Mumbai: Peter Unsworth, 51, chief executive officer of Tata Global Beverages Ltd, has an arduous task ahead of him. A month from now, Unsworth and three of his colleagues will walk 100km through high ranges and vales, criss-crossing the English country side and the time frame set to reach the finish line is just 30 hours.
He is building stamina and the walk, which will raise money for charity, will serve an opportunity to test out some of the energy drinks available in his group’s portfolio. A bigger challenge for Unsworth, who joined Tetley group in 1996 as director finance and IT—in 2000 the company was acquired by the Tata group for £271 million (around Rs1,837 crore today)—is Tata Global Beverages’ plan to grow the share of revenue of non-tea beverages to 50% of total revenue, up from the current 30%. Another quest is to create a new mega brand. Edited excerpts:
Distribution is key: Unsworth says the aura around ‘Himalayan’ is the ability to take it to a market and create a premium niche. Abhijit Bhatlekar/Mint
Mr Unsworth, do you drink tea or coffee?
Aha... When I joined Tetley group in 1996, the then chairman, a big American, asked me whether I’ll have tea or coffee. He was surprised when I asked for coffee. “Man, you have the balls,” he remarked, as those days we were known only for our Tea. These days, I have both tea and coffee. (Tata Global Beverages, formerly Tata Tea Ltd now has a portfolio of coffee, and tea brands).
There was some talk among analysts that your company would move into the packaged foods space. But now with the name change, your interest seems limited to beverages.
We have talked about nutrition, wellness, life enhancing and sustainable beverages. We are now globally a $1.5 billion (Rs6,975 crore) business. If you look at beverages business globally, it is a trillion dollar business and food and beverages account for mega trillions of dollars. We have massive opportunities. What I am trying to do with the business along with the team is to focus. We can grow rapidly but we don’t want to dissipate all of our energies into everything. We don’t want to try and do everything, but want to do a few big things well.
Even if you look at (the) US, we are tiny. In Russia we are tiny.?Tea in Russia and (the) US together is a $4 billion market.
What we are pushing in the short and medium term is beverages. Eventually, sometime in the future maybe, there is an opportunity for us to get into food as well. All our big brands are very easily translated into food. For example, Good Earth as a brand for me is organic, natural and healthy. In the US we are a year into a relationship with General Mills (Inc.) where they will use our licence to use the brand for ready-made meals. We control the brand but they drive it. So in the short and medium term we don’t have the core competencies to drive this effort. The focus for us is beverages and the name reflects that.
After exiting Energy brands (Glaceau) in favour of Coca-Cola, you had evinced plans to re-enter that business. How long will it take the company to start from ground up. Will you look at acquisitions?
We have got cash and will look at acquisitions. We can leverage the business. With Glaceau, the crucial thing was distribution. We acquired the brand which we felt and still feel is a brilliant brand. Coca-Cola looked at it and they too felt it’s a brilliant brand and they have got an ubiquitous liquid distribution set up. We have to create relationships such as the Pepsi memorandum of understanding (MoU) we just signed. At the moment our strength is not liquid distribution; hence the relationship with Pepsi.
Have you made any progress on the MoU with Pepsi?
The MoU basically says we agree to talk and we are talking. What comes out of that is not set.
What caused the sudden traction in Eight O’Clock Coffee sales which saw modern retailers in the US stock your coffee?
About 18 months back there was a report in a national consumer magazine that did a test on a whole range of coffees, including gourmet coffee. It concluded that Eight O’ coffee brand (Colombian)...is the best coffee. Around the same time the consumers were getting hit by the economic slowdown and were trading down to cheaper alternatives. As the credit crisis began to hit consumers traded down to Eight O’Clock—it’s the best coffee for people looking for value alternatives. So consumers have tried the product and they liked it and are sticking with us. The challenge is what do we do next? The US is a very expensive market...To advertise it could cost $5 million to $10 million. We are looking at it as an opportunity. We got to be very clear what we want do next.
There are reports that say that you plan to make Himalayan a global premium drinking water brand.
We are looking at two international markets where Himalayan could go in. Clearly, it will go through distributors and third party distributors like we do for our other products. We’ll position it absolutely premium. Himalayan is derived from one of the best sources of mineral water in the world. It has to be premium. We are not taking water by filling a bottle with some reverse osmosis water. We are taking the water from the source and transporting it. So there’s a cost involved in that. The aura around “Himalayan” is the ability to take it to a market and create a premium niche. Distribution is a critical thing. Whether we do it through a third party distributor or we do it in the medium term by extending our relationship with Pepsi by allowing them to distribute; they don’t have a premium product in water. We can do it ourselves. But a relationship with Pepsi or another third party distributor is the way to go.
It takes more than a lifetime to create iconic beverage brands. In Tetley, you have one, but to create another brand such as a Red Bull or Glaceau is difficult, don’t you think?
Sukk (pronounced as sook) would be the one. It is quite a funky thing. Some people will love it and some will hate it. We just launched this jelly product in the UK which is in the test market phase. Drinkable (green tea based) jelly in a pouch. It has got a lot of fibre in it and only 80 calories. We are targeting it at young people as a healthy way of snacking. If we have a brand like Red Bull, we’ll be quite pleased. I tell my people, what we got to do is to do disruptive innovation. We have to start experimenting. If we don’t put products like Sukk in the market in a small way in the UK, US and India, then we will never have a Red Bull. We have to do things differently.
What is the initial response to Sukk?
It was launched three weeks away. Advertising starts in July. It is students we are targeting. It is edgy for us. We’ll take one step at a time. If it works in Manchester in UK, then it will work in the rest of UK.
What is the target set for new brands and eventually their contribution to the top-line?
Mr Krishna Kumar (vice-chairman Tata Tea and director Tata Sons Ltd), my esteemed boss, says that within five years he wants tea to be only 50% of the total. Again it depends on how we grow. Personally, I think, we can do it sooner than that.