Organic growth takes precedence over acquisitions at Tata Global Bev

The Rs 7,270-crore company has set its sights on organic rather than inorganic growth despite counting on the latter through the last decade

Once at the forefront of acquisitions, the Rs 7,270-crore Tata Global Beverages (earlier Tata Tea Ltd) has opted to slowdown its pace of buys as the focus for the company shifts from inorganic to organic growth.  In the decade between 2000 and 2010, TGB spent nearly Rs 7,500 crore to wrap up over 10 buys including that of UK-based tea maker Tetley in 2000, billed as the largest overseas acquisition at that time at Rs 1,870 crore.

It did cash out of one transaction, the 30% stake it held in US-based Energy Brands to Coca-Cola in 2007 for Rs 2,100 crore. But besides that, TGB  has never put any entity on the block it acquired across the globe including markets such as the US, UK, East Europe, Russia and South Africa.

"The emphasis for us at the moment will be on consolidating our presence and looking at product innovations in the markets we operate in ," TGB MD Harish Bhat said in an interaction with Business Standard. The beverage company, which is the  second-largest branded tea maker in the world after Unilever, derives 65% of its turnover from international markets and 35% from the Indian market. "The plan," said Bhat, "was to take up the contribution from Indian operations to 40% in the next  five years, bringing down the contribution from international markets to 60%."

Its joint ventures with PepsiCo and Starbucks in India is likely to help TGB achieve this as the company scouts for more alliances than acquisitions. "We have an investment in a company called Activate in the US alongwith other partners. That is another venture that we are counting on to grow our presence in the US," said Bhat.  

As things stand now, TGB is the leading branded tea player in countries such as India and Canada and is ranked number two in the UK and Australia - all strong tea-drinking markets in the world. In the US, however, the scenario is different, since it remains a largely coffee than tea market. Here TGB owns and operates the fourth largest coffee brand Eight O' Clock Coffee besides allied products such as Good Earth, a niche tea brand, and Activate, a bottled water maker, where it acquired a minority stake in 2010. The acquisition of the stake, said analysts, signalled its entry back into the enriched or vitamin water space that it had exited following the Energy Brands stake sale to Coca-Cola in 2007. The enriched water market has been growing as Americans spurn carbonated drinks for more healthier options.

In India too, TGB has been pushing products on the health and wellness platform under its joint venture with PepsiCo called NourishCo. It recently relaunched its fortified water brand - Tata Water Plus - and added a mango variant to the lemon and orange flavours of Tata Gluco Plus, a flavoured water brand. "In the next 24 months, we will take both Tata Water Plus and Tata Gluco Plus to the rest of India from Andhra Pradesh and Tamil Nadu where it is currently available," Bhat said.

Tata Water Plus is available in pouches of Rs 2 and one-litre PET bottles of Rs 20. Tata Gluco Plus, on the other hand, is priced at Rs 8 for 200-ml packs.

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