January 2015 | Christabelle Noronha
'The team is excited about the opportunities ahead'
Tata Global Beverages (TGB) expanded its footprint in North America with the acquisition of Tetley in 2000. Today, Tetley is the leading tea brand in Canada. Two other acquisitions — that of Good Earth, a specialty tea brand in 2005 and Eight O’Clock Coffee, America’s best-selling whole-bean coffee, in 2006 — further strengthened TGB’s position in the region. The company has seen significant growth in the coffee and tea verticals, offering exciting flavours. Stephen Rice, regional president for Canada, Americas and Australia at Tata Global Beverages, has been part of the organisation since 1999; before that, he was with Coca Cola and Cadbury.
He speaks to Christabelle Noronha about growth in the geography, changes in customer preferences, new product offerings, increase in market share and future plans.
Where does the United States figure in TGB’s business matrix in terms of brands and product portfolio?
In the US, TGB participates in both the coffee and tea business verticals. The Eight O’Clock (EOC) coffee brand competes in the bagged or gourmet coffee segment, with a full complement of roast and ground as well as whole bean products and offerings. Two years ago, EOC successfully entered the fast-growing single-serve pod coffee segment.
Tetley and Good Earth are the key brands for TGB in the US tea market. We have recently introduced the Tata Tea brand to target the growing ethnic channel. The Tetley brand has historically been strong in the black tea business but recently has introduced a range of green teas. Good Earth is our specialty tea brand — it is primarily present in the fruit and herbal segments, offering consumers bold and intense flavour combinations and taste experiences. All brands are also sold in a variety of food service and restaurant outlets. In Canada, Tetley is the No1 tea brand in the country, with leadership across both the black tea and specialty tea markets. Tetley has a strong consumer following and loyalty with more Canadian households buying it than any other brand. TGB Canada has also broadened its tea portfolio with the successful introduction of the Tata Tea brand and most recently Tea Pigs, a gourmet range of tea products.
How has the market changed over the years?
The coffee and tea markets have experienced significant changes over the past several years. We have seen dramatic consumer behaviour shifts in coffee — for example, the single-serve pod market has grown explosively in the last five years and now it represents 30 percent of the value of the entire category. There has also been a decline in the whole bean segment as consumers move to more convenient ways of enjoying their coffee. Tea has also seen marked changes in consumer preferences. Specialty tea segments such as green tea, herbal tea and flavoured black tea have grown and so have ready-to-drink teas and single-serve pods, as consumers seek variety, new sensorial experiences and healthy beverage choices. Beyond the traditional categories, we also see emerging growth in retail, such as premium loose tea shops across North America where consumers can enjoy over 100 different varieties of exotic blends and flavours.
What have been the main factors that led to the company’s growth in North America? Any notable achievements?
In the US, the EOC coffee brand has recently hit a record in retail sales. This has been driven by a recent brand restage that included a fresh new look and a more contemporary personality, along with a broader range of products, flavours and formats. Also fuelling the growth of EOC has been the successful introduction of single-serve pods in the K-cup format. In Canada, the leadership and growth of the Tetley brand has been the result of an aggressive and consistent approach to driving new innovation and tea segment introductions, along with building consumer engagement with effective advertising and communication. The recent introduction of the Tetley Premium Signature line in the drawstring tea bag format is an example of this success.
What is the impact of the alliances with Keurig and Kraft?
The relationships with Keurig and Kraft have been extremely successful partnerships that have driven growth for TGB across North America in the rapidly growing single-serve pod market. In the US, the single-serve pod sales of EOC coffee now represents over 40 percent of the retail value of the brand and a strong 6 percent share of the national market. In addition, the launch into pods has attracted new households to the franchise and the distribution reach across North America has expanded dramatically. In Canada, TGB has worked successfully with Kraft to market the Tetley-Tassimo line of tea pods. There are now seven flavours and varieties of Tetley sold in this format, which has driven growth in this new exciting format. Tetley now commands a 30.3 percent national share of the tea pod market in Canada.
Which are TGB’s strong brands? What are the areas of strength?
In the US, the core region for the brands is east of the Mississippi, with particular strength in the Eastern corridor. In the US coffee category, EOC competes in the premium gourmet category, with both roast and ground as well as whole bean and the recent addition of single-serve pods. The EOC brand is strong at No3 with a 10 percent overall national share — it trails the strong retail brands of Starbucks and Dunkin Donuts. In the US tea category, Tetley has been primarily participating in the black tea segment and is the No3 brand in the market. Good Earth is positioned as a niche premium specialty tea brand with its core market in the west coast and California. In Canada, Tetley has broad national distribution from coast to coast and enjoys leadership across the country and across all core tea segments. In black tea, Tetley has a commanding share of the market, close to 50 percent, and it leads the highly competitive specialty tea market as well.
How has the niche brand Good Earth fared over the years?
The Good Earth brand plays an important role in our US tea portfolio as its strengths are complementary to Tetley. It allows us to reach different consumer targets, participate in different segments of the value pyramid, have a premium offering and offer new and unique flavours and tastes. Good Earth is a more specialised brand with unique and bold blends, a unique personality and strong roots in the US west coast.
Could you describe the company’s sustainability activities?
TGB in North America is completely aligned with our committed sustainability agenda. Our black tea and rooibos (red tea) business is now sourcing a large percentage of the requirements from Rainforest Alliance certified estates. Soon our green teas will also fall under this. EOC has recently introduced a Rainforest Alliance certified blend to the portfolio. In addition, the organisation and the teams across North America support several community activities. In Canada, Tetley has been a proud sponsor of the Canadian Breast Cancer Foundation since 2001. The teams have also supported events like Dress For Success (providing clothing to women returning to the workforce), Tata’s First Book literacy programme, Food Bank packing and sorting, holiday gift drive for the needy, local sports teams and children’s programmes.
What are the future plans and aspirations for each of the big brands?
The aspiration for growth across all brands is significant and the team is excited about the opportunities ahead. In the US, the Tetley brand will be fuelled by aggressive new product development across all key tea segments and a broader distribution agenda across the country. EOC will drive growth with expansion in distribution and new offerings.
Good Earth is looking forward to expanding reach and driving growth with a distinctive position and personality in the category. In Canada, Tetley will continue to drive growth by accelerating the brand across new, exciting categories, segments, usage occasions and points of consumption. We are also planning for a meaningful play for EOC coffee in the Canada market, building on the brand’s success in the US.
Fact file: Tata Global Beverages
|This article is part of the cover story chronicling the Tata group's history of doing business in North America, featured in the January 2015 issue of Tata Review:|
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