The Pakistani customers are being influenced by the western lifestyle, which is corroborated by the increasing popularity of health based beverages like green and herbal tea. This is one area which offers immense opportunity for our organization. Moreover, more than 40 percent of the tea market in Pakistan is accounted for by unbranded tea. Even if we assume that the market shares of the established players are going to remain unchanged, we can convert consumers who currently consume unbranded tea to use our product.
In a market where branded products are dominated by global players, we can create a niche for ourselves by positioning ourselves as blenders and sellers of specialized tea with a wide variety of blends suited to the requirement of the customers.
2: Internal situation
2.1 Strategic market position
Twinings has been in existence for over 300 years and has established itself as a widely respected blender for tea across the world. The company has presence in more than 100 countries and produces nearly 200 blends of tea. Worldwide it is the second largest tea brand and is part of the £6.8 billion Associated British Foods plc. Internationally the company is known for its premium products. We are going to leverage this positioning for our operations in Pakistan.
2.2 Objectives and levels of achievement
We are guided by the twin objectives of opening up the world of premium tea by making new blends and to encourage consumers to try Twinings and its new blends.
The segments we would target are the users of Unilever and Tapal brands as these customers are more likely to pay a higher price for our products. In our communication we would highlight our legacy and our expertise in blending. Although our primary focus in the initial years would be the urban markets, we would also aim at the rural markets in the long run and follow a market penetration strategy. We feel that being a niche player in the market may not help us in the long run. Moreover, there is a huge market for unbranded products which can be suitably targeted. We would also aim to target the grey market, which currently is dominated by imports from Kenya. Our global presence would also help us to source our basic products from different parts of the world and equip us to meet the taste requirements of our customers. In addition to household consumers, we would also look at the institutional buyers like hotels and offices. These segments are less price-sensitive and more quality conscious. We can seek to tie-up with global hotel chains and multinational companies which operate in Pakistan.
3: External Situation
3.1: Tea Industry of Pakistan
Pakistan is one of the highest per capita tea consumers in south Asia due to the Islamic ban on alcohol. Local tea importers speculate that this is due to a limited choice of beverages. Pakistan is the third largest tea importer in the world after Russia and UK and consumes about 170 million kg of tea every year (of which 130 million kg is imported). On average, each person consumer around one kilo of tea in a year and total around 155 million kg for 170 million population. The annual tea import bill is around US $200 million which highlights the importance and potential of market in investment point of view. Pakistan is heavily relying on imported tea, moreover consumers increasingly want better quality and various flavour in tea.
Export and import promotion bureau statistics shows tea imports from Kenya fulfil the requirement about 85% of the total consumption and India is in the second place. Sixty to seventy million kg tea smugglers brings in to the country. In addition, tea is smuggled into the country via the Baluchistan and NWFP border areas. It is also smuggle to Afghanistan.
3.2: Companies Market share data
- Unilever (Brands available in market) Lipton & Supreme 29%
- Tapal Tea 21%
- Tetley, Vital & others 9-12%
- Loose or Unbranded 38-40%
Source:
Unilever’s Lipton brand is almost vertical integrated while as a step towards backward integration. Tapal has started plantation at Shinkiari in northern region of Pakistan
3.3: Packaging and Distribution
Tea is packaged in light plywood chests which are lined aluminium foil and one or two plies of parchment paper, so providing aroma-proof packaging. The corners are covered with sheet metal to reinforce the chests and protect the contents from humidity/moisture and foreign odors.
Tea is being transported by air is known as air freighted tea and it is also transported in standard containers. Containers intended for loading have to be watertight and must not be contaminated in any way and it should be stowed away from sources of heat.
Distribution is being on going via various networks in Pakistan. Lose tea is being imported from different countries on a large scale by various dealers and then they sell this in different wholesale market. The big companies like Tapal and Unilever are operating their distribution network in very efficient way by ensure the availability of the product in far flung remote areas. Every distributor maintains their sale force in order to enhance sale of the product. This suggests that efficient distribution channels are key elements in order to get success into the market. E.g. Indian tea giant Tata tea entered Pakistan via its Tetley brand it had to form a joint venture with Lakson group to get benefits from its efficient distribution system.
References:
Telephonic Interview with Ashfaq Abbasi RSM (Lahore Pakistan) Tapal Tea (Private) Limited
3.4: Current Distribution Chain of Tapal Tea
Source: Tea.co.uk
The above chart represent of the leading company distribution network in Pakistan. It summarizes all the activities that take place in a distribution of tea. The process goes on this way. Distributors will place their order in their respective regional area offices according to their demand. The delivery according to the demands is delivered from the factory to the company’s warehouse then order will supplied to distributors warehouses. Distributor will supplied many small retailers where product can be approach to end consumer.
4: Macro-Environment (Industry analysis)
In order to launch Twinings tea in Pakistan we have done structural analysis of the tea industry. We analyzed the five forces which derive the competition in the industry. As above mention data we found out the industry size market position and now we will analyze the forces of completion in detail.
4.1: Porter Five Forces Model
4.2: Threat of new Entry
In order to understand the threat of new entry in the industry our team analyzed the following barrier to entry.
Economies of scale
The current companies in the industry are getting the benefits from economics especially in procurement and distribution of tea. Tapal will be having an edge over any new entrant because of its efficient procurement and distribution functions.
Product Differentiation
The product is highly differentiated on the basis of brand identity and loyalty of customer in the industry. The current companies have differentiated their product in order to increase the barriers for new entrant. Tapal has most successfully launched different brands increasing its brand width highly differentiating its product result of this an increased the barrier for new entrant.
Capital Requirements
In order to enter into Pakistan tea industry on a large scale, a very high capital might be required for distribution, advertising and marketing functions. On the other hand for small scale entry this barrier might be not very high.
Switching Cost
There is no switching cost in the tea industry so this barrier is not relevant in this case.
Access to distribution channels
Twinings may face some problems in accessing the distribution channels. However, in order to sell new brand tea it is vital for the product to secure front shelves in stores. Although this will effect to increase the cost of new entry and ultimate the barrier
Cost disadvantages independent of scale
- The current companies in the industry are experienced and have much more knowledge of the industry. This might have disadvantage for new entrant in the industry.
- Two main players in the industry Tapal & Unilever have some cost advantages because of back word integration in a shape of some deals with the tea producer which decreased there cost and consequently created a barrier for new entrants.
Government Policy
The policies are not strict in the industry but government can influence the overall consumption in the industry.
Expected Retaliation
Any new firm entering the industry must be ready for a severe retaliation by existing companies who are in a strong position and having enough resources to retaliate.
Although there will be always a huge threat of new comer because of forty percent of the tea sold is selling unbranded and number of companies competing at mass level are few. This can attract more companies into the industry.
Source: Telephonic Interview with Ashfaq Abbasi RSM (Lahore Pakistan) Tapal Tea (Private) Limited
4.3: Intensity Of rivalry among existing competitors
The following points will show the intensity of rivalry among current competitors.
Numerous and equally balanced competitors
There are many small firms in the industry with few giants like Unilever and Tapal. This has made the intense competition in the industry. Although marketing expenses of firms at mass level is low but they are equally balanced in resources. This creates instability because they fight and vigorously retaliate to others strategies.
Fixed cost to value addition
The ration of fixed cost to value addition is very high. The largest part of the firm total cost is the cost of the raw material that is the tea. This has also resulted in increased competition in the industry.
Industry growth
Tea industry is a moderately at growing level in Pakistan. The overall consumption of tea is quite high because of various factors E.g. population growth, Islamic ban on alcohol, low level of substitute product available etc. The competition is not very high on the basis of industry growth because it has not turned into market share game yet. Any company want growth or expansion can get new customer without decreasing share of other companies by attracting those customers who are not using blended tea.
Diverse competitors
The competitors in the industries are diverse in their nature. Some view this industry as primary one and their core business is to tell tea like Tapal whereas others are involved in other business along with this industry like Unilever. This makes the goals and objective of the business different resulting in different strategies.
4.4: Exit Barrier
Exit barrier is depending on the firm size and capital investment involve. A small firm may find it easy to abandon its business and big giants like Unilever and Tapal face many difficulties to quitting business. Analysis of all these factors can be concluded that the intensity among the existing competitors is moderately high.
4.5: Development of Substitute product
In Pakistan tea is counted as a staple food item of common man and is an integral part of our culture and heritage. There are few substitutes available like coffee and green tea but black is more popular however, some other substitutes available are somewhat expensive and not as easy made as tea. So from this it can be deduced that the pressure of substitute product is low. This factor does not play a huge role in driving the competition in the industry.
4.6: Bargaining power of Buyers
The bargaining power of buyers is very low because enormous number of small buyers in the industry. It is common understanding that tea is commodity bought by every household in the country. This means a high number of small buyers resulting in very low bargaining power. The buyer only has a power to change the brand easily. The product e.g. the tea is standardized product and there is no switching cost involved in changing the brand
4.7: Bargaining Power of supplier
In blended tea industry bargaining power is relatively high because it is dominated by few sellers. Most of the Pakistan’s tea is imported from Kenya and Srilanka. The industry heavily dependant on these countries for tea requirement result of this has increased their bargaining power
4.8: Summary
The study of the Pakistan industry reveals many opportunities and threats for Twinings tea to launch their product into market. It can be clearly seen that the industry is more concentrated and existing rivalry among current competitors are quite high. The bargaining power of buyers is quite low and consumers can switch easily to other brand because of standardized product. The supplier can also change the market environment by decrease their output or increase their price. The conclusion is to be drawn is that tea industry in Pakistan is moderately competitive industry. So before designing the any kind of strategies, Twinings must thoroughly analyze the industry structure and forces influence the industry competition because without this firm will not be able to formulate any effective plan to launch their product line in Pakistan market.
5: Key Success Factors of Pakistan Tea industry
- Competitive Price
- Strong Distribution Network
- Quality of product
- Variety in flavour
- Different customer segments
- Brand awareness
- Advertisement and promotional campaign
Source: Telephonic Interview with Ashfaq Abbasi RSM (Lahore Pakistan) Tapal Tea (Private) Limited
6: Pest Analysis
Political Factors
- Political instability
- Taxes and tariffs
- Law and order situation in country
Economical Factors
- Low purchasing power
- Fuel and energy cost
- Low per capita income
Social Factors
- Taste consciousness habit
- Highest per capita consumers market because of Islamic ban on alcohol
Technological factors
- Technical and experienced expertise would require
- No rapid change in technology but required heavy investment
7: Swot Analysis
Strength and weakness derived from internal factor evaluation (IFE)
Strength
- Wide product range
- High production capacity
- Second largest brand name in tea
- Strong financial position with $6.8 billion a year globally
- 85000 thousand employees in 43 countries
Weakness
- Less awareness about Pakistan market
Finding of the pest analysis
Threats and opportunities derived from PEST analysis (EFE)
Threats
- Law & order situation of the country
- Political instability
- High fuel and energy cost
- Economic recession
Opportunities
- Increase in population
- Huge market potential ( high consumption because of Islamic ban on alcohol)
- Different customer segments
- Increase awareness about flavour tea
7.1 Explanation of Internal & External factors Evaluation
IFE is used to see the major strength and weaknesses in the functional area of a business. On deeper analysis of IFE indicates that the company is internally strong. It is performing well in its internal operations and other activities. Company is utilizing its all resources to meet the expectations of its customers and stakeholders.
EFE indicates how effectively the firm’s current response to the external factors affecting a business. Pakistan is new market for Twinings and has less knowledge and experienced about market trends. However, in EFE its performance is not as good as in IFE. So company should emphasize on screening external environment and converting their threats into opportunities and effectively capitalizing the opportunities.
8: Gap analysis
By studying the Pakistan tea industry we found out some gap where we can hit our strategies in order to compete with two big giants of Unilever and Tapal.
- Loose & Unbranded share of tea
- No availability of flavour tea
- Distribution channel
9: Intended Strategic Position
9.1: Strategies derived from Macro-environment (industry) analysis
Introduce new Product
Twinings tea has the strengths of high production capacity, quality products, wide range of products (different flavour in tea), strong financial position and internationally recognized brand name by combining all these strengths with the opportunities like increasing awareness about flavour tea in different customer segments in tea industry. Twinings can introduce new product like flavour tea to capitalize these opportunities.
Brand Name awareness
Twinings tea has weakness of less brand awareness in Pakistan market. Firm can overcome this weakness by capitalizing the opportunity of increasing awareness about flavour tea, increase in education and increase in population.
Dealing with competition
Twining tea has a the strength in strong financial position, wide range of products, effective and high production capacity, globally recognized brand name in spite of this they can use these strength to cater the competition in tea industry.
Cost Minimization
Twinings have long run perspective intention to get high market share by target the consumer who use unbranded blend tea. Therefore firm can use its strength of strong financial position, and high production capacity to minimization cost in order to compete unbranded supplier.
10: Marketing Objectives
Based on macro-environment analysis we found that Pakistan is high growth market in term of tea consumption. So we believe that we can get high market share by targeting the unbranded seller and introducing the new flavours tea. Reaching this will require aggressive marketing. To be sure, we will support that sales goal by striving to meet the following objectives in the marketing mix.
Product objectives
Twining overriding product objectives are to firstly initially launch of the product firm will introduce black tea which is called as Twinings ‘Every Day Tea’ and then in long run introduce other varieties E.g. Speciality tea, Green Tea, Infusion, Coffee, Hot Chocolate, Iced Tea to different customer segments.
Pricing Objectives
In a market where branded products are dominated by global players, we can create a niche for ourselves by positioning ourselves as blenders and sellers of specialized tea with a wide variety of blends suited to the requirement of the customers.
Initially we would attempt to create a foothold in the market with high end products and once the products find acceptance in the market, then we would target the popular segments and the rural market with low priced varieties. However, our pricing strategy in each category where we look to compete would be to take a premium pricing strategy.
Promotional Objectives
Promotional is the second most important area where ‘Twinings’ will devote our most of attention to get market share in the Tea market. Our promotional objectives are to reach at least 45 million populations of the urban areas of the country.
11: Marketing Strategies
Target Market
We can divide our target market in to three categories
- Consumer use unbranded tea
- Consumer use branded tea
- Potential consumer who will use flavour tea
Positioning
We want our customers and potential customers to view us as a best quality Tea company. They should trust the brand name and view new brand Twinings as the best performing company.
Core Identity
‘EVERYDAY TEA’ Traditional tasting and full of flavour
Extended Identity
Twinnings & Co limited the world best company
We shall create this positioning in the mind of customers through our advertisement and promotional campaign. The detail of advertisement and promotional campaign are available in the advertisement and promotional strategy.
Product Strategy
As far as products are concerned, we would offer standard products in our stable rather than offering customized products. Our products would include Twinings everyday and Twinings speciality. The speciality product will be aimed at the niche market which is a low volume high profitability business; while the everyday product will be targeted at the mass market. We would offer customized products only for the institutional market.
Pricing Strategy
The price levels of tea in Pakistan have been high as compared to other south Asian nations. The top two players, Unilever and Tapal have been able to maintain high prices for their offerings, irrespective of the falling prices worldwide (). Unilever has a share of 45 to 46 million kg of the blended market while Tapal has a share of 28 million kg in a total market of 170 million kg of annual tea consumption. Considering the ability of the market to absorb high prices, we would maintain our premium position and price our products in the range of Rs. 200-250 per kg. This is slightly higher than the products offered by Unilever and Tapal. However, the prices are significantly higher than the products which are illegally smuggled into Pakistan.
Promotional Strategy
Promotion is the area where firm will devote most of attention to get the market share in the tea industry. In order to promote our products, our approach would be to induce trails in the beginning. Therefore we would distribute free samples and coupons. We would organize free tea testing events and also provide incentives to customers who are repeat purchasers of the products. The success of our promotional activities would help us in designing our marketing communication strategies at a later stage. In addition to store level promotions, we would devise a communication strategy targeted at all customers. We would customize our communication based on the local tastes and preferences of the customers. We felt the need to have a local communication strategy because of the peculiarities of the sub-continental market which is characterized by a wide disparity in the tastes and preferences of customers.
Advertisement Strategy
The advertisement strategy for ’Twinnings’ basically consists of
- Message Strategy
- Media Strategy
Message Strategy
Message strategy is about what u tells the customer and how you tell the customer. The message strategy will consist of logical appeal in other words it will be informational strategy.
First of all we will create the awareness about the difference in quality and taste of Twinings with other local brands.
The advertisement of ‘Twinings’ will start with the message “Blended to make everyday a little better” then there will be some fact and information about blended tea will explain experts. The message is also in line with our positioning strategy. Which will develop the image Twinnings and co limited world best company?
Media Strategy
Firm will advertisement the brand Twinings on the different Medias. This media strategy is for the first three months.
Print Media
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2 ads colour per month of quarter page on Jang newspaper (on 2nd page)
-
2 ads colour per month of quarter page on Dawn Newspaper (on 2nd page of Sunday edition)
-
2 ads colour per month of quarter page on The News (on 2nd page of the Sunday edition)
Magazines
2 ads per month on Jang Sunday magazine (Full page)
Electronic Media
Geo TV
5 ads of 15 second per week (timings will be 8:00 PM -10:00 PM) with the passage of time the frequency of ads will be decreased because it estimated that at that time people will get awareness about Twinings brand.
PTV National
5 ads of 15 second each per week (prime timing same as above)
12: Distribution strategy
Pakistani market for tea is spread across a wide geographical area exhibiting two distinct characteristics peculiar to urban and rural consumers. Being a predominantly rural economy, there is a huge market in the rural areas. In order to tap the market, we have decided to have a presence in all the provinces in Pakistan through a distribution network managed from our national headquarters in Punjab province. The reason for selection of Punjab is because of the presence of cities like Lahore and Multan, two of the largest cities in Pakistan. Our office would be located at Lahore.
The objective of our distribution strategy would be to reach out to every potential market in Pakistan. The advantage for Pakistan is that there are few large cities which include Karachi, Lahore, Faisalabad, Rawalpindi, Multan, Hyderabad, Gujranwala, Peshawar, Quetta and Islamabad. If we reach these cities, then we would be able to tap all the major urban markets in the country.
Distribution Hierarchy
13: Organizational Structure of Twinings for Pakistan market
14: Estimated Budget
International marketing plan presents the costs of planned activities and compares them to estimated revenues in detailed budget.
Sales Forecast
Estimated Product Budgets
Note: All above mention figures in budget are fictitious in order to understand the concept of marketing budget.
