Red Label falls victim to its success in India

The commodity market in a country like India is huge, with branding, especially in many categories of food and drink still in a nascent stage. Today, branded tea accounts for only 50 per cent of the market, which is estimated at around 680 million kg. Regional brands play an important role in the market, especially as consumer tastes vary from state to state. Some of them have made significant inroads into the territory of national brands -- in 2003, regional brands accounted for a share of 28.3 per cent of the market, according to ACNielsen's retail audit. Hindustan Lever's Brooke Bond is the largest brand in the market, but has been in decline for the last two years. Its market share and overall sales have been dropping sharply -- HLL beverage sales fell from US$340 million in 2000 to $270 million in 2002. HLL's market share in the branded segment of the tea market dipped to 33 per cent in 2003 -- a year earlier, it stood at 34.6 per cent. As 75 per cent of India's population lives in villages, the brand has been able to establish itself solidly in the rural hearts and hearths, and has the potential of emerging as a world leader in volume and brand-franchise terms. Every brand of toothpaste and tea alike strives to achieve this status. Brooke Bond Red Label has come close to achieving the status of one of the largest mass brands in the country. This has, in itself, created something of a problem for Brooke Bond, however. The brand Red Label is so mass that it is now "everything to everybody". The brand is close to generic status in the commodity ocean of tea. Every new brand that enters the category benchmarks on Red Label and, of course, every brand eats into its share. Competing brands use Red Label Tea as a benchmark for pricing, which has come under more and more pressure, as commodity tea prices have been falling, allowing unbranded teas, as well as smaller local players, to enter at cut prices. The challenge is one of how to maintain a brand at a premium, in a market where commoditisation is gaining ground.