetley’s business

model.

Future initiatives that had been considered as follow up, but not developed at this stage, are:

Tetley’s House of tea

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Page 13: 01 Business Strategy Tetley FINAL - Alejandro

o Similar to Nespresso Stores (Appendix 2), providing customers a mayor

experience as selling point instead of final product

Tetley’s tea capsules for coffee systems on the market

o Hein Celestials already has capsules for the K- cup system 12.5% share of

K-cup capsules sold in 2011 (Appendix 3)

Tetley’s capsules system

o Development of own capsules systems for offices and service stations and

other commercial places

Tetley’s Hot & Cold tea vending machines

o System that can deliver all Tetley flavors available in hot and cold varieties

as well as infusions. The idea is based on the Coca Cola Freestyle machine

(Appendix 4)

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Page 14: 01 Business Strategy Tetley FINAL - Alejandro

Appendix APPENDIX 1

(Lipton Tea Canada Website)

APPENDIX 2

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APPENDIX 3

http://blog.cdccoffee.com/index.php/tag/k-cups/

APPENDIX 4

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Bibliography

Agriculture & Agrifood Canada. AGR. 24 02 2012. 24 02 2012 <http://webcache.googleusercontent.com/search?q=cache:cU9t2JzDa4YJ:www.ats-sea.agr.gc.ca/can/4469-eng.htm+canadian+energy+drink+market&cd=1&hl=es&ct=clnk&gl=ca>.

Institute of Communication Agencies. "Warc." 2012. Warc. 23 02 2012 <http://www.warc.com.ezproxy.library.yorku.ca/Content/ContentViewer.aspx?MasterContentRef=3d8d39c9-c6fe-4857-bcd0-3935c08d1a84&q=tetley>.

Tanner, Lindsey. "msnbc." 14 02 2011. msnbc. 29 02 2012 <http://www.msnbc.msn.com/id/41577256/ns/health-childrens_health/t/energy-drinks-can-be-dangerous-teens-report-says/#.T06RgfEaN2A>.

Tata Analyst report Q3 2011. "TGB Q3 report." Analyst report. 2012.

Tata Brewing magic in Canada. "Tata." 09 2005. Tata. 24 02 2012 <http://www.tata.com/company/Articles/inside.aspx?artid=yYvTKApC34I=>.

TATA Global Beverages . "Annual Report and Financial statements 2010/2011." Annual Shareholders report. 2012.

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Tetley Canada Website. Tetley Canada. 23 02 2012. 23 02 2012 <http://tetley.ca/English/TetleyTeas/Products.cfm>.

The Economic Times. "Tata Tea realigning Tetley operations worldwide." 25 02 2003. 23 02 2012 <http://www.tata.com/company/Media/inside.aspx?artid=8XOfX4mgypk=>.

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