Tata Tea Limited
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TATA TEA LIMITED Tata Tea, after the acquisition of Tetley, has bacome an area of 15,000 hectares under tea cultivation, the world’s second largest branded tea company. the company produces around 40 million kilogrammes of black tea annually. Its tea estates Background are located in the states of Assam and West Bengal in eastern India and Kerala and Tamil Nadu in the Tata Tea,set up in 1964 as a joint venture named south.The company has a strong distribution Tata Finlay, with UK-based James Finlay & Co to network in India reaching out to over 1.7 million develop value-added tea, was among India's first retail outlets in India. Full-fledged research and multinational companies. In 1983 the Tatas acquired development centres of the company focusing on the entire shareholding of James Finlay to re- the branded tea business include a facility at Teok christen the company as Tata Tea Limited.In the (Assam) and a product development centre at mid 1980s, to offset the erratic fluctuations in Bangalore, Karnataka focused on the entire range commodity prices Tata Tea felt it necessary to enter of tea operations. the branded market and launched its first brand Kanan Devan in polypack, thus heralding the The Tata Group companies are the largest polypack revolution in the country. shareholders of Tata Tea with a stake of 29 per cent, followed by the public with around 23 per Today Tata Tea and UK-based Tetley Group cent stake. Foreign institutional investors, foreign represent the world's second largest global companies and non-residents hold around 18 per branded tea operation with product and brand cent stake, with the remaining stake held by Indian presence in 40 countries and a significant, albeit financial institutions, mutual funds, banks and other consciously declining presence, in plantation activity companies. in India and Sri Lanka.The world-wide branded tea business of the Tata Tea Group contributes around Products and Brands 88 per cent of its consolidated turnover with the remaining 12 per cent coming from bulk tea, coffee, While Tata Tea is the second largest tea company in and investment income. India after Hindustan Lever, it owns the single largest tea brand in the country,Tata Tea Premium. Tata Tea is headquartered in Kolkata (West Bengal) The company has five major brands in the Indian and owns 26 tea estates in India as an entity.With market catering to all major consumer segments Company Products Established Founder Distribution Production plants Tata Tea Tea 1964 Tata Group, Over 40 countries India James Finlay 150 Entity Year of Status Role formation Tata Tea,Inc, USA 1987 100 per cent subsidiary To process and market instant tea from its facility in Florida, based on sourcing of products from facility at Munnar Consolidated Coffee Ltd 1991 Acquisition of 52.5 per cent To diversify into coffee via a company (Tata Coffee Ltd) stake which was Asia's largest seller of coffee Estate Management 1992 Joint venture To manage 22 plantation companies Services (P) Limited, involved in tea, rubber, coconut and palm Sri Lanka oil, that were privatised by the Sri Lankan government "Tata Tetley, India 1993 100 per cent subsidiary Kochi-based EOU that services the (merged with Tata Tea with branded business of specific Tetley nd Tata effect from April 1, 2005)" Tea markets outside India Asian Coffee Ltd (later 1995 Acquisition of 55 per cent To get into selling instant coffee globally merged with Tata Coffee) stake Watawala Plantations 1996 Acquisition of 49 per cent Production and marketing of tea, oil palm Limited, Sri Lanka stake thourgh EMSPL and rubber in Sri Lanka Tata Tea (GB) Limited 2000 100 per cent subsidiary Special Purpose Vehicle (SPV) established for the acquisition of Tetley, UK Tetley Clover Pvt Ltd., 2003 50:50 joint venture of Tetley To import and sell tea in Pakistan as well Pakistan with Lakson group in Pakistan as build a tea blending factory in Baluchistan Tetley ACI, Bangladesh 2003 50:50 joint venture of Tetley To distribute Tetley's products in with Advanced Chemical Bangladesh Industries (ACI) in Bangladesh Good Earth, USA 2005 Acquisition of 100 per cent Establish Presence in the US and stake by Tetley acquisition of strong product portfolio Jemca, Czech Republic 2006 Acquisition of 100 per cent Market Leadership in Czech republic with stake by Tetley a product portfolio which goes across both mainstream and speciality 8’ O Clock Coffee, USA 2006 Acquisition of more than 50 per To help establish global presence cent stake, alongwith Tata Coffee in coffee and facilitate movement and Tata Enterprises Overseas up the value chain Glaceau, USA 2006 30 per cent minority stake Presence in unfolding crossover space alongwith Tata Sons of the beverages market through enhanced water for tea. Under the Tata Tea portolio, three brands Tea Agni respectively. In addition Tata Tea in India cater to the premium, popular and economy has three very strong regional brands in the four segment – Tata Tea Gold,Tata Tea Premium and Tata Southern states, which are either number one or 151 Over time, the group has grown from being a dominant plantation player into a branded international tea business. In line with this change of strategic focus, 17 of the 25 estates in South India were transferred to a new entity Kanan Devan Hills Plantation Company Private Limited (KDHP). KDPH is principally owned by the 13,000 employees of these plantations, with Tata Tea having number two in their respective geographies.These 18.2 per cent interest in the new enterprise.The are Tetley, Kanan Devan, Chakra Gold and Gemini. ground breaking initiative, which delivers the Tetley in India, though a niche brand, is presented company’s commitment to doing business in a as the new face of tea – innovation brand. The Tata sustainable manner, resulted in a one off profit this Tea brand leads market share in terms of value and year and will deliver recurring costs benefit in volume in India. future.Tata Tea has lowered major costs through Tetley acquired in 2000 is the market leader in the stringent cost control and quality improvement UK and Canada with 26 per cent and 40 per cent measures, supported ably by its R&D centres.These market share respectively by value.Tetley has also initiatives have helped the company improve its launched iced tea under Tea of Life brand in UK, operational performance. which is making good progress.Tetley is establishing a presence in the ready-to-drink segment, for Financial restructuring has also been the thrust for which Tetley Ice T has been launched in UK and the company in the past.The acquisition of Tetley Australia. Chayya, a recently launched Chai Latte was a highly leveraged deal that increased the brand in UK, is the first of its kind and is showing gearing of the company to 2.2 in the year 2002. great promise. Besides Tetley also boasts of a wide Thereafter company has taken several steps to range of fruit and herbals and speciality tea. In successfully replace its high-cost debt to reduce its order to build its business in these high value gearing to 1.1 in the year 2005.These initiatives have segments, packaging innovations such as the “stay allowed significant improvement in the Tetley fresh” flip top carton are being introduced. Group's cash flows that will enable the company to Tata Coffee has the distinction of having six of the invest behind its brand globally, launch new products world’s ten best coffees in its line up.With the and consolidate its market shares in key geographies. purchase of 8 O’Clock it now owns a strong brand in the US. Tata Tea’s contribution in making “Made in India” global Financial analysis Tata Tea,as part of its stated strategy to globalise, In order to support these acquisitions Tata Tea has has charted out its vision to be the market leader actively pursued operational and financial in the country and increase reach in the global restructuring.The impact of this is evident from the market. For this the company has followed a consolidated financial results of the company - strategy of forming subsidiaries or entering into though sales have remained flat between 2003 and alliances in countries that have a significant 2005, the operating margin has improved from 14.1 presence in the tea market, both from the per cent to 18 per cent. producer as well as consumer side. 152 and Tetley the second largest tea brand in the world, with a presence in developed economies of US, Canada, Europe and Australia.The integrated vista offered access to new markets and products to both companies, as well as synergies in tea buying and blending. The Tetley Group now contributes around two- thirds of the total turnover of Tata Tea Ltd and its brand Tetley is the second largest tea bag brand in the world. Its manufacturing facility based at Eaglescliffe, in the north east of England, is believed The first move towards globalisation was the to be the largest tea bag factory in the world.The formation of its 100 per cent subsidiary in the USA combined portfolios of branded offerings cater in 1987.This was followed by its presence in the specifically to the US, Canada,Western Europe, plantation industry in Sri Lanka. Over time the Australia, Middle East,West Asia,Africa, Poland, company realised that in order to go global, Russia and Kazakhstan markets in addition to the acquiring an international brand would be manufacturing and supply operations of Tetley’s preferable to building one afresh the world over.