Distribution Synergy: Tea Business To Run On Batteries

The first instance was, of course, when Hindustan Lever tied the knot with group associate and tea major Brooke Bond Lipton India.

When the B M Khaitan group yesterday merged the nearly century-old McLeod Russel into Eveready Industries (formerly Union Carbide India), its most recent acquisition, it was seen by many as being driven by the same urge to marry disparate corporate entities, even though under the same management.

In both, according to analysts, distribution was the strongest logic.

Hindustan Lever and Eveready Industries have developed tremendous domestic marketing networks, and possibly feel tea must ride piggyback on the fast-moving consumer goods, be it detergents or batteries.

 

Hindustan Lever has, however, denied that distribution was the major logic that spurred the merger with Brooke Bond.

It has pointed out that the huge asset base gives it better funding options, and that HLL and Brooke Bond India Ltd will continue to maintain strictly

separate marketing set-ups.

One of the challenges before the tea industry is to shift from loose marketing to the packaged business, for which intense marketing is required.

Success in the domestic market is even more important considering that exports are set to show a steep decline owing to the virtual collapse of Russian buying.

For McLeod Russel, last year was not a particularly good one, even though it completed the tortuous process of the biggest Indian-arranged corporate marriage.

Production during 1995-96 declined slightly from 244.97 lakh kg to 237.23 lakh kg, which the company attributed primarily to adverse weather conditions.

The Soom Tea factory, located in Darjeeling, was completely gutted by a fire.

(However, a new factory has been constructed in record time and is now functioning, says thecompany in its annual report.)

McLeod has concentrated on high-quality tea to charge a premium and achieve higher margins, and increased exports over nine per cent in 1995-96 in partnership with Goerogge Williamson & Co Ltd, Newbury, the overseas agents.

On the other hand, Eveready Industries, the new Khaitans-owned incarnation of Fera company Union Carbide India, has done well during the previous year.

The dry-cell market was buoyant, says the company in its latest annual report, and claims battery sales increased 12 per cent over the previous year to record an all-time high of 655 million pieces.

During the year, technology inputs were obtained from Eveready Battery Company Inc of the US for improving carbon zinc battery and flashlight operations.