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Business News/ Companies / People/  Will infuse further strength in our brands: Tata Global Beverages’ Harish Bhat
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Will infuse further strength in our brands: Tata Global Beverages’ Harish Bhat

The CEO and managing director of Tata Global Beverages, talks in an interview about the slowing growth and the restructuring

Harish Bhat, chief executive officer and managing director of Tata Global Beverages. Photo: Ramesh Pathania/MintPremium
Harish Bhat, chief executive officer and managing director of Tata Global Beverages. Photo: Ramesh Pathania/Mint

Mumbai: Sluggish sales in advanced markets and slowing growth in emerging economies like India and Russia saw Tata Global Beverages Ltd, maker of Tetley tea, double its promotions and launches in the September quarter.

During the quarter, the company also restructured some of its operations, which included merging its subsidiary Mount Everest Mineral Water Ltd, producer of Himalayan bottled water, with itself—a move the market punished by pushing the stock down 6.63% on BSE even after the company declared a 51% increase in its second-quarter consolidated profit.

Harish Bhat, chief executive officer and managing director of Tata Global Beverages, spoke in an interview about the slowing growth and the restructuring. Edited excerpts:

You have spent 37 crore more in the September quarter as compared with the year-ago quarter on advertising and promotional activities. What was the reason for it?

Normally, in a quarter we have one or two launches, but in this (September) quarter we have had 4-5 major promotional activities taking place simultaneously, given the challenging global market place—and growth is slowing down in many economies in the world including in India.

Our strongest assets are our brands, so we decided that the right approach would be to infuse further strength in our brands to drive growth in the future.

How does the slowing growth in India impact you?

The growth in the packet tea market has slowed down over the last several months. But we have a portfolio covering the entire price spectrum; our portfolio has been able to grow very well. As such, we have registered 18% value growth and a 3.5% volume growth.

But growth has slowed down by a couple of percentage points for you. Which segment of your portfolio is impacted by the slowdown?

What happens in the tea market is that no one stops drinking tea. But at the bottom end of the market, if inflation is very high, they may switch over or downtrade to local brands or loose tea. People who are drinking Tata Tea Premium or Tetley at the upper end, they don’t shift. The bottom end accounts for 20-25% of our revenues.

You have over the past couple of years continued to restructure and revisit the corporate structure, the most recent restructuring taking place in Canada and India during the quarter.

In Canada, we have restructured our sales and distribution model to get closer to the customer, who are the supermarket chains. In India, we have merged Mount Everest Mineral Water with Tata Global Beverages, which is a significant step we have taken in making Himalayan bottled water a much larger brand than it is today as we have the resources and the global footprint.

We have also invested in a new coffee plant in Theni near Madurai in Tamil Nadu, which adds 2,000 metric tonnes of instant coffee capacity, taking our total capacity up to 8,400 metric tonnes.

What kind of cost savings do you expect from such restructuring?

Our past restructuring and contract negotiations have delivered cost savings of over 100 crore on an annualized basis. All these restructuring changes will create an organization that is more future-focused.

Are you done with the restructuring?

We are still looking at some smaller geographies and have things to do.

What happens to the joint venture with PepsiCo India Holdings Pvt. Ltd, which distributes Himalayan in India?

The brand will continue to be distributed by the joint venture NourishCo Beverages Ltd in India but the brand will now be owned by Tata Global Beverages once the merger becomes effective. When the joint venture with PepsiCo was conceptualized, it was a first for India but (now) also extends to a few countries outside India.

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Published: 13 Nov 2013, 11:39 PM IST
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