Sundora Tea sells at a 20% price premium to loose tea and holds 18% of the market. What would you check to know whether the brand is a real advantage?

Check that the premium and the share held together over several years, that the premium survives what it costs to keep, and that a price rise did not cost share. Sundora passes all three: premium steady near 20% while share rose from 15% to 18%, advertising flat at 6%, and the FY23 price rise absorbed without losing buyers. It keeps about Rs 36 of its Rs 80 premium per kg, Rs 326 crore a year.

Two tea stalls stand side by side. One charges Rs 15 a cup, the other Rs 12, and the queue at the dearer stall keeps getting longer. That is an advantage. If the dearer stall's queue grew only after it cut to Rs 12, or it kept Rs 15 while its queue shrank, there is no advantage, just a pricing choice. A brand is an advantage only when it holds price and share together; either one alone can be bought.

So the first check is time, not a single year. Lay the premium and the share side by side for five years. A brand that buys share shows a falling premium; a brand that milks its name shows a rising premium and a falling share. Sundora's premium has stayed between 19% and 21% while its share rose three points.

A premium that is spent entirely on advertising and packaging is a cost, not an advantage. Per kg, Sundora charges Rs 80 more than loose tea. Packaging and distribution take Rs 15, and advertising at 6% of Rs 480 takes Rs 28.8. Sundora keeps Rs 36.2 a kg, about 45% of its premium, or Rs 326 crore a year on 9 crore kg. That is the brand's real profit. Watch the advertising line too: if share gains had come with advertising rising from 6% to 9% of revenue, the brand would be renting share rather than owning it.

The hardest test is a price rise. In FY23 leaf costs jumped and Sundora raised prices 10%, matching loose tea, and share still went from 15.8% to 16.5%. Buyers who stay through a price rise are the clearest evidence of pricing power, because a weak brand loses share the moment it asks for more. Add a check on distribution, since a tea brand's share partly reflects how many shops stock it: if the share gain came from opening new towns rather than winning buyers in old ones, the brand is less strong than it looks.

The limit: a brand advantage in a staple is real but narrow. A 20% premium can hold for years and still be capped by how far shoppers will stretch for a daily product. State the conclusion with that limit attached.