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Tata Global brews buyout plans for US,Russian tea

Tata Global Beverages,the world’s second-largest tea company,is planning to purchase tea companies and brands in Russia and the US to strengthen its presence in two of the world’s largest tea markets,managing director Percy Siganporia said.

Written by Lalitha Srinivasan | Mumbai | Published: February 2, 2012 1:54:12 am

Tata Global Beverages,(TGBL) the world’s second-largest tea company,is planning to purchase tea companies and brands in Russia and the US to strengthen its presence in two of the world’s largest tea markets,managing director Percy Siganporia said.

“We are in the process of identifying our acquisition targets in these two countries. TGBL,an integrated beverage business,has set out on a journey to become a global leader in branded good-for-you beverages through innovation,strategic acquisitions and organic growth,” Siganporia said.

On Monday,the company signed an equal joint venture with Starbucks Coffee Company to own and operate Starbucks cafes in India.

Tata Tea,owners of Eight O’ Clock coffee in the US and Tetley Tea,has a war chest of R1,000 crore after it sold its stake in vitamin water maker Glacéau to The Coca-Cola Company in 2007,RK Krishnakumar,TGBL vice-chairman,said in August 2011.

Analysts said FMCG and beverages companies are keen to sell their products in new markets. “After its Russian acquisition in 2009,the company wants to scale up its beverages business with further acquisitions in Russia,” says Nitin Mathur,a consumer research analyst with Espirito Santo Securities,a foreign broker. The UK and Russia are the largest tea-drinking nations. Last year,TGBL acquired a majority stake in Rising Beverages Company LLC,which owned Activate brands,and in 2009,purchased Grand Coffee in Russia.

Russia is the world’s largest tea market,both in terms of tea varieties,as well as for just black tea,a survey released in November by Imba Promotion Group,a market research provider in Moscow said.

“In 2010,in terms of retail sales,the Russian market was worth $3.7 billion and in terms of retail volumes,it was 152.9 million kg,” the survey said.

An average Russian now consumes 1.2 kg of tea a year compared to the global average of 0.3 kg and retail prices are relatively high and growing. Tea consumption in the US rose 22% in the past five years to touch sales of $6.5 billion in 2011,Packaged Facts,a market research provider of consumer goods,said in a report released in December 2011. “Retail tea sales across segments were up by 5.2 % in 2011,” it said.

But TGBL has many challenges to grow in global markets dominated by rivals Unilever Plc,Groupe Danone and Nestle SA. “The major challenge that TGBL faces is that it does not have a sound background in good-for-you beverage sector,” an analyst from a domestic brokerage said on condition of anonymity. “Other international players have the technology and expertise in this domain.”

TGL’s global competitors are betting big on enhanced water like vitamin water to push sales in global markets,the analyst added. According to him,TGBL does not have the consumer connect to know the emerging trends in this sector.

Domestic consumer goods makers have been growing beyond Indian shores to emerging markets in Latin America,South East Asia and Africa. Cooking oil maker Marico,owners of Parachute and Saffola brands,is looking to purchase companies in Asia and Africa in beauty and wellness sectors,Chaitanya Deshpande,Marico’s head of mergers and acquisitions said. “Despite the global economic slowdown,some of these regions continue to grow at a healthy pace. If we come across opportunities to acquire brands with potential in markets where penetration levels in our segments of interest are still low,we will evaluate them,” Deshpande said.

Fruit Juice maker Dabur India plans to acquire companies in South East Asia,the Middle East and Africa. “We will look at acquisitions only in areas that Dabur is operating in currently,like personal care and healthcare,” its group director PD Narang said.

Godrej Consumer Products,which acquired 10 overseas companies in the past two years,purchased 60% stake in Chile-based hair colour and cosmetics company Cosmetica Nacional in December. “We are looking at more opportunities in developing markets,” said Adi Godrej,chairman of the Godrej Group.

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