Tata Global Beverages looking to restructure businesses in Eastern Europe to cut losses
Kolkata: Tata Global Beverages Ltd (TGBL) is looking to restructure its businesses in Eastern Europe to cut losses and improve efficiency, its chief executive officer Ajoy K. Mishra said at a press conference in Kolkata.
After rationalising its operations in China and Russia, the company is weighing its options for its business units in Poland and the Czech Republic. TGBL is not in a hurry to exit from these markets, Mishra said, but at the same time, the company will not hold on to loss-making operations for too long.
In Poland, the company had acquired a local fruit and herbal tea brand called Vitax. It has recently launched the Tetley brand there for black tea. Poland is the second biggest market for tea and coffee in Eastern Europe after Russia, according to Mishra. But operations in Poland are still not profitable.
TGBL has tweaked its distribution strategy in Poland, and the company expects to turn things around with cost savings, according to Mishra.
In the Czech Republic, where its Jemca brand is quite strong, the market is not expanding fast enough. Unlike Poland or Russia, the market there isn’t big enough, said Mishra. And under intense pressure from competition, which is squeezing margins, the Eastern European market is witnessing consolidation.
“The economy (in Eastern Europe) is no longer robust and growing,” said Mishra. “And if you are not among the top brands, you are always going to be under pressure.”
TGBL recently sold its loss-making unit in Russia, divesting its tangible assets to a local firm Skodnya Grand Ltd for an undisclosed sum. However, the company retained its brands and will licence them for use by Skodnya. Similarly, in China as well, TGBL got out of its joint venture with Zhejiang Tea Group Co. Ltd.
These steps were taken to stop the “bleeding”, while figuring out future options, according to Mishra.
TGBL, however, remains interested in China and is exploring opportunities with the Tetley brand. A test run is currently being conducted with Alibaba Group Holding Ltd, the Chinese e-commerce company, according to Mishra. TGBL is looking to enter Malaysia, too, he added.
ICICI Securities Ltd said in a recent report that TGBL’s focus on improving operational efficiency by cutting costs and exiting loss-making markets would improve profitability. ICICI Securities is of the view that the company would focus on building on its core brands, and on product innovation in the health and wellness space.
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