Mumbai: The Tata Tea group on Thursday unveiled a new strategy to integrate its global and domestic operations so as to better compete with international beverage companies such as the Coca-Cola Co. and PepsiCo Inc.
The $1 billion (Rs4,740 crore) beverage group, part of the Tata group conglomerate, is integrating its global and regional tea, coffee and water brands under a single management team.
Its global brands such as Tetley Tea, Tata Tea, Himalayan water and the Good Earth speciality teas and coffees will be supported by its regional and speciality brands such as Eight O’Clock Coffee in the US, Vitax herbal tea in Poland, Jemca tea in the Czech Republic, and Indian brands such as Chakra Gold and Kanan Devan, said Peter Unsworth, chief executive officer of the UK-based Tetley Group, now a subsidiary of Tata Tea Ltd.
The strategy is to diversify from Tata Tea group’s core categories of tea and coffee and build positions in high growth areas such as Himalayan, its natural mineral water brand, and T!ON, a drink made from fruit juice, tea extracts and ginseng, through product innovation and growth, he added.
Strategic choices: A file photo of R.K. Krishna Kumar, Tata Tea vice-chairman. He will be responsible for stewarding the effort. Santosh Verma / Bloomberg
Unsworth said the beverage group will now focus on growing in the the Asia-Pacific region, Russia, the second biggest tea market, Africa and the US.
Tata Tea bought the UK’s Tetley Tea in 2000 for Rs1,831 crore. Since then, it has made several acquisitions including Good Earth Corp. in the US, Joekels Tea Packers Pty Ltd in South Africa and Jemca. Its associate Tata Coffee Ltd acquired Eight O’Clock Coffee Co. for Rs990 crore in 2006.
Unsworth explained that the new strategy was an “aggregation of our approach in the market place. It is not commencing from today but several months before”.
The new method will help rationalize operations, said Percy Siganporia, managing director of Tata Tea, citing instances in the group’s US operations where the company gained by closing one business and sourcing from other units.
L. Krishna Kumar, Tata Tea group’s chief financial officer, said the time was ripe for the integration. “We have scale and the resources now.”
The resources come from the sale of the Tata Tea group’s 30% stake in US-based Energy Brands Inc. for $1.2 billion in May 2007. Asked if the new strategy was a precursor to a global merger of the Tata Tea group, he said, “We are separate entities today. It is premature to talk about financial integration.”
R. Krishna Kumar, vice-chairman at Tata Tea and a director at Tata Sons Ltd, the Tata group’s main holding company, will be responsible for stewarding the Tata Tea group. The management team, based in London, comprises Unsworth, Siganporia, L. Krishna Kumar, Hamid Ashraff, managing director of Tata Coffee, John Nicholas, chief marketing officer of the Tata Tea group and Nalin Miglani, chief human resources and communications officer of Tata Tea group.
“The transformation is not about growing the bottomline or margins and it’s not about rationalization,” said Unsworth. “It’s about topline creation and about disruptive change in the market place.”
For instance, in the US, Eight’o Clock will now also sell Tetley. The group will use brands that are powerful in a region to push other brands in its portfolio. The group met with success recently when discount retail chain Wal-mart Stores Inc. decided to stock Tetley products in its US stores.
“These are normal measures in the growth phase of any company. The important agenda before the Tata Tea management is to rejuvenate the market segment,” said Nikhil Vora, an analyst tracking the consumer goods sector. “The last few years, the growth in the black tea segment has been muted. The challenge before Tata Tea is to look beyond the black tea business.”
“Despite the global downturn, the longer term growth prospects for our core markets are extremely positive. Tea, as in the past, proves to be resilient to recession and our strategic choices for the future will be in-line with ever evolving consumer needs,” Unsworth said.
Himalayan, the bottled water business acquired by Tata Tea a few years ago, has now been repositioned as a global brand. The company is also devising ways to enter the enhanced water business and the group spent nearly Rs80 crore on innovations last year.
The Tata Tea group’s income in 2008-09 increased 13% to Rs4,874 crore from Rs4,309 crore in 2007-08.