Tea enjoys sparkling sales performance

Tea enjoys sparkling sales performance

Agustina Wayansari, The Jakarta Post, Jakarta

Bottled or packaged teas might still sound strange to many
people, especially those from Western countries.

In Indonesia, tea is extremely popular and in many parts of
the country, it has become a daily refreshment. It is often
served at meals instead of water.

Compared to soft drinks, the market of ready-to-drink (RTD)
tea is still relatively small, but their sales volume continues
to increase periodically, and tea has become the rising star in
the domestic beverage market.

According to ACNielsen marketing research company, the
year-to-year growth of the sales volume of RTD tea reached nearly
37 percent in the first quarter of this year.

The sales growth of RTD tea, which includes bottled and
packaged teas, is far higher than the merely 16 percent booked by
bottled water and 2.9 percent by carbonated soft drinks (CSD).

ACNielsen said that the RTD tea market in Indonesia is still
relatively small compared to those of the bottled water and CSD,
but it continued to show remarkable growth from time to time.

Marketing analysts attributed the sharp increase in RTD sales
to aggressive sales campaigns launched by the country's RTD
producers, particularly over the past two years. The government's
recent decision to remove the 10 percent luxury tax on the drink
has also contributed to the high sales growth.

The tight competition in the RTD tea market became apparent
following the entry of PT Coca-Cola Indonesia to the market last
year.

Coca-Cola, traditionally known as the producer of carbonated
soft drinks, entered the tea market with its Frestea brand in
June last year. First marketed only Jakarta and West Java, the
new tea drink brand is now available in most parts of the
country. This new RTD tea brand continues to gain ground in the
local beverage market.

The entry of Coca-Cola into the RTD tea market has prompted PT
Sinar Sosro, the pioneer in the production of bottled tea, to
introduce more RTD brands in a bid to retain its leadership.
Previously, the company competed only with Pepsi Cola, the
producer of Tekita, in the RTD market.

Besides its Teh Botol Sostro brand, PT Sinar Sosro has
launched several new brands such Fruit Tea, which comes in the
form of a packaged tea in a variety of fruit flavors.

Corporate Affairs Director of PT Coca-Cola Indonesia, Titie
Sadarini, said the RTD tea market was still underdeveloped and
thus offered a considerable potential for growth.

"With our brand, we want to offer more tea experiences than
other brands, particularly in regards aroma and taste," she said.

She believes that with its strong marketing and distribution
network, Coca-Cola will be able turn Frestea into one of the most
popular RTD tea brands in the country.

"Affordability, and continued connection with consumers
supported by a solid infrastructure remains vital to our success"
she said.

While RTD producers enjoyed some good news and a significant
sales growth, producers of carbonated soft drinks reported
otherwise.

Among the three categories of soft drinks, CSD is the only one
still subject to the 10 percent luxury sales tax. The others --
bottled water and RTD tea -- have had the tax lifted.

"We don't understand why the government is still imposing the
luxury tax on the CSD category," said Pudji Nurutami, managing
director of PT Nala Vini Eka Beverages, which produces Navika.

Mugijanto, Chairman of the Association of Indonesian Soft
Drink Producers (ASRIM), also expressed his disappointment over
the government's tax policy on CSDs.

"The category, which used to determine whether one was
classified as a luxury drink or not, is still debatable," he
said, citing a recent study conducted by the economic research
institution at the University of Indonesia (LPEM UI), which found
that carbonated soft drinks lacked the characteristics that
defined luxury goods.

Just like bottled water and RTD tea, CSDs are consumed by all
segments of society, he said, and that based on the study, CSDs
should also receive the same tax treatment as that enjoyed by
bottled water and RTD tea.

The discrimination in taxation has became the biggest barrier
for CSD producers to further boost their market share. As a
result, the industry suffered a major setback in their sales
performance last year.

ASRIM reports that the sales of the country's carbonated soft
drinks dropped by more than 10 percent during the first half of
this year. "One CSD producer even reported a 20 percent drop in
its sales in the same period," Mugijanto said.