Smart Strategy: Tata Tea built its rural base in Uttar Pradesh through NGOs

Past Forward
The seeds of this success were sown in an obscure sales meeting held in late 2005. The growth of local tea companies in UP, despite the fact that Tata Tea and HUL were also growing, posed uncomfortable questions to Vyas’s sales team, who contended that they were covering all big cities and much of the rural areas. Vyas was unconvinced. Sent out to seek answers, the sales teams as well as the consultants Vyas hired, came back with the same answer — Tata Tea was not selling in more than 100,000 villages in UP.

That was bad news for Vyas, who as part of the organised tea trade — Tata Tea, HUL and Duncans — had fought off stiff competition from local makers in urban areas at the turn of the millennium. Back then, local industry bought cheaper CTC tea from auctions and packaged it into poly-packs in backyards. With zero advertising, retailers pushed this product for higher margins, often Rs 40 per kg as against the Rs 20 the organised sector could offer. “It had narrowed down to a price war,” says Vyas. In the next four years, organised players eliminated the price differential and poured in freebies to regain market share in UP, key to the northern markets.

Realising that the local tea industry had resurfaced in rural areas, Vyas and his managers, Samantha and Sikander Aman Khullar, opted to reach rural consumers through NGOs, despite the severe apprehensions of other team members. “These institutions had access to people like none other,” says Vyas. Eventually, the Sir Ratan Tata Trust and the Dorabji Trust screened 12 names.

In December 2005, Tata Tea launched a pilot project in a small village near Varanasi. Two months later, in February 2006, Vyas was given 15 minutes to explain the concept to his Managing Director Percy Siganporia. It was past midnight when the meeting ended, and all approvals were sealed.