Tata Tea quits beverage retailing, to focus on branded products

Tata Tea, the second largest branded tea maker in the world, will exit the beverage retailing business, including Chai Unchai, as part of the group’s strategy to focus on its branded products.

Tata Coffee, another group company, which sold its 34.3 per cent equity in retail chain Barista to NRI investor C Sivasankaran five years earlier, has also dropped its plan to re-enter the business.

In a move to refocus on growth of brands, the company has decided to exit from café business like Chai Unchai in Bangalore, said Sangeeta Talwar, executive director - marketing, Tata Tea. She confirmed that Tata Coffee, a listed subsidiary of Tata Tea, would not pursue its plans in the café business.

“As the café retail business in India is dominated by local players, the scope for new brands is limited. However, established brands like Lavazza and Café Coffee Day are expanding their business that will see 5,000 branded outlets across India in five years, up from the existing 1,200 outlets. Since margin from the café business is volatile, Tata Tea would be interested to cash in on its core competence in sale of branded products,” said an industry analyst.

The company, which unveiled Chai Unchai in Bangalore in January 2008, was planning to add more outlets in the city in not just existing movable kiosk format but also in the form of tea parlours, on similar lines with urban coffee outlets. The company had five Chai Unchai outlets in the city.

Tata Coffee was waiting for the non-compete contract it signed with Barista to expire for launching its café network. The largest coffee plantation company in Asia is also running its branded coffee powder retail business through Mr Bean Coffee Junction.

Tata Tea is going through a transformation and consolidation phase, focusing more on branded products and reducing exposure in commodities, said Tetley chief executive officer Peter Unsworth, while announcing the quarterly results. The group markets beverages mainly under brands such as Tata Tea, Himalayan and Tata Coffee, in addition to the acquired brands like Tetley, Good Earth and Eight O’Clock Coffee.

Though the company was called Tata Tea by the outside world, Unsworth said that the name of the entity was Tata Beverages for insiders. “Finding a new unified brand name is still on the cards,” he added.

Sangeeta Talwar said the recently introduced cold drink brand, TiON, was a success in Tamil Nadu, with a three per cent market share in Chennai. The company plans to enter other South Indian states with the drink.

The company is hunting for opportunities in beverages segments across the world, said Tata Tea Managing Director Percy T Siganporia. West Asia South America and Africa will be the targeted geographies for fresh forays. In France and Australia, the company will soon begin operation.

Tata Tea, which is exploring takeover opportunities in the US and Africa, has Rs 3,000 crore cash and cash equivalents on books. The gross debt stood at Rs 2,500 crore.