Tata Coffee Limited, a subsidiary of Tata Global Beverages Ltd (TGBL) and India’s third largest exporter of instant coffee, is embarking on a major expansion programme for its US subsidiary, Eight O Clock Coffee (EOC). It is firming up a plan to relaunch its brand and also introduce new offerings for consumers in US and Canadian markets.
Tata Coffee had acquired EOC in 2006 for $220 million from Gryphon Investors. Today, it is part of the TGBL family of brands and is top rated 100% Colombian coffee.
“Though EOC faced problems last year, it has come back with stronger numbers than it did previously. We are finalizing a major plan to revamp the brand further. We are coming up with the relaunch and reposition the product completely by May or June this year for the US and Canada markets,” Hameed Huq, managing director, Tata Coffee said.
Tata Coffee had borrowed $168 million to fund the acquisition of EOC in a highly leveraged borrowing programme. “We have so far repaid $38 million and also paid out $41 million in dividends,” he told Business Standard.
The company is also planning to introduce ‘single serve’ coffees for its US and Canadian consumers through Green Mountain Coffee Roasters, a specialty coffee roaster, M D Kumar, executive director – finance, Tata Coffee said.
He said Eight O’Clock Coffee and Green Mountain Coffee Roasters had announced a multi-year agreement last year to make Eight O'Clock coffee, Tetley tea, and Good Earth tea available in different formats.
During the nine months period ended December 31, 2012, Eight O Clock Coffee has shown a continuous improvement in its operating performance. EOC’s total income in the period was Rs 835 crore as against Rs 791 crore, a growth of 5.5%. Its profit before tax grew 12 times to Rs 65 crore as against Rs 5.43 crore in the corresponding period.
Huq said, following encouraging demand for its instant coffee in West Africa, Japan, Russia, Europe and West Asia, Tata Coffee is expanding its instant coffee processing capacity by 31% to 8,500 tonnes at its Theni facility in Tamil Nadu. The company is adding 2,000 tonnes additional processing capacity at an investment of Rs 55 crore, which will be commissioned in April this year.
Following its tie up with Starbucks last year, the company has also set up a new roastery at Kushalnagar in Madikeri district of Karnataka. It has set up a 375 tonne capacity unit at a cost of Rs 4.5 crore, which can be doubled any time, Huq said.
“We have set up new roastery in Kushalnagar to service Tata Starbucks retail as well as supply into Starbucks supply chain. It is functional now. We have got a big launch function next month. As and when Starbucks increases its order we will increase the capacity. We are now waiting for Starbucks to certifiy the plant,” Huq said.
Tata Coffee sources Arabica coffee from its plantations in and around the plant in Madikeri and roasts it for Starbucks. The company produces more than 10,000 tonnes of shade grown Arabica and Robusta coffees at its 19 estates in South India and also exports green coffee to countries in Europe, Asia, Middle East and North America.