Eveready Industries plans tea business revamp, hive off into separate arm

Eyes JV partner in to-be-formed subsidiary, seeks Rs 10-15 cr investments a year in branding alone

With flattish growth in its packet tea business for nearly a decade, Kolkata-based Eveready Industries has decided to turn this business into a company subsidiary. And, is looking for a joint venture partner to invest in the to-be-formed entity.

Sources said the new partner could be McLeod Russel, largest tea producer in the world. Both Eveready and McLeod Russel belong to the Khaitan family-controlled Williamson Magor Group. McLeod Russel holds 2.29 per cent direct stake in Eveready. Amritanshu Khaitan, managing director, said the decision to hive off the packet tea business into a separate company subsidiary, based primarily on branding requirements.

"There was a huge gap between the tea business and our other products. To grow the packet tea business, we need fresh investments for this category only," he said.

The packet tea subsidiary will call for Rs 10-15 crore of investments annually for branding alone.

Till now, while Eveready Industries was spending Rs 66 crore a year on advertising and marketing, the efforts were centred on the company's mainstay battery, home appliances and LED businesses.

"We cannot make marketing investments on our own for the tea brand and need fresh investments if we are to grow this business", Khaitan added.

While the Eveready brand is primarily known for its batteries, flashlights, LED bulbs and home appliances, the tea business, which is also sold under the Eveready mother-brand, as per Khaitan, has been a misfit in the portfolio.

The tea business will continue to leverage on the existing distribution structure of about one million outlets.

However, the company, in the middle term, may opt for a revision in the distribution structure as the sales points for appliances and battery will differ from those of tea.

"After such reorganisation, the standalone remaining businesses will represent only the Eveready branded product verticals. We expect to complete this exercise in the course of the coming months"

In case the tea business is hived off into a subsidiary, the new entity will have an initial turnover of Rs 80 crore. However, its paid up capital is yet to be finalised.

With the restructuring agenda, Eveready Industries is aiming to become the third-largest packet tea seller in the country over the next three or four years.

The packet tea segment, covering the Tez, Jaago, and Premium Gold brands, contributed to five per cent of the company's Rs 1,331 crore annual sales during 2015-16. Currently, these brands account for anywhere between one per cent and five per cent of the tea market across geographies in India.

Eveready Industries has two subsidiaries - Everspark Hong Kong Pvt Ltd, which has cumulative losses exceeding Rs. 5.4 lakh and Litez India Ltd, which suffered a Rs. 5.75 lakh loss in 2015-16.