smp report on tapal tea

Research Report on

Strategic Marketing & Planning

Tapal Tea Private LimitedPlot 40, Sector 15, Korangi Industrial Area, Karachi

Submitted To:

Sir Ekhlaque Ahmed

Submitted By:

Imran Ali – 8862Muhammad Bilal – 8698Arsalan Yousuf – 8677

Date: 17-04-2010

INSTITUTE OF BUSINESS MANAGEMENT

TESTIMONIAL

We bow towards, The Great Al- Mighty ALLAH for showing us, the strength and courage for all the challenges

through out our journey in exploring the wonders of this visionary and dynamic subject of “Strategic Marketing

Planning”. Indeed, we are grateful to our mentor Sir Ekhlaque Ahmed, whose dedication, guidance and enthusiasm

for the subject always persuaded a challenge for us to become and prove that, how good we are business

managers. We had at most optimum, placed our sincere efforts and sheer hard work to satisfy our mentor with

this report. We would always like to remember and honor with gratitude toward our family & friends, in

supporting and motivating us during days, we felted low and finally, the TAPAL people specially, Mr. Haroon Rashid

whose endless support glimpsed a ray of hope and success to this project. Thank You

Imran Ali

Muhammad Bilal

Arsalan Yousuf


Table of ContentsCompany’s Profile.............................................................................................................................................4

History of Tapal.............................................................................................................................................4Business Scope..................................................................................................................................................5Market Structure of Industry.............................................................................................................................9Market Structure of the Company...................................................................................................................10Market Size - Past four years – Qty (Tons).......................................................................................................11Market Size - Past four years – Value..............................................................................................................12Market Size - Next four years – Volume (Tons)...............................................................................................13

Assumptions for Growth.............................................................................................................................13Dust Tea Segment...................................................................................................................................13Leaf Tea Segment...................................................................................................................................13Mixture Tea Segment.............................................................................................................................13Green tea Segment.................................................................................................................................14Iced Tea Segment...................................................................................................................................14

Product Life Cycle............................................................................................................................................14Competition Growth matrix............................................................................................................................15Porters Five Forces Model...............................................................................................................................16

Threat of New Entrant................................................................................................................................16Bargaining Power of Buyer..........................................................................................................................16Bargaining Power of Suppliers....................................................................................................................17Rivalry between Competitors......................................................................................................................17Threats from Substitutes.............................................................................................................................17Environmental Factors................................................................................................................................17

Technological..........................................................................................................................................17Political...................................................................................................................................................18Economic................................................................................................................................................18

Social and Cultural Forces...........................................................................................................................19Company and Competitor Analysis.................................................................................................................19Distribution Structure: Shift from 2008 To 2012.............................................................................................22Distribution Shares And Company’s Positions (2008)......................................................................................23Top 5 External Trends......................................................................................................................................24SWOT Analysis.................................................................................................................................................25

Strengths.....................................................................................................................................................25Weaknesses................................................................................................................................................25Opportunities..............................................................................................................................................25Threats........................................................................................................................................................25

Value Chain Model..........................................................................................................................................27Human Resource Management...................................................................................................................27Technology Development...........................................................................................................................27Procurement...............................................................................................................................................28Primary Activities........................................................................................................................................28

Inbound logistics.....................................................................................................................................28Operations..............................................................................................................................................29Outbound Logistics.................................................................................................................................29

Relative Importance of Factors.......................................................................................................................30Rating Against Customer Buying Criteria.........................................................................................................31Impact of Issues on Strategic Profile...............................................................................................................32Statement of Commitment.............................................................................................................................33Business Objectives and Targets.....................................................................................................................34

In Short Term..............................................................................................................................................34


In Long Term...............................................................................................................................................35Segmentation Variable of the Consumer Market............................................................................................36

Geographic..................................................................................................................................................36Cimate.........................................................................................................................................................37Demographics.............................................................................................................................................37Psychographic.............................................................................................................................................37Behavioral...................................................................................................................................................37

Action Plan......................................................................................................................................................40


Executive Summary

We the students of the College of Business Management were required to submit a report on "Strategic Marketing

& Planning”. There by we have full filled our requirement and have listed our findings in the following pages. We

were required to choose a company and analyze all its activities in detail so we chose Tapal. Tapal had always

ensured its landmark in quality standards and because of this factor customer value and standards had proved its

ultimate goal of customer satisfaction. Today the market share of Tapal have reached the top even in this

economic crunch, but on to becoming a leader the company should provoke to raise the bar on a continual basis

and to address key success factors, only through mitigating the key issues. In order to achieve the objective of this

report we had to rely on our own analytical skills as well the information we received from the major players in the

Industry i.e. mainly the three leading Tea manufacturers in the Industry as the likes of Tapal, Unilever, Clover

Pakistan and Eastern Tea. We even went further to compile consumer views about different brands and the

distributors opinions on the different brands available. To full fill the extensive requirements of this report we

broke each and every one of the company’s activities in order to conduct and procure a more in-depth and more

meaningful analysis. For each activity analysis tools such as Internal Factor Evaluation Matrix, External Factor

Evaluation Matrix, In-Depth Activity Cost Analysis and Competitive Profile Matrix are just some of the tools used in

the following pages to bring a consistent and better analyzed answer. We hope the following pages will be better

able to answer and give thoughtful insight into Tapal Tea, its competitors and the Industry in which it operates

especially in the light of Pakistan’s economy.


Company’s Profile

The journey of Tapal's remarkable success is the combined efforts of three generations. Adam Ali Tapal was the founder of the Tapal Company. The saga of Tapal started with his formulation of a unique tea blend, which was later named family mixture that led to the Tapal brand becoming a hot favorite, and eventually the largest selling brand.

Taking a step forward from this humble foundation, Tapal moved up the ladder of success by innovating and introducing different tea brands to suit every taste and pocket, which were sold from its retail outlet in Karachi’s Jodia Bazaar.

People from all parts of the city flocked to the outlet to purchase Tapal tea, and soon, the quality of Tapal teas became legendary. The company continued to thrive and grow under the management of the founder’s son, Faizullah A. Tapal, who initiated tea distribution to retail outlets around the city for the convenience of the people.

History of TapalThe saga continued, and new horizons were explored by the founder’s grandson, Aftab Tapal who gave a whole new meaning to the concept of tea and developed a wide range of tea blends catering specifically to the tastes of people throughout Pakistan.

He introduced professional management and unique production ideas to the business. Being one of the few professional tea tasters in the country, and a tea connoisseur himself, his progressive outlook has given further strength to the foundation of quality laid by his family, and has bought the Tapal company to newer and higher levels of success.

Evolving and innovating its way through its near-60 year history, Tapal is presently the largest, 100% Pakistani owned tea company in the country.

Its has set new standards for modern tea blending and packaging factories, warehouses equipped with state-of-the-art equipment and a team of highly dynamic professionals headed by Aftab Tapal himself.


Business Scope

In Pakistan, Tea is undoubtedly the national drink and it has more consumption than any other type of drink

available in the market today. It is estimated that Pakistanis consume over 160 million kg of tea worth over 4.5

billion rupees every year. Despite the increasing emphasis on its hazardous effects on health and the continuously

rising prices, due to the low literacy rate and unavailability of a better substitute, the demand and the

consumption has increased over the years and is growing at an annual rate over 3.5%.

As a consequence, Tapal desires a high level of customer satisfaction and unflinching brand loyalty through

commitment to quality and constant innovation. What deserves to be mentioned is Tapal’s products are various

with premium quality and have passed the ISO-9001: 2000 quality system certification. A unique combination of

high- grown Kenya tea leaves and dust, that gives a refreshing aroma of leaf and strong taste of dust all together in

one cup. Tapal is a family name and calls attention to tea as an integral part of our lives whether it is day or night

or any time as a source of refreshments and revitalize.

Tapal has a diversified customer base ranging from urban to rural areas including various institutions. People go

with Tapal to get the Hence; Tapal’s target market mainly consists of young adults and adults belonging to high,

middle and lower income groups who are primarily living individual and in family gathering.


Pakistan Tea Industry 2009

Loose Tea Segment

47%

Branded Tea

Segment53%

Pakistan Tea Market Estimated 2009

Urban33%

Rural67%

Business Scope describes “The Business we are / want to be in” through the eyes of the customers. It defines the

areas of operation for the organization. It encompasses the following questions:

Specific Region

Regions = where?

Tapal Tea, the country’s largest National Tea Company, has manufacturing capability in the country at its three plants located in which two are in Karachi and one in Raiwind. The mother factory in Karachi only produces 65% of the total Tea categories like Danedar, Mezban, Family Mixture, Shades of Green, Chenak, Tezdum and Ice Tea to fulfill its major share contributing south market. The other manufacturing plant in Raiwind mainly produces two categories i.e. Tezdum and Family Mixture.

The head office for the operations is based in the cities of Karachi and Lahore with warehouses maintaining the organization’s presence in the cities of Hyderabad, Sukkur, Multan and Islamabad.

To meet customer requirements everywhere, Tapal Tea further expands its network through Utility Stores, Army Stores and Modern Trade Network country wide.

The only company owned shop located in Jodia Bazaar, Karachi to which it started his business in 1947 as both whole seller and retailer. It’s Tea Blending and mixing center is located in Karachi.

Tapal Tea has divided the country into two main and Six sub regions as;

South

KarachiHyderabadSukkur

North

LahoreMultanIslamabad

These Regions further classified into Zones/Territories and Towns to extensively cover the market.

Tapal Tea is currently exporting to Asian counties of Afghanistan, Middle East, USA, Australia and, other European continents which constitute around 1% – 2% of their total sales.

Functions / applications

Functions / applications = what needs?

Tapal Tea is catering to the basic need of “Tea” accompanied with “Quality and Affordability”.

Customer seeking needs would be:

Primary Attributes:

o Strong Tasteo Aromao Coloro Premium Quality


Secondary Attributes:

o Priceo Availability

Customers

Whose needs?

“Rural and Urban” – They are catering to the needs of people living in Rural Areas of Pakistan, as the main market for Tapal Tea happens to be the people from rural areas as its 68% of the total population of Pakistan. Besides, it is also catering to the need of people from urban areas as they also constitute a significant percentage of their total market share.

Added value

For Distributors:

o Competitive Marginso Credit Facility

For Traders & Wholesalers:

o High marginso Quantity Discountso Trade promotions and incentiveso Shop Branding + merchandising Rento Timely Oder Deliveryo Shelf Space Rent

Considerations

Diversify the business in the complementary products.

Boundaries and Future Scope

- Matching production with increasing demands in the future.- Bringing new products (ranges) for new segments and untapped markets- To broaden exports function in Middle East and other international markets; and prove existence in

international markets. - To maintain the leading position in the local market.- Modernizing operations and optimal capacity utilization.- Restructuring strategies for the bottom of pyramid customer base. - Customer oriented pricing strategy- Tactical media strategy for each brand- Strengthen the brands and communication to avoid internal cannibalization.

Input:

Tapal always seeks out different arenas to beat the competition while struggling to maintain the existing share, plan trade driven promotions to strengthen the long term relationships. To be an aggressive player in the market it is trying to exploring international markets where it can not only penetrate, diversify and make long-term investment but also harvest its current business.


Market Structure of IndustryCategory Tapal Unilever Clover Pakistan Eastern Tea

Loose /Mushroom Tea

Dust Mezban DustChenak Dust

Pearl DustRed Rose Royal Dust

Surhan DustDawn Dust Available

LeafDanedar Tezdum

DD-Teabags

Lipton Yellow LabelLYL Teabags

Supreme

Tetley WorldTetley Teabags Vital Chai Available

Mixture Family Mixture - - Vital Chai Available

Green Tea

Jasmine TBsElaichi TBsLemon TBsGulbahar

Clear Green TBs - - Available

Iced Tea Tapal Ice tea (Can + Powder)

Lipton Iced Tea (Powder + Can) - - -

Inputs:

Tapal is present in all the brand segments of Tea industry but there is a gap in the mixture and Ice Tea segments so Tapal must develop strategic plans to enhance these two categories.


Market Share

Quantitative findings

Over all the branded Tea market has been greatly dominated by Tapal, stealing 43% of the markets share, followed by Unilever 40%

The other Tea manufacturers only hold 4% of the markets share which reflect that how difficult is it to penetrate the market.

It also highlights the fact that Tapal and Unilever market shares represent the major chunk of the consumer base.

Input:

Tapal Tea must sustain the market share but explore new markets to avoid internal cannibalizing amongst its existing brand.


Pakistan Branded Tea Market 2009

Clover Pakistan

4%

Eastern Tea9%

Others4%

Tapal43%Uniliver

40%

Market Structure of the Company

End UsersMasses Bulk buyerPrice sensitive

MassesMassesShoppersPrice sensitive

Arm forces and their familiesForeigner Consumers

Product Application

Discounted Price

B2BB2CProfit margin on bulk buying

Convenient buyContracted supplyB2BDiscounted PriceEconomy Packs

Satisfy Tea drinking needsB2BB2C

Product

MixtureLeafDustIced Tea

MixtureLeafDust

MixtureLeafDust

Leaf

Influencer Govt. OfficialsFinance Dept.

OwnerProprietorConsumer

Vendor/contractorFinance Dept.Administration Dept.Family Monthly Budget

Govt. OfficialsFinance Dept.

Purchaser Procurement Dept.

TradersRetailersWhole sellersRestaurantsHotels/CafesCorporate OfficesBanksEducational Institutions

Contractual Restaurants,Hotels/Cafes, Offices suppliesPortion of Traders/wholesalersFamily Shoppers

Procurement Dept.Foreign Distributions

Synopsis:

In the Tea Industry, the key player in the distribution structure is “the Distributors”. These distributors are basically hired by companies. These distributors are further cover whole sellers and retailers, as they custodian of their respective areas defined by the company.

International Modern Trades are the next sales drivers in the FMCG industry but may damage the distributor or attract the company direct distributionsUSC/CSDs are also playing an important role in the market but its dependency on Govt. grant would have a substantial impact on its operations.

Armed forces is a niche segment but contributing a portion of the cake. Rate of Exchange due to Export market supports business.


The Manufacturer

Distributors[General Trade/Wholesale

Out Of Home]

USC/CSD Armed forces & Export Channel

Modern Trades[MAKRO/METRO]

Market Size - Past four years – Qty (Tons)

*All in Ton


Market Size - Past four years – Value (in ‘000)


2005-06 2006-07 2007-08 2008-09Rural 100,395 103,771 107,397 111,175

Loose 57,564 59,729 61,155 62,462

3.8% 2.4% 2.1%

Branded 42,654 44,101 46,182 48,744

3.4% 4.7% 5.5%

Urban 47,245 48,833 50,540 52,317

Loose 12,748 12,956 13,186 13,456

1.6% 1.8% 2.0%

Branded 34,674 35,854 37,301 38,825 3.4% 4.0% 4.1%

Grand Total 147,640 152,604 157,936 163,492Loose Total 70,312 72,485 74,300 76,332

Branded Total 77,328 80,119 83,636 87,160

*All in Ton

2005-06 2006-07 2007-08 2008-09

Dust

Sub Total 50,381 52,425 54,667 57,123

Rural 34,007 35,387 36,900 38,558

Urban 16,374 17,038 17,767 18,565

Leaf

Sub Total 80,476 83,051 85,796 88,541

Rural 54,321 56,059 57,912 59,765

Urban 26,155 26,991 27,884 28,776

Mixture

Sub Total 16,532 16,716 16,851 17,021

Rural 11,159 11,283 11,374 11,489

Urban 5,373 5,433 5,477 5,532

Total Black Tea

Grand Total 147,640 152,604 157,936 163,492

Rural 100,395 103,771 107,397 111,175

Urban 47,245 48,833 50,540 52,317

*All in Ton

Synopsis:


0

20,000

40,000

60,000

80,000

100,000

120,000

Urban Rural Urban Rural Urban Rural Urban Rural

2005-06 2006-07 2007-08 2008-09

Total Tea Market

Branded Tea

Loose Tea

The overall Tea industry has been growing gradually both in terms of sales and revenue.

Branded Tea segment is showing healthy growth especially in rural markets where as market is gradually saturating in urban area.

In the Tea Industry, Dust and Leaf has a major chunk of the Tea industry in terms of Black Tea. However the dust category is now become 2nd most demanding brand and has been continuously increasing among the core tea users especially in rural areas because of two major concerns as:

1. Per capita income has been increased which caused in increase of Tea consumption with the growth in the population rate.

2. people are serving Tea as an economic point of view and with draw from the serving of cold soft drinks to their guests as an expensive drink

3. Bottom of Pyramid market

In Mixture category which was the legendry brand of the time and initially blended by Tapal when first started its business in Pakistan is now either being matured or cannibalized by other brand.

Green Tea has developing bit-by-bit as the health awareness level gradually build in the mind of the consumers. This segment is very niche as the consumption pattern has restricted consumer with the diet planning, health issues and exposure to particular social class.

Iced Tea portfolio has yet to be waited for the acceptance from consumers as the brand is premature for the industry and need few more years to be established.

Input:

Overall the industry has natural growth with respect to the Population growth rate. Therefore, good pricing strategy related to bottom of pyramid market i.e. Rural Market could capture more returns for the company as well as market share. However Green Tea and Ice Tea needs to be milking to sustain their growth.


Market Size - Next four years – Volume (Tons)

Assumptions for Growth

Dust Tea SegmentRural population is continues growing in Pakistan and hence the market size is increasing proportionally as the total area expending and regular Tea consumption of the people has also increased. Since the Dust category is the flagship brand of this market hence the demand has been increasing at the average rate of 3.3% each year.

Leaf Tea SegmentThere is a pilgrim shift in the economy of Pakistan which has stretched the middle class upward as a consequence more and more consumer switch to this premium brand. In Pakistan, the growth rate of Leaf is around 2.5% this year which is the highest growth in last 5 years. Teabags are the major revenue generators in the Leaf category in the local urban and international markets providing high contribution margins to business.


Mixture Tea SegmentThis category is reaching at its maturity stage but in last decades it was a primary brand of the market. Also one of the major reasons of down this brand is low price gaps between the category brands which stimulate the customers to switch on other brands

Green tea SegmentPeople have become health conscious today and would want to prefer green tea over the traditional black tea but this category has a niche segment so would take time to build in future. As the literacy rate is continue to increasing in Pakistan therefore more growth is expected in this category.

Iced Tea SegmentDue to climatic conditions, where the weather of Pakistan is mostly hot; consumers would prefer soft drinks over tea but due to low awareness level this segment would take couple of years to build the market as the youth has been moving towards the healthy lifestyle and trend lovers in urban areas.

Input:

Tapal must sustain its current position in the industry but strive to capture the share from the competitors and Loose Tea market by offering good value for money to consumer at every price point. Women are the key part of the overall Tea purchasing and making so targeting this gender and rewarding would be effective for Tapal to grab the market share.


Product Life Cycle

Product Segment Introduction Growth Maturity DeclineDUST ***

Mezban Dust +++

Pearl Dust/Redrose ++

Royal Dust +

LEAF ***Danedar +TB +++

Tezdum ++

Supreme ++

LYL + TB +++

Vital Chai +

Tetley World +

MIXTURE ***Family Mixture +++

Vital Chai ++

Tetley World + TB +

GREEN TEA ***Shades of Green ++

Lipton Green Tea +

ICED TEA ***Tapal Ice Tea Powder +

Lipton Iced Tea +

Nestea +


Competition Growth matrix

COMPETITIONSEGMENT

DUST LEAF MIXTURE GREEN TEA ICED TEA OVERALL(in Ton)

Tapal Tea Mezban DustChenak Dust

DanedarDD TBsTezdum

Family Mixture

Jasmine TBLemon TBElaichi TBGulbahar

Tapal Ice Tea

33,000

UnileverPearl DustRed Rose

LYL packsLYL TBs

Supreme- Clear Green

(Mint + Lemon)Lipton

Iced Tea 32,000

Clover Pakistan Royal Dust Tetley WorldTetley TBs

Tetley World

- - 3,000

Eastern Tea Surhan DustDawn Dust Vital Chai Vital Chai - - 4,000

Historical Growth 4% 3% 1% 4% 9% 3%

Projected Growth 3.4% 2.6% 1% 4.8% 22% 3%

Company Profitability 6% 7.5% 3% 10% 13% 6.6%

Synopsis:

After analyzing the market for its capacity and its segmentation, we have come up with the following findings: The Tea Industry is directly influenced by the changes in the economic factors and stability Each segment has its own stimuli or functionality which affect the product demand especially Dust

segment is penetrating in the urban areas of upper Punjab and has a greater influence on the other variants.

The change in prices and margins has a direct impact on the sales of the segments Tea consumers in market greatly rely on strong brand name and reputation created over the years. Iced Tea segment is still premature concept in Pakistan but the trend would be more favorable in future

for this category. Each company has a set target market in which it capitalizes but now they are doing guerilla warfare

strategies to capture more share in the market. Mixture category must clarify its positioning to sustain in the market.

Input:

Growth in Dust, Leaf and Green Tea Segments

Mixture is facing challenges as of being approaching maturity so preemptive action would be taken to avoid lose of positioning and cannibalizing.

Green Tea has a huge potential of longevity but more variants to be launched in order to sustain growth

More and continuous investment would required to develop the Ice Tea market and opportunity to launch new variants

Low cost leadership would improve the pricing strategy


Porters Five Forces Model

Threat of New Entrant

Ever rising number of Mushroom Tea products is new entrant in the Pakistani Tea industry and are threat for the

other three key players in the market namely:

Tapal Tea Private Limited

Unilever Lever Pakistan Limited

Eastern Tea Private Limited

Tetley Clover Pakistan Limited

Pakistan is truly a rare land, home to different civilizations and diverse cultures. The industry is dominated mainly by four companies, Tapal, Unilever, Eastern Tea and Clover Pakistan in this very order. As we have already discussed, Unilever capitalizes on its strong hold as the Multinational Giant in the FMCG market due to its multiple product lines in the segments and their low prices. Tapal Tea on the other hand does directly compete with Unilever at the Tea base since it has only Tea manufacturer. The main competitors of these companies are Loose Tea (smuggled) markets i.e. Mushroom Brands, which has been successfully operating in the rural markets especially on price packs. We have discovered that the consumer is not ready and willing to pay price for a cup of Tea that is only affordable. Tapal Tea needs to come up with a differentiation strategy to put up a fight with Loose Tea which is projecting a low priced. Tapal Tea needs to bring down its price in order to make the consumers shift from Loose Tea or other branded Tea without compromising quality.

Bargaining Power of Buyer

In case of Tapal the bargaining power of Buyer is low because the there are so many distributors in Pakistan and Tapal has a wide range of options to choose.

Bargaining Power of Suppliers

In case of Tapal, Supplier’s bargaining power is high because there are many distributors available but the market has limited number of suppliers.

Rivalry between Competitors

There is an intense rivalry among the competitors, as the market has a lot potential, which can be observed by the entry of two new competitors in the tea market in the last five years i.e. Clover Pakistan & Eastern. However, the main competition and rivalry is among Unilever & Tapal. Both are always trying to capture each other’s market share and in the recent retaliation strategies from Tapal have been fruitful.

Threats from Substitutes

Coffee is a substitute for tea as both fulfilling the core need of refreshment. In the category of coffee Nescafe has a lion’s share and it is an indirect threat of substitute for Tapal because in the winter season people usually prefer coffee over tea.


Environmental Factors

TechnologicalTechnology is also harnessed at Tapal to benefit the consumer. Tapal was the pioneer in soft packaging and round tea bag. They imported this innovative technology and established a fully automatic facility under the guidance of their founder, Adam Tapal, where soft packs were produced for the first time in Pakistan. Few years back Tapal has improved the technology to hard packaging. At this facility tea is blended and packed in hygienic conditions, untouched by human hands whilst the hard packing technology keeps tea fresh and packaging costs economical. The success of these hard packs has been such that other tea companies have also followed Tapal's lead and launched some of their brands in hard packaging.

PoliticalThe political & legal forces that affect Tapal are the taxes & excise duties levied on Tapal’s products and its imports. Also it has to fulfill all the rules and regulations as per law.

Fluctuation in the import duties by federal government is an issue of great concern for all tea-marketing companies. If we look back in past, tea imports during 2004-05 increased by over 10 percent compared to 2003-04 mainly due to a cut in the import duty, the federal government in the budget 2004-05 cut by 50 percent the import duty on tea, bringing it down from 20 percent to 10 percent to what it said protect the local industry and curb the menace of smuggling. This decline resulted in more production and Tapal discovered a new market for herself and started exporting its blend tea. Right now Tapal is exporting tea to some of the countries abroad like Canada, Saudi Arabia, and Dubai. Illegal imports are substantial, nearly 1/3 of domestic consumption and an 81 million USD business. Tea smuggling is a matter of great concern. The government loses huge money in import duties and domestic importers face tough competition from those who are instrumental in bringing back tea meant for Afghanistan. Most is Indian low-grade bulk tea transported through Afghanistan and sold bulk in markets in the towns near the Western border.

The trade is growing, 48,000,000 kgs, were brought illegally into the country during FY06 and 40,000,000 kgs, in FY05, a 10 percent increase. Legal imports declined 12.5 percent in the same period.

EconomicAnother major factor that affects Tapal’s marketing strategy is the conditions prevalent in the economy. The main economic forces affecting the market are:

Stage of Business Life Cycle

Whether the economy is in a recession or in a boom, it affects the activities of Tapal in a way that it influences the demand of their product. In a boom the demand of the product increases. Similarly, in a recession the demand of a product falls since the buyers consume less of the product due to falling incomes. Though fluctuations in the demand do occur, these are not major fluctuations as demand for tea is inelastic in relation to price.

Inflation

Inflation plays a major role on the marketing strategies used by a company due to two main reasons. Firstly, inflation affects the consumers’ psychology and they become more selective in their purchases. Secondly, inflation results in rising prices for the raw materials purchased by Tapal, which in turn increases the cost of production. This factor plays a major role especially if the increase in cost cannot be transferred to the consumers in the form of raised prices.


Social and Cultural ForcesSociety and culture plays an important role in determining the marketing plan of Tapal. Consumer adoption of a product depends greatly on the target markets beliefs, tastes and values of the people. For instance, Mezban tea was developed as a stronger tea keeping in mind the taste of the consumers of interior Sind

Company and Competitor AnalysisMaking a modest beginning over half a century back, today Tapal has become the largest, 100% Pakistani owned Tea Company in the country. It has modern tea blending and packaging factories, warehouses equipped with state-of-the-art equipment and a team of highly dynamic professionals headed by Aftab Tapal himself. He was the first to introduce soft packs in the country. He developed an entirely new brand and category- Tapal’s Family Mixture (the mixture of tea & dust). Mr. Aftab Tapal was the first to invent the highly successful brand Danedar Leaf Blend. In December 1997, Tapal Tea became the first Pakistani Tea Company to earn the ISO-9001 certification: a symbol of the highest international quality standards. Again in December 2000, Tapal acquired the ISO-9001: 2000 certification, making it one of the first few companies in the world to achieve this milestone. In addition to the standard requirements, the ISO-9001: 2000 certification system includes requirements for environment improvement, concepts of TQM (continuous improvement) with major emphasis on consumer requirements and satisfaction.

Tapal’s success has left many astounded. No magic formula however, lies behind its growth other than hard work, dedication and of course unique blends and better quality.

Competition in an industry is of four kinds Product form competition Product category competition Generic competition Budget competition

In the case of Tapal we would be considering the following competition that is:

Product Form Competition

In case of Tapal product form competitions are:

Brokebond Supreme Tetley tea Lipton tea Vital Chai Surhan Dust Mushroom Tea

Product Category Competition

In case of Tapal product category competition would be:

Danedar Kenya BP Mix Patti Super PFI Brazil Green Tea Bangladesh Green Tea Lemon Grass BPI (Indonesia) Kenya Mix Tea


Kenya Dust F-1 Kenya Green Tea (Indonesia)

Generic Competition

In case of Tapal the Generic competition comprises of:

Nestle Instant Coffee Nescafe Coffee Mineral Water Cola Cadbury Coffee Lipton Ice Tea Juices and soft drinks

Budget Competition

Incase of Tapal the Budget Competition is:

Restaurants Hotels Offices Educational institutions International Modern Trades Cafes Airlines Arm forces USC/CSDs

Distribution Structure: Shift from 2008 To 2012


% Tea Market

2008 2012

DISTRIBUTOR 65 50

MODERN TRADES 7 20

USC/CSD 10 7

OOH 18 23

100 % 100%

Synopsis:

Distributors will divert themselves towards the large retail stores as the margins are continuously cutting off so the Tapal Tea outlets coverage would be tougher than before.

Introduction of the Modern Trades in Pakistan would influence the distribution and other local government subsidiary chains as of more convenience factors and volume share by offering memberships and freight cutoffs.

Tapal has been improving the OOH structure to capture the opportunity in the future.

Utility Stores has dependency upon the Government subsidy if the policy changes they could be having great impact on the market.

Input:

Tapal should reduce the cost of operation and logistics to not only retain its current distributions network but also minimize the margin gaps amongst the sales sources.


Distribution Shares And Company’s Positions (2008)

% ALL PAKISTAN DISTRIBUTION

COMPANY’S TURNOVER SHARE

#1 COMPETITOR’S TURNOVER SHARE

OUTLET COVERAGE

DISTRIBUTOR(GT/WS) 60 70 60 65

MODERN TRADES 7 10 15 90USC/CSD 18 15 15 75OOH 5 5 10 25

o The only change in the last 4 years is the introduction of IMT (International Modern Trade) with their regional placement and presence at key transaction centers.

o The distribution structure of Tapal Tea and Unilever is comprised mainly of “distributors”. The total number Tapal’s exclusive distributors are approx 435 distributors covering 114,000 outlets across Pakistan. However, Tea is also being channeled through various other channels in order to reach to end consumers.

o Distributors are the institution through which availability of products is possible across the retail trade. Tapal’s exclusive distributors have a very good relationship with them. The important thing is that they must integrate into total marketing mix because of time and money required to setup an efficient channel.

o Whole sellers are very dynamic in their demand as they try to find the better option and direct reach the Modern Trade channels.

o The company’s turnover share through, distributor & direct is 70%, & 30% respectively. o The outlet coverage is almost 85-95% in South but 65% in North.Where,

o GT= General Trade (general stores, Kiryana stores, Medical and General stores)o IMT= International Modern Trade (departmental stores/Hyper Market such as Makro)o Whole seller- is route to direct to the rural areas and offered quantity discountso USC=Utility Stores corporation – Govt. subsidized shopso CSD=Canteen Stores Department – Cantonment subsidized shops

Input:

Further expansion in the distributions to increase coverage and reach more consumers and market share.

Heavy investment in the marketing promotions in OOH sector can build strong and long-term relationships with the corporate businesses and other complementary goods manufacturers.

Top 7 External TrendsTaking advantage


Trend Potential Impact We C1 C2 C3

Growth of rural markets of Sind and Punjab; focus of companies on this area

Increasing competition, price erosion, market share Yes Yes Yes Yes

Manufacturing Cost Increase Cutoff Profit and margin No No No Yes

Teabag Growth Opportunity, high profits Yes Yes No No

Digital communication Influence on sales and marketing Promotions Yes Yes Yes No

Population growth Market share increases Yes Yes Yes Yes

Healthy Lifestyle and awarenessMore demand of Green Tea as an Health benefit indicator Yes Yes No Yes

Customer/Trade Credit Policy Low ROI, budget constraint ,More receivables

No No Yes Yes

Synopsis:

Since the industry is on the growth as population expansion in Pakistan especially in rural areas so the arrival of new entrants has major impact on the industry.

Tea prices in international market are randomly increasing in a fiscal year which caused cuts n profitability in major brands.

Since the SEC classes have been stretching towards the upper middle level therefore the demand of the premium product has increased as well as price products in lower middle.

This industry is still following the conventional rules of communication therefore no company yet entered in this strategy.

Tea has become a national drink of Pakistan and has more preference over other beverages especially in rural market which is contributing 66% of the total population of the country. As a consequence, the market size is continuously increasing so far caused more consumption of tea.

Input:

Focus on the cost reduction, managing healthy brands, compelling brand communication and product innovation.


SWOT Analysis

Strengths

1. Company name image –1st National Tea Company2. Highly experience Sales staff + exclusive sole distribution network3. Efficient production capacity4. Expertise – Tea Blending. 5. Economical pricing strategy6. Short term credit policy i.e. efficient ROI

Weaknesses

1. No customer complain center within the company.2. Limited budget and investment in the business3. Weak coverage in upper northern areas of Pakistan 4. high Price gaps between product line5. Single product manufacturing company i.e. just Tea6. No specified R&D department

Opportunities

1. Growing rural market and export2. Initiatives in price pack category as to capture value from price sensitive customers3. Newer segments introduced with entry of new brands which still have huge potential for growth4. Central and upper Punjab has tremendous potential for growth and profitability5. Competition is still weak in south coastal areas6. Tea prices are become high in gray/loose tea market 7. Green Tea market is growing because of health awareness programs

Threats

1. Abolishment of Subsidy given by Govt. on Tea Import 2. WTO (World trade Order) opening local markets for global competition.3. Competitors launching newer brands with high margins at reduced price for our price-sensitive economy

proving serious threat in near future4. Increase counterfeit and IP issues5. Attraction for new entrants in the industry 6. Complementary goods are going more and more expensive then before i.e. Milk, Sugar etc.

Cross Matrix AnalysisOpportunities

1. Growing rural market and

Threats

1. Abolishment of Subsidy given by


export2. Initiatives in price pack

category as to capture value from price sensitive customers

3. Newer segments introduced with entry of new brands which still have huge potential for growth

4. Central and upper Punjab has tremendous potential for growth and profitability

5. Competition is still weak in south coastal areas

6. Tea prices are become high in gray/loose tea market

7. Green Tea market is growing because of health awareness level

Govt. on Tea Import 2. WTO (World trade Order) opening

local markets for global competition.

3. Competitors launching newer brands with high margins at reduced price for our price-sensitive economy proving serious threat in near future

4. Increase counterfeit and IP issues5. Attraction for new entrants in the

industry 6. Complementary goods are going

more and more expensive then before i.e. Milk, Sugar etc.

Strengths

1. Company name image –1st National Tea Company with recognized brands

2. Highly experience Sales staff + exclusive sole distribution network

3. Efficient production capacity4. Expertise – Tea Blending. 5. Economical pricing strategy6. Short term credit policy i.e.

efficient ROI

O1,2, 4 & 5: S2, 3, 4 &5

High Potential

O6:S1&5

Increase Market Share

O7:S4

Segment Growth

T1,2:S1,5 & 6

Ability to resist

T2,3 & 5: S1,3,4 & 5

Ability to resist

Weaknesses

1. No customer complain center within the company.

2. Limited budget and investment in the business

3. Weak coverage in upper northern areas of Pakistan

4. High Price gaps between product line

5. Single product manufacturing company i.e. just Tea

6. No specified R&D department.

O4:W3

Hire new distributors

O2:W4

More customer switching

T6:W5

High Risk

T5:W3

Market Saturation

T3:W2

Price wars


Value Chain Model

Human Resource ManagementTapal's management philosophy is based on the traditional values of the Tapal family; values that were based on good business sense such as establishing a tea-shop in the business area of Jodia Bazaar. This mix of tradition and innovation has become the hallmark of the winning Tapal strategy.

The company is managed by a dedicated team of highly qualified and experienced professionals with diverse experience. Some of the key features of the management philosophy are:

Accessibility-Open Door Policy On-Going Training & Development Discipline & Respect at every level Participative Management Style Performance Appraisal System Excellent Employee Compensation

Technology Development

Tapal is always striving to install the most innovative technology in their firm. In the production, Tapal has Hesser & Sohrab machines require less human requirement and whole work is automated only the finished product are packed in cartons by the workers. Although Tapal can automate this process too but in this case workers working their might loose their jobs.

To record the attendance of employee and to enforce the punctuality there’s a machine on the entrance of the factory where every employee has to put his/her finger and enter ID card number and their arrival time will be recorded. Human Resource department has software through which they maintain the leaves encashment record along with full information about every employee is maintained. If an employee wants a leave on so and so date he/she must access the server and send an email to the HR executive and the confirmation will be delivered to the employee.

The software we really impressed with is the Oracle software used in the sales department to dispatch orders to distributors. In this oracle software they have record of every distributor and its zone, town, territory. We search the customer name and then book new order. In the new order-booking format there is a table, which is divided in to following columns:

In this process they call the number of stock requested by distributors in the column of quantity reserved. If the stock is not available an alert message will prompt on the screen and then the sales executive on his own discretion allocate the items to distributors. This system is centralized by the warehouse database so you get the updated information about the stocks.

ProcurementThe procurement of tea is dealt by Tea and Blend department. The purchase of tea takes place in two ways: on an auction and on a private offer basis. In a private offer the tea gardens send samples to different tea industries. There are no bids and no auctions. The same procedure is carried out in checking the tea samples. However in a private offer the purchase is made on the SAS basis i.e. subject of approval of sample. If the sample is approved by the tea tester then the purchase is made. Incase of a rejected sample a replacement is made of another kind of tea.

In both cases that are the auction and private buying, after the purchase is made a purchased sample is sent which is again checked to confirm the authenticity of the tea and when the tea batch that actually comes in after shipment is also tested to confirm it is the same tea without anything wrong in it.


Primary Activities

Inbound logisticsThe raw material for tea is provided mostly by Kenya. The Tea and Blend department initiates the whole process, be in touch with the suppliers in Kenya. The purchase of tea takes place in two ways. On a auction and on a private offer basis. In an auction what happens is that all major tea producing and exporting countries send catalogues and samples of tea to major tea industries around the world. These samples are tested on various aspects of taste, color, aroma and many other aspects. The samples that are approved by the tea testing people are bought in the auction. The auction takes place every week in a major city of the tea exporting country e.g. in Kenya it takes place in Mombassa, in Srilanka it takes place in Colombo. Tapal has representatives in all these major tea exporting countries who buy tea in the auction on behalf of Tapal.

OperationsThe testing procedure is as such that the samples are displayed first. In front of the samples is a cup which has that specific tea in it. All teas are brewed in the same manner with the same amount of contents for the best result. Tea tasting team tastes all the tea and comes to a joint conclusion. The tea which is selected is then bought in an auction or a private offer. There is obviously a lot of samples coming in every week and lot of purchases being made. Thus to keep a record of all such purchases and samples Tapal has prepared a software called the Raw Tea Inventory. This software keeps record of all purchases, samples, tea gardens, country and the person selling tea. We were astonished to know that the tea department tastes about 500 cups a day.

Outbound Logistics

The outbound logistics in the south region is provided by the Al Mohammadi Enterprises, a renowned and old customer of Tapal.

Relative Importance of Factors

Factor Number Absolutely Critical

Very Important

Quite Important

Nice to Have

Not significant

Don’t Want it


5 4 3 2 1 0

Price Competitiveness YesProduct Innovation YesProduct Quality YesFinancial Performance YesMarket Share YesAvailability of stocks and Outlet Coverage Yes

Customer service/support

Yes

Marketing Communication Yes

Manufacturing Cost Yes

Suggested Definitions:

Absolutely Crucial: Overrides most other considerations, wouldn’t consider supplier who doesn’t perform on this factor.

Very Important: One of the first things we ask for, but we may be prepared to negotiate on it.

Quite Important: A negotiable item, but one when we attach considerable weight to.

Nice to Have: It could make the difference in a division, but is normally taken into account last.

Not Significant: Not normally taken into account at all.

Don’t want it: Would prefer a product without this feature

Synopsis: The key issues identified were the Manufacturing Cost, Price and Quality. We are already aware that the

Tea prices are touching sky high and consumers are becoming very price sensitive in purchasing Tea for either further selling or personal consumption. Tapal is already working on horizontal integration, improve the technology, cost minimizing and optimal production capacity utilization.

Another key factor is the market share which can be achieved through extensive coverage. The booking time and delivery is a major cause and concern of the customer which may shift the

customer to other brands. The current delivery period of Tapal is every alternate day when booked an order which is a great concern of product availability.

The customer service is not a key requirement for the company as it has controlled by the field force. Since Tapal has a diverse network of distributors the general consumer base does not go too deep down into the complain requirements.

Input:

Price is the heart of all factors for the consumer to choose any brand. However, good quality, packaging and performance also play as a catalyst for purchasing decision.

Rating Against Customer Buying Criteria

QUALITY & PRICE This Business Comp A Comp B


Non Price Attributes affecting WEIGHTAGE

Customer Choice %PRODUCT RELATED 80%

1. Quality 30 9 9 62. Color 10 8 8 63.Aroma 20 7 9 54.Brand Image 10 8 8 55.Taste 10 9 9 8

SERVICE RELATED 20% 1.Customer Complain Service 10 4 8 32.Availability 10 8 8 2

TOTAL 100% 53 59 35Has quality gone up/down (+/-)In past 4 years

Up Same Down

Relative Price today (Rs.) 460-499/Kg 490-550/Kg 400-470/Kg

Relative Price 4 years ago 260-370/kg 280-385/Kg 240-370/Kg

Rating Scale: 1 – 101 = Very Weak 10 = Very Strong

QUALITY & PRICE This Business

Comp A Comp B

Non Price Attributes affecting WEIGHTAGE

Customer Choice %PRODUCT RELATED 80% 6.6 7 4.7

1. Quality 30 2.7 2.7 1.82. Color 10 0.8 0.8 0.63.Aroma 20 1.4 1.8 14.Brand Image 10 0.8 0.8 0.55.Taste 10 0.9 0.9 0.8

SERVICE RELATED 20% 1.2 1.6 0.51.Customer Complain Service 10 0.4 0.8 0.32.Availability 10 0.8 0.8 0.2

TOTAL 100% 7.8 8.6 5.2

Inference:

After analyzing the customer preference and buying requirement we can safely conclude that:

The product constitutes 80% of the customer requirement i.e. customer is more concerned about the non-price factors which include the brand Image, Quality, Aroma, Taste and Color.

Tapal plays a good role in quality attribute and have brands to satisfy varied consumer needs.


In the Service criteria the customers is more interested in the availability and complain service. Tapal is weaken in customer complain area where the Unilever has a separate unit for that so if Tapal covers up this area then surely would have an edge over the rivals.

The main issue which needs to discuss is rapidly increasing product’s price that has already increased over 100% in last four years.

Input:

Improve the Aroma, quality and customer complaint services to break the clutter.

Impact of Issues on Strategic Profile

Issue Name Product Innovation

Company Credit Policy

$ PriceConsumer Purchasing

Power

High Manufacturing

CostCustomers +++ ++ +++ +


Market segments ++ + ++ +++ +

Products/Services ++ +++ +++ +++

Strategic Management +++ ++ +++ +++ +++

Operations (Production/Logistics) + ++ +++

Technology +++ +++ +++

Distribution Channels +++ ++

Raw Materials, Energy + +++ +++

Organization Structure +++ +

+++ Critical ++ Very High Impact + High Impact

Synopsis:

Analyzing each issue we conclude that the company must focus on critical issues and regenerate their operating strategies according to the changing purchasing power of the customer.

Input:

Continues improving operation planning and optimize production cost at minimum level.

Remove credit policy to improve ROI and hire self sufficient distributors who can easily invest.

Low cost strategy would pass maximum benefits to consumers that improve their purchasing power

Proper forecasting of demand and inventory management can reduce the impact of uncertain $ price

Strong relations with supplier can reduce the $ price

Value innovation would give competitive edge over rivals

Customers Buying Criteria: Price...%, Quality Attributes...%


Relative Performance Rating

Question its Cost

Keep it up

Input:

Improve Aroma and customer complain services

Improve the quality to beat competition

Expand coverage to provide convenience to consumers

Build strong brand image through attractive packaging and win top of the mind of the consumer

The Five Generic Competitive Strategies


Better Availability Taste

SameColor

Packaging Quality

Worse Customer Complain Service

Aroma

10% 20% 30%

Attributes Important to Customer

Do not Sweat

Improve Fast

Type of Advantage Sought

Lower Cost Differentiation

Chenak DustMezban SachetFamily MixtureDanedar Twin Pack

Tezdum 22gmGulbahar

SOG Selection Pack

Tapal Special TeabagTapal Ice Tea Danedar Round Teabag

BroadRange of Buyers

Narrow Buyer

Segmentor Niche

Mezban Dust 125gm

Inference:

Overall Low Cost Provider Strategy

This category comprises of Tea brands falling in the Dust and Mixture segments. These segments have been dominated in Karachi, interior Sindh, coastal and thar belt by Tapal’s Family Mixture, Mezban Sachet/Packs, Chenak dust and Denedar Twin Packs. The Tea manufacturers compete with each other on the grounds of price and economy packs.

Broad Differentiation Strategy

This area has been competing on differentiation strategy with many customers choosing on the basis of getting less for more. Tezdum competes in this segment on the grounds of 22gm and better brand image and Strong Taste. Gulbahar is the only choice for making traditional Kashmiri Chai for consumers which has differentiation USP. SOG selection pack offers all three Tapal famous Green Tea flavors i.e. Lemon, Jasmine and Elaichi to consumers who seek multi offers on brands.

Focused Differentiation Strategy

This strategy has been only adopted by Tapal on Danedar Round Teabag which competes in the high end segment of Lipton Teabags.

Best Cost Provider Strategy

The sole runner in this category is the Mezban Dust 125gm which provides value for money that has proved its success in the product line in the sindhi cultural lifestyle.

Input:

Less for more, distinctive brands with sustainably growth and value to appeal larger buyer

Vision & Mission

The management and the employees of Tapal Tea (Private) Limited is committed to:

Satisfy stakeholders and be a benchmark for Quality, Creativity and Ethical values in business


Achieve leadership in all the categories of core business and diversify in areas which compliment the core business.

Provide products and services that meet customers’ requirements, expectation and agreements relating to all aspects of Tapal Integrated Management System.

Define and update measurable objectives and continually improve the effectiveness and performance of the Quality, Health, Safety, Environment, food Safety and IS Management system.

Prevention of injury and ill health by continuously identifying hazards and reducing risks to people, facility and business.

Ensuring that the Tapal processes and products are environment friendly and do not contribute to polluting the environments in any manner.

Adhere to all applicable legal, statutory and other requirements that relate to Tapal products, services, health and safety.

Establish effective arrangements for communicating with all stakeholders throughout the food supply chain regarding all applicable aspects of Tapal Integrated Management System.

Strategic Vision

To be a benchmark of Quality, Creativity and Value Innovation, achieve leadership in the beverage manufacturing

industry which compliment the core business

Strategic Intent

Making Tapal the premium choice of consumers not only in hot beverage segment but also in other correlated

segments.

Competitive Innovation Bring down the cost through horizontal and vertical business partners; optimize the production capacity

to meet the future demand

Apply six sigma in complete business processes in order to attain cost leadership

Business Objectives and Targets

1. To maintain market leading position and increase the sales in North Region by 5% in 2010.

2. To strengthen the regional brands by brand building strategy

3. Seek out the areas where new products can be introduce to diversify the core business

4. Investing to increase production capacity, in order to meet expected demand in coming 5 years.


5. To increase localization by the end of 2011 in order to maintain and improve cost effectiveness.

6. To optimize the introduction of new products by developing products with new designs and features for youngsters segment.

7. To broaden export functions and prove and maintain product existence in International markets.

8. Modernize the company’s operations by acquiring greater technical expertise.

9. Increasing field force and distribution network.

How?

In Short Term Through strategic partnership between vendors/suppliers delivering Raw Tea, packaging materials, and

machinery required to improve the efficiency of production assembly and simultaneously through lead time management techniques such as maximizing stock delivery turnover.

Through continuously train and development of the front line workers and supervisors to ensure to meet the deadline and productivity.

Implication of Total Quality Management Techniques such as constant checks in through every stage of assembly line and final test passes through the professional test inspectors, generally meeting the prescribed requirement standard set preferably by ISO- 9000 or other quality standard maintaining bodies. The philosophy of doing it right the first time would be achieved through this method.

This can be achieved through effective production processes and a strong link between the Logistics and distribution spread in the market. An integrated system to be devised where by the vendor/supplier and distributor would log in the details of the ordered product on the computer screen and the same would be available to the company plant office. The plant office will start production; each level of completion can be monitored through the intelligent system. This would ensure that the delivery process bottle necks are reduced and also an MIS can be generated to observe the delays, reasons and even the frequency of orders and preference. Subsequently a separate “SOP’s – Standard Operation Procedures” to be devised which would contain the details and timing of production at different stages of production

Seek out for avenues such as Tea could be manufactured cheaply on the local grounds rather than depending on dollar price. The following measure would help slash the manufacturing cost on two key risks, devaluation of local currency and unrealistic demand.

Through organizing events such as road shows, attack plans, events organizing or more consumer engagement programs to be carried out through brand building and promotional activities to appreciate the brand hard core loyal.

Integrated Complaint Management System with 24 hours Call Center facility for Tapal Customers facing any complain to active resolving trouble like counterfeit, fake activities etc.

Regular audit Schedule of surprise inspection team to test the measures, service and standards set up at Tapal exclusive distributions centers.

Constant Social Contribution and Environmental Reporting at Factory Site for the residents and workers health and safety and following and obtaining the Ethical Modules requires by the authorities(The above objectives pertain to the day to day business activity and need to be addresses on real time basis. Any delay or slackness in the above would lead to business losses in terms of revenue and repute)


In Long Term Achieve further capitalization and investment outlay production of more profitable segment and divest

non profitable business units. This will benefit the Tapal Tea by milking to more demanding segments and production. Simultaneously Tapal will have to work out a strategy to reduce the prices of its above price products as they have major share but also focus on the economy packs as volume drivers by consistent in their supply, while entering into a new untapped markets.

The positioning of the each segment would be such that it would compete with the Unilever and Eastern Tea but would create an impression of better quality and value innovation without facing the internal canalization. We expect that the customer can be drawn towards each segment even if there were price war.

A structured Resource program to be devised emphasizing on intellectual and technical skills that can be made available in obtaining technology of specialized in manufacturing. This entity would achieve two factors, firstly reducing considerable production cost and secondly exposing the company to an additional market which can be supplied with desired profit margins.

With the added stress towards environmental protection, CSR initiatives and Sustainability corporations need keep themselves aware of the global developments. One such development is the discouragement and discontinuance of wastages from the global impact scenario.

Segmentation Variable of the Consumer Market

GeographicTapal has divided its operations in to two regions namely:

South Region:

South side looks after the Karachi, Hyderabad and Sukkur.

North Region:

North side includes Multan, Lahore, and Islamabad.

Size of Southern Region

Karachi population size is 19,315,843 till 2010, area 4,227 km² (1,356 sq mi)

Hyderabad population size is 1,847,275.

Sukkur population size is over 1 million 5,165 km² (1,994 sq mi)

Size of Northern Region

Multan population size is 4 million (approx), area is 3,721 km² (1,437 sq mi)

Lahore population size is 8,896,000, area comprises to 1,772 km² (684 sq mi)

Islamabad population size is 805,000 (1998), area 906.0 km² (350 sq mi)

Density of Southern Region

Karachi 3,491.9/km² (9,082.5/sq mi)

Sukkur 175.9 persons/km²/km²

Density of Northern Region


Multan 838/km² (2,170/sq mi)

Lahore 3,660/km² (9,479/sq mi)

Islamabad 880/km² (2,279/sq mi)

ClimateThe climate varies as much as the scenery, with cold winters and hots summers in the north and a mild climate in the south, moderated by the influence of the ocean. The central parts have extremely hot summers with temperatures rising to 45 °C (113 °F), followed by very cold winters, often falling below freezing. Officially the highest temperature recorded in Pakistan is 52.8 °C at Jacobabad. There is very little rainfall ranging from less than 250 millimeters to more than 1,250 millimeters (9.8–49.2 in), mostly bring by the unreliable south-westerly monsoon winds during the late summer.

Demographics

Age: 20 – 60

Gender: Male and Female both

Family: Cohesion families

Occupation: Labor, Business man, entrepreneurs & self employed, student, farmer

Religion: Muslims, Hindus and Christians etc

Nationality: Pakistani

Psychographic

Social Class: lower, middle, middle-upper and upper-upper

Life style: Trendy, quality conscious, trying to differentiate themselves from others, family

belongings, Cultural and Heritage values, Pride, Patriotism

Personality: Elegant, simple, extrovert

Behavioral

Occasions: Ritual, meetings, evening get to gather, Breakfast or any social meeting

User status: Potential users, non users and hard core users

Usage rate: depend upon need and consumption

Readiness stage: intending to buy

Attitude towards product: Positive attitude

Where customers buy:


Tea is sold through two different places, one is the where customers directly buy the product from general retailers, USCs/CSDs, Modern Trades and the second is the institution sales where customers (institutions) directly buy the product from Tapal’s Out of Home Sales department (OOH) who directly maintains links with different institutions.

When customers buy:

The consumers usually buy Tea at the start of the month in bulk amount for family usage or when the Tea desire strikes that can suffice them for that particular month or the commencing one too.

How Customers choose:

Customers choose Tapal through advertising, print ads, promotional schemes & word of mouth. Since it proudly caters to the different tastes and preferences of people belonging to diverse lifestyles, Tapal Tea is the primary choice of tea lovers nationwide.

Why they prefer a product:

As tea fulfills a core need of refreshment. Tapal’s brands remains favorite around the country with its grape-nutty appearance, rich golden color and strong refreshing taste. In fact its popularity is such that other companies have launched their own versions of these blends, but Tapal's remains the original and ultimate.

Strategic Canvas - Past & Future


The Strategy Canvas of the Pakistan's Branded Tea Industry 2005-2009

Price Premium Quality Extensive Coverage Delivery Time Efficient ROI Production Capacity Recognized Brands

Tapal Unilever Eastern Tea Clover Pakistan Loose Tea

The Strategy Canvas of the Pakistan's Branded Tea Industry 2010-2015

Price Premium Quality ExtensiveCoverage

Delivery Time Eff icient ROI ProductionCapacity

Eff icient SCM CSR Initiatives

Tapal Unilever Eastern Tea Clover Pakistan Loose Tea

Input:

Exclusive distribution who have extensive market coverage and willing to invest more in the business would increase the market penetration but the long term relationship must be maintain with value in return.

100% capacity utilization can reduce cost of production and thus offer competitive price in the market

Social issues and CSR initiatives can strengthen the company image, customer preference, brand positioning, attract more investors which would ultimately affect the business cycle.

Company owned “Chai Shai Café” would give preemptive mover advantage in this business.

Cost Structure


High

Low

High

Low

S. No. Contents % contribution

1 Raw Materials and components consumed 862 Direct Labor 1.23 Technical director’s remuneration 0.014 Salaries, wages and benefits 1.65 Employees’ severance cost -6 Stores consumed 1.77 Light, heat and water 0.88 Insurance 0.29 Rent, rates and taxes 0.05

10 Repair and maintenance 0.311 Royalty 4.0812 Technical assistance 0.713 Traveling. Conveyance and entertainment 0.214 Postage and telephone 0.0715 Printing and stationary 0.0316 Vehicle running 0.0317 Depreciation 318 Canteen 0.1719 Newspapers, magazines and subscription 0.0120 Staff training 0.0421 Intangible assets amortized 0.01122 Other manufacturing expenses 0.003

Total Manufacturing Cost 100%

For Tapal Tea, highest value adding component in the total manufacturing cost is Raw material, i.e. 86% which the company import from Sri Lanka, Kenya and Bangladesh

Tapal Tea has reduced it costs, as compared to its competitors, buy changing it Raw material Supplier source and auction. It purchases “premium quality” Tea from Sri Lanka, Kenya and Bangladesh. These countries are relatively high annual Tea producer in the world.

Cost effectiveness achieved by increased localization.

Tea Companies are importing Tea fully from Sri Lanka, Kenya and Bangladesh which in actual increase there costs tremendously as Tax. The end result for them is increased prices.

Input:

Selection of Supplier on the basis of price competitiveness can reduce the major part of the production Cost.

Optimal capacity utilization of plant can reduce expenses

Implementation of TQM can improve the business infrastructure and lead to cost leadership in all grounds

Pricing Strategy

Unilever happens to be the trend and price setter for the whole industry. The other major player in the industry, i.e. Tapal, Eastern Tea, Clover Pakistan and Loose Tea its followers.


These players generally follow the Cost Plus and variable methods for pricing. Fixed margin 3.36% and 5-8% pass on Distributors and Traders respectively.

Loose Tea has been smuggling through borders so mushroom players offer high margins to trade and create tough competition in the market.

Input:

Both Low cost and differentiation strategies can give better pricing options to the company as well as to the customers to create competitive advantage.

Legging Indicators and Leading Indicators

Leading & Lagging Indicators [Company is

focusing]

Projects/Activities done

Impact on Results Area of Focusing for tomorrow


Introducing new brandsProduct development, Blind Test and pre-research has been done

Increase profit and market share

New market development

New brands for children and youth

Tea bag markets Diversification in Core

business European Market

New flavors in Green Tea Product is in testing phase Increase sales and market penetration

Health conscious people

Diet plans

New variants in Ice Tea Powder

Lab test has doneFlavors have decided and tested

Taking first mover advantage in the category

More revenues

Children and youth who are trendy and want social change

Instant powder/energy Ready To drinks

Implementation of TQMTIMS unit has established who will ensure the implementation of all areas

Manufacturing Cost would be optimized

Reduce the wastages Drop down Time delay

in processes Environment friendly

company

Kaizen and Six sigma implementation

Phase out SBUs having no profitability

Disposed off Ice Tea CAN and Safari PF1

Investment to be utilized in milking profitable brands

Warehousing Capacity improve

New machinery would be purchased to cater key demanding brands

Action Plan

S # Input Ref Pg#Strategy & Action

PlanWhen & Where Results


1 Customer Complain Center

SWOTStrategy Canvas

2932

Establish Customer Care Department

1st QTR 2011-2012

Karachi

To handle customer complainsBuild trust of customersRegenerate the product strategy

2Hiring of new Distributors in North

SWOTDistributor Structure

2926

Seek efficient and experience distributors

4th QTR 2010-2011

North Region

Capture more market share

3 Diversify Business

Business ScopeSWOT

0929

Research new markets and opportunities

1st QTR 2011Nationally

Business growth and generate revenues to milk the other business units

4 R & D Department

Assumptions of growth SWOT

Top 7 External Trends

182927

Establish department or outsource the consultancy to seek out women cooking behaviors

2011Karachi

Market health indicators and opportunities identification

5New fillers in the existing product line

SWOTCompetition Growth

Matrix

2920

Market surveyCompetition Analysis

4th QTR 2010

Nationally

To capture those customers who are willing to pay at different prices

6 Export Market exploration

Business ScopeSWOT

0929

Visit International Markets and Tea Exhibitions to seek out the demand and potential investors

2010-2012Mid EastEuropean countries

Increase the sales volume and company good willIncrease Sales revenues as difference in rate of exchange

7 Rural Market penetration

SWOTCompetition Growth

MatrixMarket Share

111829

Develop brands for rural market with high leverage of costRound Dust Teabags launch

1st QTR 2011-2012

South Region

Enjoy the major chunk, first mover advantage and leadership

8 Green Tea variants

SWOTTop 7 External Trends

2927

Introduce new unique variants in Green Tea by stretching health benefits of having it

3rd QTR2011-2012Nationally

First mover advantage

9 Tea Suppliers relationship

SWOTImpact of Issues on

Strategic profile

2935

Build long term relationships with number of suppliers to grab the demand of Tea and make difficult to reach for competitors

4th QTR 2011-2012

SrilankaKenya

Respond the uncertain demand of the marketIncrease market shareCharge Premium

10 Pricing Strategy

SWOTStrategy Canvas

Market SizeTop 7 External TrendsRelative importance

Factor

16292732

Implement Full pricing strategy

4th QTR 2010-2011

Nationally

Reduce cost of manufacturing and enhance margins

11 Availability of Products

Strategy Canvas 29

Train the Sale force and schedule to respond productive calls on daily basis

Weekly 2011-2012

Nationally

Shelf share will be improvedIncrease sales and revenues

12 Tea Aroma and Quality

Customer Buying Criteria

Top 7 External Trends

3527

Improve the blend of Leaf to enrich the aroma

1st QTR2011-2012

Metro Cities

Capture competition Brands share

13 Improve Mixture Blend and clarify its Positioning

Market Structure of Industry

Competition Growth

1020

Through Research, multiple blending tests to improve the blend

1st QTR2011-2012

Karachi [initial

To take out form maturity stage and sustain growth


MatrixWork on communication platform to reposition the brand

phase]

14Brand Communication Strategy

Market ShareTop 7 External Trends

1127

Distinctive brand communication to avoid cannibalization within Tapal brandsSpecific marketing mix planning for each brand

2nd QTR2012-2013All Regions

Build brand positioning and specify segmentation

15 Low cost Strategy

Competition Growth Matrix

Distributor StructureTop 7 External Trends

Cost Structure

202533

Implement TQM and JIT to attain the low cost leadership

1st QTR2012-2013

Operation & Production

plant

Increase CM and price competiveness Increase Consumer value

16Choose Cause and CSR initiatives

Strategy Canvas 43

Find issue that best fit to the business vision, mission and goals.Select CSR initiatives that fully support the cause and brands

3rd QTR2011-2012Rural Areas

Increase firm goodwill and brand positioning Market shareGrowth Attract more financial investors and NGOsPublicizing the company CSR


smp report on tapal tea

Documents