The Hindu Business Line : Bush to cup, Duncans' way

Duncans Industries is trying out innovative marketing strategies to grab a major share of the loose tea market where other players have failed to make a mark.

"What sort of tea would you prefer, Didi? CTC or Orthodox? Dust or leaf?" asked the shopkeeper.

The middle-aged housewife fumbled for a few seconds. "Actually, I do not know what sort of tea it would be, I want the final tea to be a bit strong but there should a good aroma too," the lady prescribed.

"Would you like to drink some of the tea that you wish to buy?"

"Oh, that would be great!"

Instantly, the shopkeeper blends some CTC tea with Darjeeling tea and voila! it has just the right strength of Assam tea and the exquisite flavour of Darjeeling! The tea was the perfect blend that Didi was searching for. Pleased with it, she orders half-a-kilo. Immediately, the shopkeeper blends the teas from different containers in front of her, packs it in an aluminium packet and hands it over.

THIS is the latest concept in selling tea. Gauri Prasad Goenka's Duncans group is calling it the branded loose tea retailing business and the shop is called Duncans Tea House (DTH).

Duncans owns 13 tea estates located in the Dooars, Terai and Darjeeling. It owns packet tea brands such as Double Diamond, Sargam, Shakti and Runglee Rungliot. The packet tea business enjoys a market share of seven to eight per cent.

Despite such a flourishing business, the group wished to have a branded presence in the loose tea segment. It also wanted to give the ultimate consumer a perfect tea blend within the shortest possible time so that the freshness of tea is ensured. So, the idea of DTH has been termed `Bush to Cup'.

J. K. Majumdar, Senior Vice-President of Duncans Industries Ltd, said Duncans carried out extensive field surveys and market research over a period of six months prior to the launch of DTH in April 2002.

This enabled the company to develop customised blends, which are far superior to the existing ones available in the unorganised loose tea retail shelves.

DTH offers a complimentary cup of tea to everyone who visits its outlets irrespective of their buying it. It is either a CTC or Darjeeling blend. According to Majumdar, this novel concept has caught the imagination of tea drinkers and more than 10,000 cups of tea are sampled everyday.

To start with, Duncans chose the West Bengal market as it mostly consumes loose tea. India's total tea consumption is 550 million kg, of which 45 per cent is in loose form and the rest in packets. In West Bengal, of the total tea consumption of 45 million kg, 90 per cent is sold loose. Bihar, Rajasthan, the North-Eastern States, Himachal Pradesh, Punjab and Chandigarh have similar high percentages of loose tea drinking shares.

At present, DTH has over 80 outlets in West Bengal. Of these, 10-15 per cent are owned by the company and the rest by franchisees. By the end of 2003, there will be 250 such outlets. From West Bengal, Duncans would move to Gujarat, the largest tea-consuming State, Madhya Pradesh, East Uttar Pradesh, Rajasthan, Maharashtra and others. Duncans has worked out an aggressive target of reaching at least two new States in every quarter in the next one year or so.

Why buy from DTH outlets? According to Majumdar, the first advantage is the freshness. In DTH, teas come from the garden within seven to ten days, while in other shops, it takes more than a fortnight, through the auction houses and the subsequent trade.

Second is the price. As the DTH concept is cutting out the trade it can afford to pass on a heavy price benefit to the consumer. "The price of 250 gm CTC tea of any reputed brand is Rs 160-170. We are offering a better quality of the same type of tea at only Rs 100," he said.

While buying packet tea the consumer can neither taste the tea nor have the flexibility to blend it according to his choice.

"We have created a new market category apart from the traditional loose or packet tea segments. Each of our outlets function as blending points, packaging factories, retail outlets, market survey points and more," he said.

The DTH outlets also function as wholesale points. In afternoons, when customer turnout is low, a section of DTH staff reaches out to the local grocery shops for marketing DTH packet teas.

"Here too we have an advantage. The grocers no longer have to wait for the company officials for supplies. There is a lot of flexibility as the grocers can order their specific needs and get the tea delivered within a day. So, there is an additional function and revenue earning path for the DTH outlets," he said.

Another feature has just been added to the DTH outlets - mobile dispensing units. These are small carry vans which move out to residential areas, to individual households. In smaller towns, they park themselves outside banks and post offices, where people regularly visit. There they hawk and sell, after offering the complimentary cup of tea. Majumdar said each DTH outlet would have two such units.

The DTH outlets sell 12-14 varieties of tea and the price range varies from Rs 100 to Rs 3,000 per kg. At present, the DTH business is being run by two not so well known companies of the Duncans Group. However, a restructuring programme is currently on and soon the DTH business would be corporatised in one single entity. Duncans Industries will carry on with its own packet and loose tea business as it has been doing for years.

Professor Ranjan Das of Indian Institute of Management-Calcutta, felt Duncans has worked out an innovative business proposition to get a foothold in the huge loose tea market where other organised and big players have drastically failed. Moreover, with its existing tea business in place, there is hardly any incremental cost on account of logistics.

"There is another aspect. At present, tea prices in the auction houses are extremely low and mostly ruling below the average production cost. By selling tea through these outlets, Duncans can recover a good amount of value but that would be lower than the available reputed packet teas," Prof Das told Catalyst.

According to him, loose tea offered by DTH may be costlier than the average loose tea but the Duncans brand adds much value. Prof Das felt the consumer would not mind paying a little more because the brand name ensured good quality.

Duncans has initiated another innovative marketing strategy whereby it is entering into agreements with several travel agencies. The rationale, Majumdar explained, is to market good quality tea to domestic and foreign tourists.

"Whoever visits India or Kolkata wants to buy good tea. However, there is hardly any information as to where he would get such tea. They end up buying worthless tea and in the process Indian tea loses its goodwill. So, we are trying to promote DTH through brochures and pamphlets among the tourists. They may even get discount coupons which can be redeemed at the DTH shops. We may even go for co-branding with the travel agencies," he said.

As a part of this tourist promotion, DTH outlets would be opened in Hyderabad, Bodh Gaya, Delhi and other cities, apart from the normal expansion route charted out by the company. The company has also developed `chestlets' to market special Darjeeling tea produced in its Marybong tea estates. The brand is that of the garden's name itself.

However, Majumdar is all hush-hush about the business growth of DTH. Without revealing the volumes of tea sold or revenue earned, he only says that it is still registering a growth of over 1,000 per cent every month. He also does not disclose the amount of money invested by Duncans in this business.

Regarding profitability, he said, "It is certainly good but I will not be able to give you the exact numbers. Instead I can say that profitability will increase as time goes by. In the first year we spent a good amount on advertisements and promotion. This cost would come down in the next few years."

Despite such huge plans, DTH has not opted for any extravagant ad campaign. Instead, it has gone in for hoardings on buses and trams because the OTS (opportunity-to-see) is extremely high.

"Each outlet of DTH where the complimentary cup of tea is offered functions as a great promotional activity. We have already created a high amount of awareness wherever we have moved in. We are on a high growth trajectory and the future is for DTH only," says Majumdar. It's a cup that will cheer him.

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