Ramesh Aggarwal, Managing Director, Mohani Tea, talks about new developments in the company and growth plans in a fast evolving tea industry
Growth plans
Mohani Tea plans to double its growth in the next five years. Having established a strong presence in Uttar Pradesh, Uttarakhand, Madhya Pradesh and Punjab, It has entered Delhi, Bihar and Jammu & Kashmir, and is set to extend its reach to Rajasthan, Himachal Pradesh and Haryana. “We want to cover the Hindi belt by 2015 and then focus on Maharashtra and South India. For the West and South we will be bringing more differentiated products that suit local tastes and preferences,” informs.managing director Ramesh Aggarwal.
Since Delhi and J&K are relatively new markets, the company is keen to increase its distribution here. Competing with the likes of Tata Tea and Brooke Bond and strong regional players like Marvel, Today and Sugandh is not an easy task, but Aggarwal is prepared to take on the challenge. After all, their products are of superior quality, offer value for money, and are affordable. In fact, the company plans to have a national presence in the years to come. “We don’t really think the challenge is big or unachievable since the market for branded tea is growing and is ready to accept new products that offer quality and value for money. We offer best value products, which are as good as or better than many of the established brands,” he claims.
Private Label supplier
The company is a supplier to several big retailers. It has an exclusive ‘contract manufacturing’ with entities like Bharti Walmart, Future Group, and others to supply its tea products to retail chains in India. It is also a supplier to various government/semi government institutions like the Indian Defence, Kendriya Bhandar, and other state-owned organizations. “Such association with chain retailers and organizations gives us brand visibility and a wider reach. Moreover, it also proves the brand’s credential and enhances its reputation in the market,” says Aggarwal.
He informs that the private label segment contributes significantly to the company’s overall volume and is growing faster than general trade. “We are market leaders in this segment, and are constantly endeavouring to tap more organized retailers as we see a huge potential for private label in India in the next few years.”
The company’s PL business started in 2009 has seen 30 percent year on year growth. “We follow the quality standards given by the retailers (many of which are international chains), and they all stress on 3 things: no complaints from customers, competitive price, and on time fill rate. (Our fill rate is ~98%). We will be having more tie-ups in the coming months with brands such as Gaia (for supplying flavoured tea); Himalaya Company, and Apollo Pharmacy (for green tea, flavoured and functional tea like anti-aging tea).
Strengths
Established in 1992. Mohani Tea is considered a pioneer amongst regional packaged tea brands in India. Apart from its in-house tea tasting, buying and blending facility, and a packaging unit, it has a laboratory for post-production quality checks. With a wide portfolio of skus that cater to different tastes and price points, the brand produces 100 MT of tea per day at .its facility in Kanpur where it has two factories, and plans to set up another in Rania, (25 Km from Kanpur) with a capacity to produce 200 MT of tea daily. In addition, the brand has a storage capacity of 20,0000 sqft to procure premium quality tea.
The company was awarded the Most Promising Brand award by Assocham in 2013. Aggarwal informs that the winning factors were the company’s continuous volume growth, focus on meeting requirements of rural and suburban consumers, consistent quality and affordability, supply chain management, and customer service. “The key to the success of a supplier-retailer relationship is customer service and the ‘spirit of partnership’ which has been our biggest strength. Wal-Mart recognized our ‘world class’ customer orientation and honoured us with the ‘Supplier of the Year’ award in 2012.”
New developments
New developments in the company include establishing an export division for the value added as well as bulk tea segments; catering to the HoReCa sector with a special classic blend of tea with a moderate flavour; developing new teas like jasmine, chamomile, and fruit flavoured, introducing tea bags, green and other premium teas in the near future. It will soon be opening tea lounges in tier 2 and 3 cities.
“Our export division started 3 months ago, starting with West African countries like Niger, Mali, and Nigeria to which we will supplying black tea, Assam tea and flavoured tea. Since pre- Independence, these countries have been associated with Indian tea and they are familiar with our flavours, and there is demand for them. After Africa we will concentrate on Russia, China, Bangladesh, Middle Eastern countries, and Kazakhstan.
As regards the tea lounges, Aggarwal opines: “The younger generation is drifting more towards coffee due to aggressive marketing by coffee companies to promote a café culture. We want to promote tea consumption, particularly among the youth.”
He informs that the tea lounges will be designed as places for relaxation over a cup of tea and light snacks. Facilities for the young target audience will include a free wi-fi and an iPad on each table. “Our idea is to make the space creative so that young people can come and have fun here,” and adds, “We will open our first tea lounge in Noida, then move on to Kanpur, Banaras, Ludhiana and Jalandhar. We are focusing on tier 2 cities where there are not many options for eating out.”
It Mohani Dhaba Hotel brand of tea is primarily catering to the conventional trade with focus on local teashops, dhabas and smaller restaurants that are frequented by truck drivers who prefer strong flavored tea. The blend is crafted keeping in mind the needs of these consumers.
Markets
Mohani Tea has a strong presence in rural markets with 75 percent revenue coming from here, and the rest from urban markets. In Kashipur village in UP, the company enjoys almost 50 percent market share. “We will keep rural markets as one of our prime focus area as there is a huge growth potential here. The rural market is changing; people here are becoming aware of products that offer value for money, and are more discerning of brands. Our teas start from Rs 54 for a 250 gm pack, and give complete value for money,” claims Aggarwal.
He adds, “When entering a new market, we do an in-depth market research to learn about regional benchmarking, quality, and taste preferences. For example, in Maharastra the tea preferred is moderately flavoured, while the North prefers strong flavours. Such understanding helps us make the required changes in our teas.”
The company is also focussing on Modern Trade. “As the per capita income increases, customers are more inclined toward modern trade which is growing by 7 to10 percent every year. We want to make our presence stronger here and are looking at more visibility in retail chains like Big Bazaar, Walmart, Q Shop, etc,” he informs.
Mohani Tea has adopted an aggressive 360 degree marketing strategy using advertising, PR, social media, hoardings, wall paintings, and in-shop branding. An innovative campaign using e-rickshaws (in rural areas) generated a lot of interest. “We have about 10 e-rickshaws in some districts of UP, Uttrakhand, Delhi and Punjab, and are also using decorated buses which play digital films, and really pull crowds. When we launch our new range of teas we will promote them through cafes and at retail stores,” informs Aggarwal.
Tea trends
The tea industry is one of the oldest and most organized agro-based industry with a large network of tea producers, retailers, distributors, auctioneers, exporters and packers. The total tea production in the world has exceeded 3.5 billion kgs with India producing approximately one third of it. During 2008 to 2013, black tea production in India increased at a CAGR of 2.5 percent, and consumption rose at a CAGR of 2.3 percent.
India’s total annual tea production in 2013 is estimated at 1,200 million kgs out of which 75 percent (~ 900 million kg) is produced by big tea gardens, while ~350 million kg tea is produced by bought leaf tea factories, which do not own plantations but source green leaf from small growers with land area ranging from 2 to 20 hectares. Tea export has remained flat over the years due to increasing competition in the global market and growing consumption of tea in India, making less surplus tea available for exports.
Says Aggarwal, “India’s tea market is (traditionally) a key driver in the country’s economy and has always been on a growth trajectory. Today, tea is no longer perceived as a mere beverage, rather, it also brings with it aspects related to health, immunity and lifestyle, driven by growing consumption of green tea, herbal, functional, and flavoured teas, etc.”
“Tea consumption has been steadily growing but there is need for an organized campaign to build awareness about healthy aspect of tea versus coffee. For this, we are in talks with the Tea Board of India to dedicate a day as ‘National Tea Day’. This will not only help promote tea as a beverage but also leverage our brand,” he says.
