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Tata Tea seeks distribution tie-ups on a global scale

Nevin John  |  Mumbai 

In talks with PepsiCo and Coke for alliances

Indian beverages giant Tata Tea is looking at expanding its global network through tie-ups and acquisitions. The priority is a distribution joint venture with of the scale of Coca-Cola and PepsiCo.

“We are talking to many players, not just Pepsi and Coke,” said Tetley Chief Executive Peter Unsworth. Tata Tea acquired Tetley in 2000.

The trigger: Lipton's lead position within the fast-growing ready-to-drink global tea market became stronger after Unilever and PepsiCo announced a joint venture to expand marketing and distribution. The success of Nestea through a distribution joint venture between Nestle and Coca-Cola also motivated Tata Tea.

“We have a global opportunity to align with Coca-Cola or Pepsi. But both the players have relations with Lipton and Nestle. But still there are plenty of opportunities for something very large,” Unsworth told Business Standard.

The Indian tea major is focusing on global distribution expansion in West Asia, South America, Africa, the Commonwealth of Independent States and Russia. With this in mind, the company has recently acquired 51 per cent in Grand, a well-known player in Russia’s coffee and tea business, jointly with the European Bank for Reconstruction and Development.

Tata Tea, which has cash reserves of Rs 3,000 crore, is also in talks with several players in the US, Europe and Africa to buy soft drink brands as part of its efforts to diversify from tea. It earlier had talks with specialist soft drinks such as the US’ Jones Soda and the Arizona Beverage Company.

The company is the second-largest branded tea products maker, Unilever being the largest, with about 20 per cent market share. Tea sales account for just over 70 per cent of total turnover, but the company wants to reduce it to less than 50 per cent.

First Published: Mon, November 02 2009. 00:07 IST