June 2016 | tata.com
'We are pushing boundaries in the area of health'
Graeme Karavis, managing director of Tata Global Beverages, United Kingdom, heads sales and marketing for the largest market within the region and the largest globally for the Tetley brand. In this interview to tata.com, he speaks about the company’s operations in the United Kingdom, the opportunities and challenges, and prospects for the immediate future.
How important is the UK market for Tata Global Beverages (TGB)?
UK is a very important market for TGB. It is home to the Tetley brand, one of the best known tea brands globally. We also have best-in-class production facilities located here in the UK, which supply to other countries across the world.
Tetley continues to dominate the TGB portfolio of products in the UK. How has the focus on the Tetley brand helped in positioning the other brands in the TGB-UK basket?
Tetley is an established brand and will be 180 years old next year. UK is a sophisticated, competitive and developed market, so introducing new brands is not easy. Having said that, innovation is a key platform for us and the Tetley brand has a strong presence across several tea segments. We are well positioned to exploit growth opportunities for other products using the mass appeal of Tetley and innovation.
What are the sort of opportunities that TGB-UK has in what is a matured — perhaps even saturated — market? How is the UK operation making the most of these opportunities?
We have a clear strategy to capitalise on growth opportunities in the UK market. The first on the list would be to protect value in the standard (everyday) tea segment and drive revenue per serve by introducing more premium black tea products.
Second, introduce a wider repertoire of products and occasions to enjoy them, which would mean accelerating the growth of non-black segments. Tetley is uniquely positioned to bring mainstream appeal to the smaller but growing tea segments within the category.
Third, attract new, younger consumers from outside the tea-drinking group with unique, healthy blends that appeal to the younger generation and provide a convenient and tasty way to get a health benefit.
The health element is becoming ever more prominent in TGB-UK’s offerings. What are the factors at play here?
The focus on health is a global trend. The good news for us is that tea is inherently healthy. Consumers these days are looking at convenient ways to become and remain healthy, which is why we launched a range of ‘super teas’ with added functional benefits such as tea with added vitamin C to strengthen the immune system, with vitamin B6 to help reduce tiredness and fatigue, and with vitamin B1 to help support the body’s cell function and circulation.
The ‘super’ concept is being rolled out in other geographies and as a company we are pushing boundaries in the area of health with exciting innovations in the pipeline.
Tea is an obvious winner for TGB in the UK market but what about water, coffee and other beverages?
The water and coffee segments are in growth in the UK. The market is dominated by large multinational companies and an entry at this point would require considerable investment, hence at the moment we are concentrating on creating value and driving growth in the tea business.
Innovation is a standout feature in TGB-UK’s evolution. Please tell us a bit about the innovation ecosystem that TGB has in the country, how this is managed and encouraged?
TGB as a company is focused on innovation. In fact, one of our core values is to ‘lead by innovation.’ A thoroughly thought-through stage and gate process is the cornerstone of innovation at TGB. The company recently launched the concept of cross-functional teams to ensure that the organisation is lined up to capitalise on big innovation opportunities.
At TGB-UK, the focus is on gaining category, shopper and consumer insight, which has helped in developing an innovation mindset across all levels of the organisation.
What are the challenges that TGB-UK faces and how is it coping with these?
UK is a very competitive market place. For the first time ever, there is deflation across major grocery categories. Large retailers are rationalising ranges and reducing prices to compete with discounters. This has lead to an ever-present threat that we may lose out on distribution.
Within the tea industry, media spend has reached record levels of 40 percent plus year on year. When you add rising input costs and a category dominated by standard black tea, which is on a decline, the challenges are considerable.
We are coping with these challenges in several ways. First, we collaborate with our large customers who account for two-thirds of our business so that we can maintain distribution levels and deliver balanced promotional programmes to enhance sales growth. This means finding ways to align strategies and find win-win opportunities. Second, we are also looking to channeling our media investment towards supporting innovation within non-black teas as this is a significant growth opportunity which will drive revenue per serve. And of course, we will keep a close eye on cost.
What are your expectations of TGB-UK in the near future? How do you see operations here shaping up?
Our plan for the near future is to emphasis more on digital marketing (both social and online shopping) customer collaboration and non-black tea.
We are very active on social media and have been ranked No2 among FMCG companies. Our online retail network is already well developed in the UK with 6 percent of the sales now coming from online sources. However, we still need to do more.
Collaboration with customers will be directed towards developing a customer-focused approach based on insight, new ways of working and mutual long-term strategic partnerships.
Tetley Teafolk [UK’s most recognised advertising icons with 81 percent consumer recognition] and the mass appeal of the Tetley brand are huge assets. We will use these to move the balance of our portfolio away from a product mix dominated by black tea to a mix that is more balanced across the black and non-black segments.