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.