Case Study 1

Name / Enrolment_Arsal Nasir / 02-111231-392 Time Allowed:

Tapal's journey to the top

Pakistan is a nation of tea drinkers. Despite a multitude of options available in the beverages industry,
from detox smoothies, iced lattés to laal sharbat, tea remains the second most consumed drink in
Pakistan, both in rural and urban areas; only water has managed to stay ahead. It is hardly surprising then,
that despite not growing tea locally, Pakistan has one of the highest per capita tea consumption statistics
in the world (one kilogram, compared to the global average of 0.79 kilogram per capita, according to
Dawn.com). This is because tea is not just a beverage in Pakistan; it is a part of our cultural identity.
There are two interesting aspects of Pakistan’s tea market. First, the taste preferences of consumers vary
considerably across geographic zones. In the south, people prefer a rich colour and strong flavor but up
north, preferences shift to lighter concentrations. Second, people are unwilling to change the tea they have
been using for generations and this is why, despite the increasing penetration of tea brands, unbranded,
loose tea (khuli patti), still accounts for a 40% share of the tea market. Of the remaining 60%, Tapal is the
undisputed market leader, Unilever’s Lipton is a distant second, Eastern Tea Company’s Vital has
emerged as a significant third player and the remainder comprise small brands, strong in specific regions.

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Tapal’s market leadership is a relatively recent phenomenon. The fact that a home-grown Pakistani brand
has emerged as the leader in a category, historically dominated by multinationals, makes for an interesting
case study. Tapal’s story is as old as Pakistan. It started in a small dukan (shop) in Jodia Bazaar, when
Adam Ali Tapal began importing Ceylon teas and developed a specialized product called Family Mixture.
This was a blend of leaf and dust tea and was sold in brown thelis (paper bags). Despite the fact that two
essential elements, branding and packaging, were absent, this new product carved out a niche for itself.
There were many Iranian cafés in Karachi at the time where tea was the largest-selling commodity. Due
to its consistency, quality and affordability, Tapal became very popular with café-goers, who, upon
discovering the source of the tea, became regular customers of the shop in Jodia Bazaar. According to
family tradition, after completing his education abroad, Aftab Tapal, the third generation of the family,
joined the business in 1975 and from there began a journey of innovation and transformative change. By
his own admission, Tapal was interested in the tea business long before he started working in his
grandfather’s shop. Although the business was doing well, he saw tremendous scope for improvement
and growth.

“Thanks to the time I spent at the Central Institute of Art, I had a natural eye for aesthetics. We were still
selling high-quality tea in thelis and I realized that we would not be seen as a brand if we continued this
practice.” His immediate focus shifted on creating a brand identity through design and customized
packaging. As a short-term fix, a logo was created which was screen-printed on the brown bags; this
continued until Tapal launched their first branded, soft tea pack in the 1980s. Tapal’s strategy yielded
results and sales increased to a point where the shop was no longer sufficient. The business moved to the
company’s first factory with in-house warehouses built on a two-acre plot in Korangi in 1979. This is
where the company continues to operate from. The move to a larger set-up marked a series of strategic
changes. The company was looking to break through the duopoly of the multinationals that dominated the
branded tea market at the time: Unilever’s Lipton was the market leader and Brooke Bond’s Supreme was
the number two brand (until Unilever bought it in the 1990s).

For operational efficiency, Tapal imported machinery from Germany that allowed tea blending and
packaging to be mechanized. On the distribution side, he decided to do away with the traditional depot
system and used company-owned vans for retail distribution. However, as the brand’s footprint increased,
he realized that it did not make financial sense to have a fleet of vans distributing the product across the
country; and so, a network of independent distributors was created in the mid-1980s. Today, the company
relies on its distributors to ensure that their portfolio of more than 20 tea variants is available to customers
across Pakistan, urban and rural areas included.

Even while the business continued to grow in scale as a direct result of the changes he had introduced,
Tapal’s interest in discovering new teas did not diminish. His encounters with tea connoisseurs from
across the world led to the diversification of his portfolio. It started with Chenak in 1984, a low-priced
dust tea targeting the Thar district and positioned against Unilever’s (now defunct) Red Rose.
Colloquially, chenaks are metal containers used to pour tea at dhaabas. The name struck a chord with the
target audience, due to the association with their tea-drinking habits, while the taste and price suited the
Thari people who are daily wage earners and looked forward to a cup of tea after a hard day’s labour. The
success of the brand can be gauged from the fact that the only other low-end dust brand, Red Rose, was
redacted during the 90s due to insufficient sales. The year 1988 proved to be a landmark one for Tapal
with the launch of two new brands. Recognizing the untapped potential of interior Sindh (where there was

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a growing middle-class), Mezban was brought to the market as a premium dust tea. It was not long before
Mezban became the market leader, going well past Unilever’s Pearl Dust, and now controls 90% of the
branded dust tea market. Until this time, the branded tea variants available were from Sri Lanka. A
friend’s recommendation prompted Tapal to experiment with a new granular form of Kenyan tea, which
he branded Tapal ‘Danedar’ due to its texture. This proved to be a masterstroke because the rich, golden
colour and stronger taste made it an instant hit with consumers.

“Danedar was stronger than the Ceylon tea that my grandfather started with. It was better suited to the
palette of Pakistani tea drinkers due to the extra kick it delivered, and thanks to iconic campaigns such as
‘Daane Daane Pe Likha Hai Peena Wale Ka Naam’, it became our flagship brand, and eventually, the
most-consumed tea brand in Pakistan.”

As these changes were taking place within the company, Tapal says that the multinationals did not pay
much attention to the new player that had entered the market and he believes this worked in his favour. “I
continued worked on improving the packaging and blending of our teas and it was years before we came
within striking distance of Lipton.” A point worth mentioning here is that the Kenyan teas that Tapal
began importing were considerably expensive than the Ceylon teas that the market leaders were using at
that time. Despite this, there was a conscious effort to ensure that the price points remained affordable for
the average tea drinker. This meant that the company was working on very narrow margins compared to
the competition. Tapal attributes the exponential increase in Tapal’s sales to an “an unwavering focus on
quality and continued innovation” and this is what helped Tapal become the largest-selling tea brand in
Pakistan between 2008 and 2009.

Despite becoming the largest-selling brand in Pakistan and exporting to over 20 countries, Tapal is not
about to relax and enjoy being the best in the business; in fact, he has his eyes set on breaking through
into new markets. He believes that there is still a lot of potential to grow within the tea category. With
consumer preferences shifting from conventional teas to flavored and herbal green teas, he is working
towards diversifying his company’s portfolio by introducing new formulations in the coming months.
Should he decide to look at the rural market (the company has a limited presence there), he would end up
with 50% of the entire Pakistani tea market, branded and unbranded combined.

Discussion Questions

1. Explain how Tapal understand the marketplace (customer needs and wants) and deliver a superior
value to its targeted customers.
2. Marketing consists of actions taken to build and maintain desirable exchange relationships with
target audiences. Beyond simply attracting new customers and creating transactions, explain how
Tapal tea retain customers and grow their business with the company.
3. Define Value Preposition, and briefly explain Tapal value preposition.
4. Briefly explain customer perceived value for Tapal, and what role it has played in customer
satisfaction.