Big Companies, Slow Moves

A couple of days ago, I came across some promotion for this new product from the Unilever stable, the Taj Mahal dessert teas. Since I was already walking out of the supermarket, I couldn’t go back in to check it out, but it set me thinking on why do big companies often enter new markets late?

Premium teas and flavored teas, have in the last couple of years, really picked up in the Indian market. I don’t really have any data to back this up, but the sheer variety that is available and the shelf space that is being dedicated to such teas, surely is some evidence. And this is happening not just at premium outlets or really large stores, but even at neighbourhood family run supermarkets. So there has to be a reasonable level of demand happening.

But Hindustan Lever (or Hindustan Unilever, as they are called now), one of the largest brand-owners in the Indian tea market, has really not set foot in this market, or not to a great extent. I recall seeing some cardamom and such flavours from them, but the exciting new flavours are all really being brought out by other brands. Earl Grey, Chamomile, Orange Blossom, Vanilla, Mint, English Breakfast – you name the flavour, and its available on Indian shelves now. The brands are usually Tetley, or Sri Lankan teas like Dilmah. The strange thing is none of these brands really had any significant presence in India until five years ago, and now they are the face of premium tea, while HLL which owned the tea category, keeps touting the same old Taj Mahal as its premium brand.

Which brings me back to my question – why do big companies often enter new markets late?

I think their very size handicaps them when they look at new markets. For a Rs. 1000 million sized brand, an opportunity that is Rs. 10 million worth, seems very small. The brand waits, and waits, until the opportunity becomes worthwhile. In the meanwhile, smaller brands with smaller ambitions start developing the market. Conventional marketing wisdom infact accepts this as a viable strategy where a big brand enters a market once it has grown to a certain size, and then proceeds to chew it up on account of sheer size and financial and distribution muscle. It could work; On the other hand, smaller brands do sometimes acquire a certain image especially in premium categories, and a late entrant could end up with some lost opportunities.

Any thoughts on this?

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5 Comments

  1. not just tea, across categories, esp food, innovation is low becoz india is more a stapls market than packaged food, though packaged food is picking up of late. esp in beverages, even soft drinks are not as big as say US who drink water in place of cola. tea is a habit led category where people prefer their kadak tea, and they r very attached to their brand be it a lipton or a red label, & even the type- whether it is dust or leaf.
    indulgence teas are an occasional thing.
    the spate of green tea launches/ earl greys are meant to be had without milk which is a very english concept- something which every indian will not consume as often as a milk-tea.
    therefore marketers take their time before launching them.
    probably the purchases till date have come from the launch stake holders!! had been working on them for quite sometime
    also most of the MNC’s do not liase with their abroad counterparts for R&D support – perhaps they fear questioning. they rely upon flavour houses for indiansised concepts / ideas/ recipes and then work out the most suited prototype for themselves.

  2. itchy – thanks for that view from the ground! as you say – food is an area where preferences are hard entrenched; however it still makes me wonder why across categories (except for ITC), very few of the biggies are into innovation. if you take something like breakfast cereal for e.g., all the supermarket shelves carry a whole lot of different mueslis from good earth, baggrys, avee’s etc….kelloggs is there ofcourse, but no other large co. seems to be looking at this market. i guess in these habit-led categories, as u say, the biggies want to wait and watch…

  3. u need a certain volume/ value achievemnt to invest in a new concept … small companies can take on only small volumes and they r easier to do.. they can manufacture themselves, get a small plant and run full capacity whereas large companies will have to look at 3 Ps and their own plants etc toa chieve national level volumes
    cereals are not as big market as an atta or rice in india!
    moreover look at the price- not everyone in mass market will buy that and big companies like to play in mass volumes and something that can be taken to rural india too

  4. Just called to say Happy Deepavali.

  5. you know, itchy – i think its really your first line, which says it all… waiting till the market reaches the right value – otherwise, manufacturing isnt such a big deal anymore – why look at your own plants at all – contract manufacturing is available…

    Padmaji – thank you!


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