Tea Drinks Competition Intensifies

Thursday, 17 03 2011
BY NURMAYANTI & MONALISA
The development of the processed tea market is quite fast, stimulated by the increasing consumption of Indonesians. (IFT/DINUL MUBAROK)

JAKARTA (IFT) –The competition between two ready-to-drink tea producers, PT Sinar Sosro and Orang Tua Group intensify following their high targets this year. Sinar Sosro has a sales target of 10 to 12 percent growth compared to 2010, while Orang Tua Group aims for increasing its market share to 45 percent from 20 percent in 2010. 

Sinar Sosro controls 65 percent of ready-to-drink tea national wide with 1 billion liter production in 2010. Using capacity from its 10 production sites, Sosro relies on major brands such as Teh Botol Sosro, Fruit Tea, Joy Tea, Tebs and S-Tee. While Orang Tua Group has a 20 percent market share and production of around 210 million liters from two production sites, with main product of an instant tea drink called Teh Gelas. 

The remaining 15 percent of the market share is highly sought after by PT Cocal Cola Indonesia, Pepsi, and several other producers. 

The IFT Research Department estimated that the steady release of instant tea beverage variants stimulates a higher competition rate each year. The Sinar Sosro market share was still 78 percent in 2008 and down to 65 percent in 2010, due to the competing products of tea drinks from the Orang Tua Group and other producers. It is possible that Orang Tua Group aiming to increase its market share from 20 percent to 45 percent could become a challenge to Sinar Sosro. 

The development of the processed tea market is quite fast, stimulated by the increasing consumption of Indonesians. Trade Ministry data showed that the processed tea industry grows really fast with a compound annual growth rate (CAGR) of 36 percent in 2006 to 2009 period, making it the fastest segment growth in beverage industry compared to alcoholic beverages and bottled water. Processed tea includes tea powder, teabags and bottled tea. Meanwhile, consumption rate for instant tea drink has a 7.7 percent growth per year. 

In order to increase its market share, the Orang Tua Group, through its subsidiary PT CS2 Pola Sehat builds instant tea drinks production site worth 30 billion rupiah (US$ 3.42 million). Dicky Susanto, Managing Director CS2 Pola Sehat, said that the new plant will enable the company to produce two million glasses of instant tea drink per month, a 100 percent increase from its current position of one million glasses per month. 

The new plant will be located in Pasuruan, East Java. The development fund will be taken from the company’s internal reserves and bank loans, but Dicky did not refer to any specific bank. “We hope the plant will reach its full-scale production rate at the end of this month, right now it is still under production test,” he said. 

Meanwhile, Sinar Sosro hopes to increase its sales to grow 10 to 12 percent in 2011, compared to 2010 with rising domestic demands. The company planned to expand its production capacity to pursue the target. 

Rijanto, Operational Director of PT Sinar Sosro explained that the Sosro sales target is higher this year from 2010, which grew only four to five percent from 2009. Yet, he is unwilling to mention Sosro sales value last year. In 2008, Sosro booked 1.8 trillion rupiah in local sales and export with nine billion rupiah for the export sales. 

He said, Sosro sales in 2010, was low due to the product diversifying effort from tea to mineral water and fuit juice. Sosro acquired PT Country Choice Jus, a local fruit juice-producing company in 2008 worth 55 billion rupiah. Unfortunately, the effort was halted eventually by stiff competition with other producers such as PT Coca Cola Indonesia and Orang Tua Group. 

Sinar Sosro will also increase production capacity by the end of first semester. “The expansion plan is still being finalized due to production capacity and segment selection of beverage product,” Rijanto said. 

 Farchad Poeradisastra, Chair of the Indonesian Soft Drink Industry Association, estimated that the instant tea drink domestic market will grow 7.5 percent to 1.67 billion liter in 2011, compared to 1.55 billion liter in 2010. The major driver for the tea soft drink market growth is domestic population of adolescent and young people. “They have high disposable income,” he said.