The world’s second-largest tea firm Tata Global, best known for its audacious acquisition of UK’s Tetley Tea in 2000, pushing it into the league of top tea makers, is now getting its focus back on India. The move comes as global markets, which gives Tata Global higher revenues (55 per cent of branded business) slows down, especially in the crucial black tea segment, the firm’s mainstay in the category.
According to the company’s last annual report for 2016-17 (FY18 annual report yet to be released), tea contributes 80 per cent to Tata Global’s sales of its branded business, followed by coffee at 19 per cent and nearly 1 per cent coming from water.
Overall, the branded business gives Tata Global nearly 90 per cent of its consolidated revenue (Rs 68.15 billion for 2017-18); 45 per cent of which comes from India. This is now expected to grow as the company's India push increases, led by innovations, acquisitions and new product launches.
According to analysts, the change in focus comes as company Chairman N Chandrasekaran looks to leverage domestic strengths aggressively — the India branded business has been growing between 6 and 8 per cent in the past few quarters, led by a strong volume growth in tea.“We are increasing our focus on India. This is a geography (India) that is giving us growth. We have a great sales and distribution network here as also a great brand (Tata Tea), which evokes trust and loyalty among consumers,” said Ajoy Misra, managing director and chief executive officer of Tata Global.
The company may also look at a phased roll out of Tata Tea Fruski, a tea-based ready-to-drink beverage, which is currently being piloted in Delhi-NCR, across markets. The company is also taking innovations such as Tata Gluco Plus, it's cup-based energising drink available for Rs 10 a unit, which is part of its joint venture with PepsiCo, to more markets beyond the south, east and west, Misra said.
NourishCo, the Tata Global-PepsiCo joint venture, Misra said, had broken-even in 2017-18, seven and a half years after it was formed and the firm, he said, would continue to look at new hydration categories to fuel growth. On the other hand, Tata Global’s joint venture with Starbucks, formed in 2012, would not be affected, Misra said, with Nestle and Starbucks globally entering into a deal to market the latter’s consumer products. Currently, the joint venture company Tata Starbucks, has 115 stores in the country, with plans to add another 24 stores this financial year.
Misra said acquisitions would be pursued in both core areas as well as adjacencies in the country, with the move, said sector analysts, coming when the company was exiting non-performing businesses in Russia, China and Sri Lanka.
Speculation about Tata Global’s interest (as an acquisition target) in Hector Beverages, the maker of the Paperboat brand of ethnic drinks, has only grown in the past few quarters, though Misra said the company was evaluating multiple inorganic opportunities in the country. “We are open to inorganic opportunities (in India) and continue to explore relevant ones,” he added.