Dilmah Tea Stakeholder Analysis Customer Segments There Essay

Excerpt from Essay :

Dilmah Tea

Stakeholder Analysis

Customer Segments

There are two ways of looking at Dilmah's customers. The buyers -- to whom Dilmah sells -- are the supermarkets and wholesalers that carry the tea. The other customer group is the end user. Tea is a mass market product that is consumed by a broad swath of the population, and to the extent that there is a definable "typical" demographic for tea consumption, this will vary by market. Initially, the company experienced difficulty in attracting interest from supermarket chains, which would then have had to utilize a push strategy to convince consumers to buy the tea. Over time, however, Dilmah was able to build its brand, making it more attractive to both supermarkets and consumers.

The global hot beverages market is worth $69.77 billion and the two major segments (coffee and tea) are both growing (PR Web, 2011). The growing demand, combined with constrained consumption, means that the current production of around 3.8 million metric tons globally is 140-150 metric kilograms short, and the gap between production and demand is growing annually (PFN, 2010). The largest producers are China, India, Kenya and Sri Lanka, which combine for 72% of global production. Nations like China, India and Japan are heavy consumers, but are all producers that consume domestic production. The largest markets, therefore, are in high-consumption nations without domestic production. These include Morocco for green tea and Russia, the United Kingdom, the United States, Pakistan and Japan for black tea. Sri Lanka in general is a major supplier for the Russian market. This market has a high average retail price of $18-20 per kilogram, and in the Russian world (ex-USSR) consumers have demonstrated low price elasticity of demand (PFN, 2010).

Geographic product segments are important for Dilmah, because the characteristics of tea drinkers can vary significantly within a country, but country characteristics determine important variables like elasticity, consumption patterns and routes to market. Russians are one major customer segment. This nation has increased wealth from oil and gas investments, which has fueled the modernization of other segments of the Russian economy. Tea is an everyday beverage for Russians, with 95% of all Russian believed to consume tea (Orimi, 2002) and despite the incursion of Western-style coffee chops in Moscow and St. Petersburg, tea remains the hot beverage of choice for Russians by far. Retail in Russia consists of a mix of Western-style supermarkets, especially in big cities, and small shops and kiosks. All of these typically sell tea. There is also an institutional market for tea in businesses, hotels, universities, hospitals and the national railway system. All told, Russians consume 1.26 kg per capita of tea, which is about twice Indian levels and a little over half of British levels (FAO, 2008). Russia is the largest importer of black tea in the world and its market is worth over $3 billion, growing at 12% by retail value on just 2% growth by volume (PRN, 2010). There is a growing trend towards Sri Lankan teas. By 2002, Sri Lanka had 39% share of the market, overtaking India, which had 33% (Orimi, 2002).

The Australian market is another strong market for Dilmah. Australians have adopted British tea-drinking traditions, but they also consume a large amount of coffee, especially in the big cities where most Australians live. The route to market typically goes through supermarkets. The Australian market is how Dilmah got its start, and the company is still affected by movements in the Australian dollar, highlighting the importance of Australia to Dilmah (Bajaj, 2010). There is also a strong institutional market in Australia. The Australian market is worth $437 million as of 2008, growing 8.2% to $473 million in 2013. Per capita consumption is 0.8 kg and tea faces strong competition from a robust coffee culture, inhibiting growth. Lipton is the number one tea brand in Australia, with Dilmah at number two and Tetley at number three (Datamonitor, 2010).

Dilmah tea generally does not appeal to institutional markets, but has a strong retail presence in both Russia and Australia. Dilmah has adopted premium positioning in the global packaged tea market (Ellis, 2007) and this makes it more appealing in markets that are enthusiastic tea drinkers, because those markets better understand the quality component of Dilmah's value proposition. The other important market characteristic for Dilmah, as a premium producer, is that the market needs to be able to afford premium team. While this is not always the case in the Indian subcontinent, it is the case in Australia and as well in Russia, a country that has seen its per capita GDP increase significantly in recent years and that has low price elasticity of demand (PFN, 2010). In both countries, tea drinkers are brand conscious, with Lipton, Tetley and Dilmah dominating the Australian market. Lipton is the market leader in Russia, with Dilmah as the number two (CoffeeTea.info, 2010). Russians are brand loyal, and an oft-cited reason for switching brands is the ability to afford a better brand, something that benefits premium players in the market such as Dilmah (Orimi, 2002).

b. Competitors

In each of these important markets, Dilmah trails Lipton, a brand owned by Unilever. Unilever also owns other tea brands as well: Beseda and Brooke Bond in particular. Unilever has great brands in tea, and considerable buying power among its strengths. As a diversified consumer products company, Unilever has superior market access since virtually all stores will want to carry Unilever products. The company has few weaknesses, but Lipton is definitely considered a lower quality of tea compared to Dilmah. Another weakness of Unilever is that in weaker markets, its representatives sell multiple products and therefore may not pay as much attention to the tea business. Both the Lipton brand and Unilever as a whole are considerably larger than Dilmah.

Another major competitor is Ahmad Tea, an English brand that sells around the world and targets the same premium segment as Dilmah. The company has a good brand name, and high quality teas as its strengths. Among its weaknesses is that the company is less established, having been founded in 1986, and in many markets entered after Dilmah. Another weakness that Ahmad has is that the company does not have any tie-ins with other consumer products, putting it at a disadvantage in distribution. Ahmad is roughly comparable in size to Dilmah, perhaps a little bit smaller, but it has a stronger domestic market to help it.

C. i. Internal Stakeholders

One internal stakeholder is the family that owns Dilmah. The have been in the tea business for their entire lives, so there is a high level of personal stake in the business, but also a high level of expertise. They run the business so have an exceptional amount of influence. The second internal stakeholder group is the tea producers. Their stake is their livelihoods. They influence Dilmah in terms of providing the best quality tea, but also the company seeks to earn superior prices for its tea because that will benefit all internal stakeholders, including the plantation workers and their families.

ii. One strength that Dilmah has in many markets is first-mover advantage. The company was the first Sri Lankan premium player in Australia and the first major foreign brand in Russia. This has made it more difficult for new entrants to gain access to retail channels and therefore market share. Dilmah also has a strength in the quality of its tea, as Sri Lanka is an especially renowned producer of rich, malty, earthy black teas. The company's lack of other products does hurt it, however, with distributors and retailers, who may prefer dealing with companies with whom they have larger relationships. Another weakness is within management. As a family-run business, Dilmah relies on the family almost entirely for strategic management, including the patriarch, who is now getting old in years.

d. There are other external stakeholders. The Sri Lankan government benefits from Dilmah's promotion of Sri Lankan tea, and the receipts that it receives from the company's business. Government policy can affect the company, however, so Dilmah needs government intervention in its business to be minimal. Another external stakeholder is the company's suppliers, as Dilmah is packaged tea. These suppliers benefit from the business growing rapidly, and likely base much of their business on Dilmah, one of the country's major exporters.

2. Marketing Mix Analysis

a. The concept of the triple bottom line refers to three outcomes of an organization's activities: the profit and loss account, the people account, and the planet account (The Economist, 2009). The first consists of the traditional financial measures such as revenues, net income and other such financial outcomes. Dilmah is the world's sixth-largest tea brand, and recorded net income of $5.2 million on revenues of $19.7 million in the six months ended September, 2009 (Bajaj, 2010). The company is not public so finding more details is difficult, but Dilmah has achieved profitability and a strong position in the global tea market, so has likely achieved its profit…

Cite This Essay:

"Dilmah Tea Stakeholder Analysis Customer Segments There" (2012, May 11) Retrieved January 23, 2018, from

"Dilmah Tea Stakeholder Analysis Customer Segments There" 11 May 2012. Web.23 January. 2018. <

"Dilmah Tea Stakeholder Analysis Customer Segments There", 11 May 2012, Accessed.23 January. 2018,