Project Report
On
TATA TEA
Submitted to: Sumbitted by:
KATAN.VIRA LOVEKESH- PHUTANE
Acknowledgement
I am grateful to my marketing faculty, Prof KATEN.VIRA, who gave us such an exciting project on the marketing strategies of a company. This project has helped me to clear my concept which is otherwise not possible inside the classroom. It has enabled me to relate the classroom knowledge to the real world and further gain insight into the actual application.
I express my deepest regards to my faculty and friends whose guidance, support and timely advice has helped me bring this project report in its final shape.
INDEX
S.no Topic Pg.no
1. Indian Multinational 1
2. Introduction of TETLEY – A Tata enterprise 2
3. Tale of Tata Tea 2
4. History of Tetley 5
5. Tata Tetley Limited 6
6. Going Global 9
7. Impact 10
8. Strategies 11
9. Conclusion 12
10. Bibliography 13
List of Indian Multinationals
Amtek Auto Limited
Arvind Mills Limited
Ashok Leyland Limited
Asian Paints Limited
Aurobindo Pharma Limited
Bharat Forge Limited
Dabur India Limited
Dr Reddy's Laboratories Limited
Glenmark Pharmaceuticals Limited
Gokaldas Exports Limited
Infosys Technologies Limited
ITC Limited
Larsen & Toubro Limited
Mahindra & Mahindra Limited
Marico Industries Limited
Moser Baer India Limited
Motherson Sumi Systems Limited
Nicholas Piramal India Limited
Ranbaxy Laboratories Limited
Rico Auto Industries Limited
Satyam Computer Services Limited
Sterlite Industries India Limited
Sundram Fasteners Limited
Tata Consultancy Services Limited
Tata Motors Limited
Tata Steel Limited
Tata Tea Limited
The Indian Hotels Company Limited
Thermax Limited
Titan Industries Limited
United Phosphorus Limited
Voltas Limited
Videsh Sanchar Nigam Limited
Wipro Limited
Wockhardt Limited
Zee Telefilms Limited
• Indian industry has grown wings. There has been a rapid upsurge in the Indian corporate world as a result of globalization. Globalization has given a new meaning and dimension to corporate India. Many Indian firms have slowly and surely embarked on the global path, leading to the emergence of the Indian multinational companies.
• Indian industry has crossed domestic boundaries and established a remarkable presence in foreign markets in a very short time.
• The evolution of the Indian multinational spans diverse sectors from pharmaceuticals to automotive to hotels to textiles to engineering goods and entertainment. With each passing day, Indian businesses are acquiring companies abroad, becoming world-popular suppliers and are recruiting talent cutting across national boundaries.
• This trend truly signifies the global aspirations of Indian companies, but more importantly, represents the ability of Indian businesses to achieve global standards of competitiveness.
• It indeed gives me much pleasure in presenting to you - ‘Indian Multinationals’ - a bouquet of global corporate India.
Kamal Nath
Minister of Commerce & Industry
Government of India
Tetley is part of Tata Tea, one of India’s best known tea brands and itself a part of the Tata Group, one of India’s largest business corporations. And we own Good Earth Teas, one of the USA’s most exciting specialty tea brands, JEMČA, the market leading tea company in the Czech Republic and Joekels Tea Packers, the third largest player in the South African tea market.
Tata and Tetley not only share a passion for tea but also a commitment to operate as a responsible business.
THE TALE OF TATA TEA
Tata Tea was incorporated in 1962 as Tata Finlay Limited, and commenced business in 1963. The company, in collaboration with Tata Finlay & Company, Glasgow, UK, initially set up an instant tea factory at Munnar (Kerala) and a blending/packaging unit in Bangalore,. Tata Tea Limited
Over the years, the company expanded its operations and also acquired tea plantations. In 1976, the company acquired Sterling Tea companies from James Finlay & Company for Rs 115 million, using Rs 19.8 million of equity and Rs. 95.2 million of unsecured loans at 5% per annum interest. In 1982, Tata Industries Limited bought out the entire stake of James Finlay & Company in the joint venture, Tata Finlay Ltd. In 1983, the company was renamed as Tata Tea Limited.
In the mid 1980s,Tata Tea felt it necessary to enter the branded tea market to offset the erratic fluctuations in commodity prices.
In May 1984, the company revolutionized the value-added tea market in India by launching Kanan Devan tea in polypack. In 1984, the company set up a R&D center at Munnar, Kerala. In 1986, it launched Tata Tea Dust in Maharashtra. In 1988, the Tata Tea Leaf was launched in Madhya Pradesh. In 1989, Tata Tea bought a 52% stake in Karnataka-based Consolidated Coffee Limited-the largest coffee plantation in Asia, in order to expand its coffee business. In 1991, Tata Tea formed a joint venture with Tetley International, UK, in order to market its branded tea abroad. In 1992, Tata Tea took a 9.5% stake in Asian Coffee-the Hyderabad based 100% export oriented unit known for its instant coffee, through an open offer. Later, in 1994, Tata Tea increased its stake in Asian Coffee to 64.5% through another open offer. This helped it to consolidate its position in the coffee industry.
In 1995, Tata Tea unveiled a massive physical up gradation program at a cost of Rs 1.6 billion. The up gradation program, spread over four years, was meant to improve its production lines. In the same year, the company, along with a Sri Lankan partner, bid successfully for a group of 20 tea estates in the famous Watawala plantations in Sri Lanka. ........
Products and brands
The company has five major brands in the Indian market — Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini — catering to all major consumer segments for tea. The Tata Tea brand leads market share in terms of value and volume in India and has been accorded "Super Brand" recognition in the country. Tata Tea's distribution network in the country with 38 C&F agents and 2,350 stockists caters to over 1.7 million retail outlets (ORG Marg Retail Audit) in India.
The company has a 100 per cent export-oriented unit (KOSHER & HACCP certified) manufacturing instant tea in Munnar, Kerala, which is the largest such facility outside the United States. The unit's product is made from a unique process, developed in-house, of extraction from tea leaves, giving it a distinctive liquoring and taste profile. Instant tea is used for light density 100 per cent teas, iced tea mixes and in the preparation of ready-to-drink (RTD) beverages.With an area of 26,500 hectares under tea cultivation, Tata Tea produces around 60 million kg of black tea annually.
Overseas business
The Tata Tea and Tetley portfolios of branded offerings sourced from the India based JV, caters specifically to the Australian, Middle East, West Asia, North Africa, Poland, Russia and Kazakhistan markets. This is independent of the manufacturing and supply operations of its Tetley and other subsidiary companies.
Subsidiaries
Tata Tea has subsidiaries in Great Britain, United States and India.
The Tetley Group headquartered in Great Britain, is a leading international tea company selling over 60 Tetley branded products to over 40 countries world-wide. Tetley is the second largest tea bag brand in the world, it is the number one tea bag brand in Great Britain and Canada and has significant market shares in the United States, Australia, Poland and France. Beyond these markets Tetley is steadily growing its presence in the rest of Europe, particularly the former Eastern block countries and throughout the Caribbean and lesser developed markets such as Bangladesh, Pakistan and Russia where Tetley was launched last year. Tetley has a customized portfolio of offerings for each country, ranging from black, green, fruit and herbal teas, iced ready-to-drink teas and an extensive range of exotic specialty tea. The Tetley brand is accorded "Super Brand" recognition in Great Britain.
Tetley own one manufacturing facility at Eaglescliffe in the north of England. Established since 1969, it currently occupies 220,000 square feet and is believed to be the largest tea bag factory in the world. Its quality management systems are accredited to the ISO 9002 standard and is also in the process of receiving the ISO 14001 certification.
Tata Coffee with instant coffee manufacturing facilities, R&D capability and plantation assets of around 8000 hectares, producing over 9000 MT of coffee annually, is the largest coffee plantation company in Asia. The company grows both the robusta and arabica varieties of coffee and markets both instant and "ground" coffee. Its curing facility has the Certificate of Approval for Quality Standards ISO 9002, the first curing unit in Asia to receive this certification.
Tata-Tetley is a Kochi-based EOU which services the branded business of specific Tetley and Tata Tea markets outside India.
Tata Tea Inc in the United States processes and markets instant tea from its facility in Florida, based on sourcing of Instant Tea products out of Munnar, Kerala.
Associate companies
Tata Tea has a substantial interest in the Sri Lankan tea industry through Watawala Plantations, Sri Lanka, where it focuses on production and marketing of tea, rubber and palm oil.
Kanan Devan Hills Plantation Company, established on March 31, 2005, has major interests in production and manufacture of black tea at its 17 estates in Kerala. Tata Tea has a minority stake in the entity.
HISTORY OF TETLEY
It all began in 1837…
In 1837, two brothers, Joseph and Edward Tetley started to sell tea and became such a success that they set up as tea merchants. In 1856, in partnership with Joseph Ackland, they set up "Joseph Tetley & Company, Wholesale Tea Dealers".
Joseph Tetley and Co tastes success…
Business was good and the company grew. As well as selling tea, Joseph Tetley & Co also began to blend and package it. In the 1880s they began to sell tea to the United States of America, and started to bring ideas back; one of these was the tea bag.
The Tea Bag hits Britain
Tea was rationed during World War II, it was not until 1953, just after rationing finished, that Tetley launched the tea bag to the UK and it was an immediate success.
The rest, as they say, is history. The tea bag had captured the public’s imagination and desire for convenience. Within 10 years it revolutionised how Britons drank their tea and the old fashioned tea pot had given way to making tea in a cup using a tea bag.
More innovations followed…
Since the 60s, Tetley has continued to develop people’s love of tea drinking by introducing innovative and exciting ideas in many different countries. In 1989 we launched the round tea bag, latching on to the fashion to drink tea in a mug, rather than a cup. Next came the Drawstring ‘No drip, no mess’ tea bag.
Tetley owners through the years
1974 Tetley Tea Company was bought by J Lyons who merged it with the Lyons tea business to form Lyons Tetley. 1978 Allied Breweries acquired J Lyons’ Businesses then as Allied Domecq sold them in the 1990s. The Tetley Group was created in July 1995, when a group of investors bought what was then the world-wide beverage business from Allied Domecq. On 10th March 2000, The Tetley Group was sold to Tata Tea Limited, one of the world’s largest integrated tea businesses.
Today at Tetley...
Every day, our focus is on developing new, exciting and different ways of making tea. Recently in the UK, Canada and Australia, we’ve launched new blends of green teas and fruit and herbal infusions, some delicious new ready to drink iced teas and spicy chai latte teas (just add a shot of steamed milk and away you go..). And there’s lots more on the way!
Nearly 1,000 people world wide work for Tetley, at its headquarters in Greenford, UK and in Australia, Canada, Poland, Russia, the USA, Pakistan, Bangladesh, India and South Africa. Tetley also includes Good Earth Teas, one of the USA’s most exciting
specialty tea brands and JEMČA, the market leading tea company in the Czech Republic selling a range of black, green and fruit and herbal teas.
Tetley is part of Tata Tea, India’s No 2 tea brand and itself part of the Tata Group, one of India’s biggest business corporations. Between us, Tata Tea and Tetley have tea for sale in 60% of the world’s tea market.
Tata Tetley Limited
The Company was incorporated during 1992. Consequent to the formation of the Joint Venture between Tata Tea Limited and Tetley Group, UK, the business of Tetley Division of Tata Tea Limited was transferred to the Joint Venture Company during 1994. The paid up share capital of the Joint Venture Company is Rs. 10 crores, with a 50% holding by each Joint Venture partner. Tata Tea Limited is the largest integrated tea company in the world and Tetley is the second largest branded tea company in the world and have very strong presence in the major tea bag markets like U.K., USA, Australia, Canada and Poland. Consequent of the acquisition of Tetley by Tata Tea Limited during the year 2000 the Joint Venture Company has become a subsidiary of Tata Tea Limited.
The Company has a 100% EOU at Cochin, Kerala and a domestic unit also at Indore, Madhya Pradesh.
The main markets of the Company and the main product lines are as under :
• Poland & Russia
The main products are : different variants of tea bags and packet teas. The sales to Poland and Russia are sold to Tetley group companies. The tea bags and packet teas are marketed in two brands, viz. 'Tetley' and 'Lyons'
Tea Bags :
Round Tea Bags - black and flavoured. Flavoured tea bags include Earl Grey, Lemon, Strawberry, Peach, Raspherry and Black Current.
Drawstring Tea Bags - black as well as flavoured. Flavoured drawstring tea bags include only Earl Grey.
String & Tag Tea Bag - black tea.
Packet Tea / Pouch Teas :
Packet teas include both black as well as flavoured. Flavoured packet teas is available only with Earl Grey.
Middle East :
The main products are tea bags and packet teas. The sales to Middle East are invoiced to Tata Tea Limited / Tata International at agreed transfer prices. The products are marketed in the brand name of 'Tata Tea'.
Domestic Market :
The product sold in the domestic market is conventional string and tag tea bags sold under the brand name "Tata Tetley". These tea bags were launched during 1997.
With effect from October, 2001, tea bags would be positioned under 'Tetley' brand.
Market share in India - 5%.
The Manufacturing Base at Cochin :
The manufacturing base in Cochin is considered as the most efficient and cost effective unit in the group. This unit is also capable of producing different kinds of tea bags and packet teas with various pack sizes and the range of such products goes to 40 (Forty). The expertise of Tata Tetley Limited in Tea Bags manufacturing is of International standards. Our product 'Draw String' Tea bag is an innovation of Tetley and is marketed only by Tetley in the world.
Tetley performance, a mixed bag
Tetley, in which Tata Tea holds a 98.6 per cent stake, recorded a 12.8 per cent decline in its revenues in the quarter ended December compared to the corresponding previous quarter.
But revenues have been impacted by the sale of its bulk tea business in the US. Profits have increased by 60 per cent to £17.9 million.
The company has indicated that the debt restructuring undertaken the previous year had resulted in lower outgo on interest, helping profits to grow.
The impact of any change in accounting relating to amortising is not known. If the change has had a significant impact, it will affect the quality of Tetley's profit growth.
Rising competition
Another area of concern relates to competition. Tata Tea and Tetley together derive more than 80 per cent of their revenues from black tea, whose market is shrinking and is marked by a few large players.
Tata Tea is one of the bigger players in the packet tea segment and any strategic moves from others can impact Tata Tea's revenue growth.
Over the past two quarters, HLL and Godrej, the latest entrants, have been promoting their products aggressively.
Tata Tea has, however, not aggressively responded to such moves in the past one year. Except for the launch of Tetley tea bags and Tata Tea Gold, the absence of aggressive marketing initiatives has been conspicuous, especially in the face of HLL's relaunch of the `Brooke Bond' umbrella brand.
The rise in competition is of concern to Tata Tea and Tetley in the light of their stagnating market shares of Tata Tea and Tetley.
So far, however, competition has not made any dent on Tata Tea's hold on the market. Market shares have remained largely unchanged in India, the UK, Canada, and the US.
Tetley has gained market share in Australia in the past one year, but sustaining and replicating it in other markets hold the key to its future growth prospects. In this context, the launch of products augurs well. Shareholders can hold on to the Tata Tea stock in the light of its steady performance.
GOING GLOBAL
On march 2000 Tata Tea Limited has bought out all the brands of Tetley Tea of the UK for stg271 million ($431.3 million).
This acquisition of the worldwide Tetley tea business, which is twice the size of Tata Tea, represents the largest cross-border takeover of an international brand by an Indian company.
As per the terms of agreement TTL would make a formal offer for acquiring all the shareholding of the Tetley group through a 100 percent subsidiary in the UK.
The takeover includes the private label tea business in the US but excludes its coffee business there, which was recently sold by the existing shareholders separately.
Tata Group chairman Ratan Tata said it was a momentous occasion for the Tatas as this was the largest ever acquisition by an Indian company abroad in terms of acquiring an international brand. "It is a bold move and I hope that other Indian corporates will follow," he said.
The acquisition of Tetley was financed with stg70 million of equity, of which stg60 million will be from TTL and stg10 million from its New York based subsidiary, Tata Tea Inc.
The debt component of stg20 million raised through instruments like subordinate vendor loan notes and debt offerings arranged by Rabo Bank, which acted as the financial and strategic advisor as well as sole lead manager for this transaction. The loan was raised in four tranches of tenors varying between 7.5 to 9.5 years, carry an average interest of 11 percent per annum.
IMPACT
This deal which happened to be the largest cross-border acquisition by any Indian company, marked the culmination of Tata Tea's strategy of pushing for aggressive growth and worldwide expansion. The acquisition of Tetley pitchforked Tata Tea into a position where it could rub shoulders with global behemoths like Unilever and Lawrie. The acquisition of Tetley made Tata Tea the second biggest tea company in the world. (The first being Unilever, owner of Brooke Bond and Lipton). Moreover it also went through a metamorphosis from a plantation company to an international consumer products company.
Apart from the size of the deal, what made it particularly special was the fact that it was the first ever leveraged buy-out (LBO) by any Indian company. This method of financing had never been successfully attempted before by any Indian company. Tetley's price tag of 271 mn pounds (US $450 m) was more than four times the net worth of Tata tea which stood at US $ 114 m. This David & Goliath aspect was what made the entire transaction
so unusual. What made it possible was the financing mechanism of LBO. This mechanism allowed the acquirer (Tata Tea) to minimise its cash outlay in making thepurchase.
Tata Tea and Tetley have taken some steps to achieve emotional integration. They have formed several groups comprising executives from both outfits. Two of these are : the tea procurement group (TPG) and the geographic expansion group (GEG).
The main job of TPG is to strategise sourcing by Tetley of tea from India, in general and from Tata Tea, in particular. Tata Tea had made a small beginning as a supplier of both North and South Indian teas to Tetley about two years back. The process has since stabilised. Obviously, the quantum will depend on two factors — the incremental market share that can be garnered and the ability to make subtle changes in the blend so that the product quality, particularly in the existing markets, continues to be accepted.
GEG's principal responsibility naturally is to coordinate foray into new markets. Tetley, which is predominantly into tea bag business (92 per cent of sales), will target for growth in the packet tea segment, where it now has a minimal presence. Russia and Kazakhstan have since been identified. Tata Tea, with its experience of marketing packet tea in India and in West Asia, will aid Tetley's efforts.
The collaboration and coordination exercise now also extends to R&D. Tata Tea has joined hands with the R&D wing of Tetley and the spheres in their purview are new products, packaging materials, improvement in tea quality and analytical methods.
For e.g… launch of ready-to-drink teas and flavoured teas in which Tetley already had experience.
Strategies:
The premium tea bag offering of Tata Tea, which was launched in the last quarter of 2001-02 and whose content has fine Assams and a Sri Lankan component, has been brand-named Tetley. (It, however, has to be mentioned that acting on the new `power brand' concept, the Levers have drastically reduced the number of tea brands in India.)
Under the control of Tata Tea, the UK outfit has already seen a phase of restructuring and consolidation. The relatively small Greenford tea factory in West London, whose product range included `Drawstring' tea bags, black tea bags and a range of speciality, fruit-flavoured teas and fruit/herbal infusions, was de-commissioned last year and its capacity re-located at the large Eaglescliffe facility near Middlesborough in Northeast England. The next phase of the UK firm's consolidation may involve its nine subsidiaries.
In fact, an in-principle decision on the fate of the Kochi-based 50:50 joint venture, Tata Tetley Ltd, is likely in not a too distant future. If on stock taking the board of Tata Tetley
finds that continuation of a separate joint venture is not necessary, it may be merged with either of the joint venture partners and earmarked to foster international business.
In the course of 2001-02, the company `demised' the Tata Tetley brand in the domestic market and wound up its domestic market activity. This would enable the company to focus on exports. Its role in the domestic market is now restricted to that of a tea bag converter for Tata Tea.
Conclusion
Tata Tea contributes significantly to social and community development on its estates through comprehensive labour welfare programmes that offer free housing, healthcare and other benefits. The company has set-up and manages hospitals, adult-literacy centres, childcare centres and schools to educate the children of its nearly 40,000 employees. In addition, the company has special facilities to look after "differently abled" children of the workers who are taught how to operate in the environment by enhancing their skills and abilities.
Tata Tea has institutionalised a process of Annual Welfare Audit conducted by renowned WHO experts, among the first Indian companies to do so.
Committed to running its business responsibly, Tetley works with stakeholders around the world to understand the social, ethical and environmental impacts of its business and identify how to manage and improve the most significant of these. This approach results in a range of local activities and corporate initiatives - from waste management programmes at our Eaglescliffe Tea Factory to the provision of safe water for people in the tea growing areas of Malawi.
The Tetley Group also manages its social impacts by building partnerships with charities and non government organisations, focusing on causes with a clear relevance to its business. These partnerships go beyond traditional corporate fundraising, involving activities that change both the Tetley business and the partner organisation for the better. This means encouraging our staff to become personally involved in the partnerships, donating their time and skills, as well as money.
Bibliography
1. http://www.indiabrands.org/artdisplay.aspx?cat_id=84&art_id=13725
2. http://www.mit.gov.in/eg/article-indiawired.asp
3. http://www.india-now.org/artdispview.aspx?art_id=4218&cat_id=387&page=1
4. http://www.icmr.icfai.com
5. http://www.tatatea.com
6. http://www.tetley.com
7. Philip Kotler
On
TATA TEA
Submitted to: Sumbitted by:
KATAN.VIRA LOVEKESH- PHUTANE
Acknowledgement
I am grateful to my marketing faculty, Prof KATEN.VIRA, who gave us such an exciting project on the marketing strategies of a company. This project has helped me to clear my concept which is otherwise not possible inside the classroom. It has enabled me to relate the classroom knowledge to the real world and further gain insight into the actual application.
I express my deepest regards to my faculty and friends whose guidance, support and timely advice has helped me bring this project report in its final shape.
INDEX
S.no Topic Pg.no
1. Indian Multinational 1
2. Introduction of TETLEY – A Tata enterprise 2
3. Tale of Tata Tea 2
4. History of Tetley 5
5. Tata Tetley Limited 6
6. Going Global 9
7. Impact 10
8. Strategies 11
9. Conclusion 12
10. Bibliography 13
List of Indian Multinationals
Amtek Auto Limited
Arvind Mills Limited
Ashok Leyland Limited
Asian Paints Limited
Aurobindo Pharma Limited
Bharat Forge Limited
Dabur India Limited
Dr Reddy's Laboratories Limited
Glenmark Pharmaceuticals Limited
Gokaldas Exports Limited
Infosys Technologies Limited
ITC Limited
Larsen & Toubro Limited
Mahindra & Mahindra Limited
Marico Industries Limited
Moser Baer India Limited
Motherson Sumi Systems Limited
Nicholas Piramal India Limited
Ranbaxy Laboratories Limited
Rico Auto Industries Limited
Satyam Computer Services Limited
Sterlite Industries India Limited
Sundram Fasteners Limited
Tata Consultancy Services Limited
Tata Motors Limited
Tata Steel Limited
Tata Tea Limited
The Indian Hotels Company Limited
Thermax Limited
Titan Industries Limited
United Phosphorus Limited
Voltas Limited
Videsh Sanchar Nigam Limited
Wipro Limited
Wockhardt Limited
Zee Telefilms Limited
• Indian industry has grown wings. There has been a rapid upsurge in the Indian corporate world as a result of globalization. Globalization has given a new meaning and dimension to corporate India. Many Indian firms have slowly and surely embarked on the global path, leading to the emergence of the Indian multinational companies.
• Indian industry has crossed domestic boundaries and established a remarkable presence in foreign markets in a very short time.
• The evolution of the Indian multinational spans diverse sectors from pharmaceuticals to automotive to hotels to textiles to engineering goods and entertainment. With each passing day, Indian businesses are acquiring companies abroad, becoming world-popular suppliers and are recruiting talent cutting across national boundaries.
• This trend truly signifies the global aspirations of Indian companies, but more importantly, represents the ability of Indian businesses to achieve global standards of competitiveness.
• It indeed gives me much pleasure in presenting to you - ‘Indian Multinationals’ - a bouquet of global corporate India.
Kamal Nath
Minister of Commerce & Industry
Government of India
Tetley is part of Tata Tea, one of India’s best known tea brands and itself a part of the Tata Group, one of India’s largest business corporations. And we own Good Earth Teas, one of the USA’s most exciting specialty tea brands, JEMČA, the market leading tea company in the Czech Republic and Joekels Tea Packers, the third largest player in the South African tea market.
Tata and Tetley not only share a passion for tea but also a commitment to operate as a responsible business.
THE TALE OF TATA TEA
Tata Tea was incorporated in 1962 as Tata Finlay Limited, and commenced business in 1963. The company, in collaboration with Tata Finlay & Company, Glasgow, UK, initially set up an instant tea factory at Munnar (Kerala) and a blending/packaging unit in Bangalore,. Tata Tea Limited
Over the years, the company expanded its operations and also acquired tea plantations. In 1976, the company acquired Sterling Tea companies from James Finlay & Company for Rs 115 million, using Rs 19.8 million of equity and Rs. 95.2 million of unsecured loans at 5% per annum interest. In 1982, Tata Industries Limited bought out the entire stake of James Finlay & Company in the joint venture, Tata Finlay Ltd. In 1983, the company was renamed as Tata Tea Limited.
In the mid 1980s,Tata Tea felt it necessary to enter the branded tea market to offset the erratic fluctuations in commodity prices.
In May 1984, the company revolutionized the value-added tea market in India by launching Kanan Devan tea in polypack. In 1984, the company set up a R&D center at Munnar, Kerala. In 1986, it launched Tata Tea Dust in Maharashtra. In 1988, the Tata Tea Leaf was launched in Madhya Pradesh. In 1989, Tata Tea bought a 52% stake in Karnataka-based Consolidated Coffee Limited-the largest coffee plantation in Asia, in order to expand its coffee business. In 1991, Tata Tea formed a joint venture with Tetley International, UK, in order to market its branded tea abroad. In 1992, Tata Tea took a 9.5% stake in Asian Coffee-the Hyderabad based 100% export oriented unit known for its instant coffee, through an open offer. Later, in 1994, Tata Tea increased its stake in Asian Coffee to 64.5% through another open offer. This helped it to consolidate its position in the coffee industry.
In 1995, Tata Tea unveiled a massive physical up gradation program at a cost of Rs 1.6 billion. The up gradation program, spread over four years, was meant to improve its production lines. In the same year, the company, along with a Sri Lankan partner, bid successfully for a group of 20 tea estates in the famous Watawala plantations in Sri Lanka. ........
Products and brands
The company has five major brands in the Indian market — Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini — catering to all major consumer segments for tea. The Tata Tea brand leads market share in terms of value and volume in India and has been accorded "Super Brand" recognition in the country. Tata Tea's distribution network in the country with 38 C&F agents and 2,350 stockists caters to over 1.7 million retail outlets (ORG Marg Retail Audit) in India.
The company has a 100 per cent export-oriented unit (KOSHER & HACCP certified) manufacturing instant tea in Munnar, Kerala, which is the largest such facility outside the United States. The unit's product is made from a unique process, developed in-house, of extraction from tea leaves, giving it a distinctive liquoring and taste profile. Instant tea is used for light density 100 per cent teas, iced tea mixes and in the preparation of ready-to-drink (RTD) beverages.With an area of 26,500 hectares under tea cultivation, Tata Tea produces around 60 million kg of black tea annually.
Overseas business
The Tata Tea and Tetley portfolios of branded offerings sourced from the India based JV, caters specifically to the Australian, Middle East, West Asia, North Africa, Poland, Russia and Kazakhistan markets. This is independent of the manufacturing and supply operations of its Tetley and other subsidiary companies.
Subsidiaries
Tata Tea has subsidiaries in Great Britain, United States and India.
The Tetley Group headquartered in Great Britain, is a leading international tea company selling over 60 Tetley branded products to over 40 countries world-wide. Tetley is the second largest tea bag brand in the world, it is the number one tea bag brand in Great Britain and Canada and has significant market shares in the United States, Australia, Poland and France. Beyond these markets Tetley is steadily growing its presence in the rest of Europe, particularly the former Eastern block countries and throughout the Caribbean and lesser developed markets such as Bangladesh, Pakistan and Russia where Tetley was launched last year. Tetley has a customized portfolio of offerings for each country, ranging from black, green, fruit and herbal teas, iced ready-to-drink teas and an extensive range of exotic specialty tea. The Tetley brand is accorded "Super Brand" recognition in Great Britain.
Tetley own one manufacturing facility at Eaglescliffe in the north of England. Established since 1969, it currently occupies 220,000 square feet and is believed to be the largest tea bag factory in the world. Its quality management systems are accredited to the ISO 9002 standard and is also in the process of receiving the ISO 14001 certification.
Tata Coffee with instant coffee manufacturing facilities, R&D capability and plantation assets of around 8000 hectares, producing over 9000 MT of coffee annually, is the largest coffee plantation company in Asia. The company grows both the robusta and arabica varieties of coffee and markets both instant and "ground" coffee. Its curing facility has the Certificate of Approval for Quality Standards ISO 9002, the first curing unit in Asia to receive this certification.
Tata-Tetley is a Kochi-based EOU which services the branded business of specific Tetley and Tata Tea markets outside India.
Tata Tea Inc in the United States processes and markets instant tea from its facility in Florida, based on sourcing of Instant Tea products out of Munnar, Kerala.
Associate companies
Tata Tea has a substantial interest in the Sri Lankan tea industry through Watawala Plantations, Sri Lanka, where it focuses on production and marketing of tea, rubber and palm oil.
Kanan Devan Hills Plantation Company, established on March 31, 2005, has major interests in production and manufacture of black tea at its 17 estates in Kerala. Tata Tea has a minority stake in the entity.
HISTORY OF TETLEY
It all began in 1837…
In 1837, two brothers, Joseph and Edward Tetley started to sell tea and became such a success that they set up as tea merchants. In 1856, in partnership with Joseph Ackland, they set up "Joseph Tetley & Company, Wholesale Tea Dealers".
Joseph Tetley and Co tastes success…
Business was good and the company grew. As well as selling tea, Joseph Tetley & Co also began to blend and package it. In the 1880s they began to sell tea to the United States of America, and started to bring ideas back; one of these was the tea bag.
The Tea Bag hits Britain
Tea was rationed during World War II, it was not until 1953, just after rationing finished, that Tetley launched the tea bag to the UK and it was an immediate success.
The rest, as they say, is history. The tea bag had captured the public’s imagination and desire for convenience. Within 10 years it revolutionised how Britons drank their tea and the old fashioned tea pot had given way to making tea in a cup using a tea bag.
More innovations followed…
Since the 60s, Tetley has continued to develop people’s love of tea drinking by introducing innovative and exciting ideas in many different countries. In 1989 we launched the round tea bag, latching on to the fashion to drink tea in a mug, rather than a cup. Next came the Drawstring ‘No drip, no mess’ tea bag.
Tetley owners through the years
1974 Tetley Tea Company was bought by J Lyons who merged it with the Lyons tea business to form Lyons Tetley. 1978 Allied Breweries acquired J Lyons’ Businesses then as Allied Domecq sold them in the 1990s. The Tetley Group was created in July 1995, when a group of investors bought what was then the world-wide beverage business from Allied Domecq. On 10th March 2000, The Tetley Group was sold to Tata Tea Limited, one of the world’s largest integrated tea businesses.
Today at Tetley...
Every day, our focus is on developing new, exciting and different ways of making tea. Recently in the UK, Canada and Australia, we’ve launched new blends of green teas and fruit and herbal infusions, some delicious new ready to drink iced teas and spicy chai latte teas (just add a shot of steamed milk and away you go..). And there’s lots more on the way!
Nearly 1,000 people world wide work for Tetley, at its headquarters in Greenford, UK and in Australia, Canada, Poland, Russia, the USA, Pakistan, Bangladesh, India and South Africa. Tetley also includes Good Earth Teas, one of the USA’s most exciting
specialty tea brands and JEMČA, the market leading tea company in the Czech Republic selling a range of black, green and fruit and herbal teas.
Tetley is part of Tata Tea, India’s No 2 tea brand and itself part of the Tata Group, one of India’s biggest business corporations. Between us, Tata Tea and Tetley have tea for sale in 60% of the world’s tea market.
Tata Tetley Limited
The Company was incorporated during 1992. Consequent to the formation of the Joint Venture between Tata Tea Limited and Tetley Group, UK, the business of Tetley Division of Tata Tea Limited was transferred to the Joint Venture Company during 1994. The paid up share capital of the Joint Venture Company is Rs. 10 crores, with a 50% holding by each Joint Venture partner. Tata Tea Limited is the largest integrated tea company in the world and Tetley is the second largest branded tea company in the world and have very strong presence in the major tea bag markets like U.K., USA, Australia, Canada and Poland. Consequent of the acquisition of Tetley by Tata Tea Limited during the year 2000 the Joint Venture Company has become a subsidiary of Tata Tea Limited.
The Company has a 100% EOU at Cochin, Kerala and a domestic unit also at Indore, Madhya Pradesh.
The main markets of the Company and the main product lines are as under :
• Poland & Russia
The main products are : different variants of tea bags and packet teas. The sales to Poland and Russia are sold to Tetley group companies. The tea bags and packet teas are marketed in two brands, viz. 'Tetley' and 'Lyons'
Tea Bags :
Round Tea Bags - black and flavoured. Flavoured tea bags include Earl Grey, Lemon, Strawberry, Peach, Raspherry and Black Current.
Drawstring Tea Bags - black as well as flavoured. Flavoured drawstring tea bags include only Earl Grey.
String & Tag Tea Bag - black tea.
Packet Tea / Pouch Teas :
Packet teas include both black as well as flavoured. Flavoured packet teas is available only with Earl Grey.
Middle East :
The main products are tea bags and packet teas. The sales to Middle East are invoiced to Tata Tea Limited / Tata International at agreed transfer prices. The products are marketed in the brand name of 'Tata Tea'.
Domestic Market :
The product sold in the domestic market is conventional string and tag tea bags sold under the brand name "Tata Tetley". These tea bags were launched during 1997.
With effect from October, 2001, tea bags would be positioned under 'Tetley' brand.
Market share in India - 5%.
The Manufacturing Base at Cochin :
The manufacturing base in Cochin is considered as the most efficient and cost effective unit in the group. This unit is also capable of producing different kinds of tea bags and packet teas with various pack sizes and the range of such products goes to 40 (Forty). The expertise of Tata Tetley Limited in Tea Bags manufacturing is of International standards. Our product 'Draw String' Tea bag is an innovation of Tetley and is marketed only by Tetley in the world.
Tetley performance, a mixed bag
Tetley, in which Tata Tea holds a 98.6 per cent stake, recorded a 12.8 per cent decline in its revenues in the quarter ended December compared to the corresponding previous quarter.
But revenues have been impacted by the sale of its bulk tea business in the US. Profits have increased by 60 per cent to £17.9 million.
The company has indicated that the debt restructuring undertaken the previous year had resulted in lower outgo on interest, helping profits to grow.
The impact of any change in accounting relating to amortising is not known. If the change has had a significant impact, it will affect the quality of Tetley's profit growth.
Rising competition
Another area of concern relates to competition. Tata Tea and Tetley together derive more than 80 per cent of their revenues from black tea, whose market is shrinking and is marked by a few large players.
Tata Tea is one of the bigger players in the packet tea segment and any strategic moves from others can impact Tata Tea's revenue growth.
Over the past two quarters, HLL and Godrej, the latest entrants, have been promoting their products aggressively.
Tata Tea has, however, not aggressively responded to such moves in the past one year. Except for the launch of Tetley tea bags and Tata Tea Gold, the absence of aggressive marketing initiatives has been conspicuous, especially in the face of HLL's relaunch of the `Brooke Bond' umbrella brand.
The rise in competition is of concern to Tata Tea and Tetley in the light of their stagnating market shares of Tata Tea and Tetley.
So far, however, competition has not made any dent on Tata Tea's hold on the market. Market shares have remained largely unchanged in India, the UK, Canada, and the US.
Tetley has gained market share in Australia in the past one year, but sustaining and replicating it in other markets hold the key to its future growth prospects. In this context, the launch of products augurs well. Shareholders can hold on to the Tata Tea stock in the light of its steady performance.
GOING GLOBAL
On march 2000 Tata Tea Limited has bought out all the brands of Tetley Tea of the UK for stg271 million ($431.3 million).
This acquisition of the worldwide Tetley tea business, which is twice the size of Tata Tea, represents the largest cross-border takeover of an international brand by an Indian company.
As per the terms of agreement TTL would make a formal offer for acquiring all the shareholding of the Tetley group through a 100 percent subsidiary in the UK.
The takeover includes the private label tea business in the US but excludes its coffee business there, which was recently sold by the existing shareholders separately.
Tata Group chairman Ratan Tata said it was a momentous occasion for the Tatas as this was the largest ever acquisition by an Indian company abroad in terms of acquiring an international brand. "It is a bold move and I hope that other Indian corporates will follow," he said.
The acquisition of Tetley was financed with stg70 million of equity, of which stg60 million will be from TTL and stg10 million from its New York based subsidiary, Tata Tea Inc.
The debt component of stg20 million raised through instruments like subordinate vendor loan notes and debt offerings arranged by Rabo Bank, which acted as the financial and strategic advisor as well as sole lead manager for this transaction. The loan was raised in four tranches of tenors varying between 7.5 to 9.5 years, carry an average interest of 11 percent per annum.
IMPACT
This deal which happened to be the largest cross-border acquisition by any Indian company, marked the culmination of Tata Tea's strategy of pushing for aggressive growth and worldwide expansion. The acquisition of Tetley pitchforked Tata Tea into a position where it could rub shoulders with global behemoths like Unilever and Lawrie. The acquisition of Tetley made Tata Tea the second biggest tea company in the world. (The first being Unilever, owner of Brooke Bond and Lipton). Moreover it also went through a metamorphosis from a plantation company to an international consumer products company.
Apart from the size of the deal, what made it particularly special was the fact that it was the first ever leveraged buy-out (LBO) by any Indian company. This method of financing had never been successfully attempted before by any Indian company. Tetley's price tag of 271 mn pounds (US $450 m) was more than four times the net worth of Tata tea which stood at US $ 114 m. This David & Goliath aspect was what made the entire transaction
so unusual. What made it possible was the financing mechanism of LBO. This mechanism allowed the acquirer (Tata Tea) to minimise its cash outlay in making thepurchase.
Tata Tea and Tetley have taken some steps to achieve emotional integration. They have formed several groups comprising executives from both outfits. Two of these are : the tea procurement group (TPG) and the geographic expansion group (GEG).
The main job of TPG is to strategise sourcing by Tetley of tea from India, in general and from Tata Tea, in particular. Tata Tea had made a small beginning as a supplier of both North and South Indian teas to Tetley about two years back. The process has since stabilised. Obviously, the quantum will depend on two factors — the incremental market share that can be garnered and the ability to make subtle changes in the blend so that the product quality, particularly in the existing markets, continues to be accepted.
GEG's principal responsibility naturally is to coordinate foray into new markets. Tetley, which is predominantly into tea bag business (92 per cent of sales), will target for growth in the packet tea segment, where it now has a minimal presence. Russia and Kazakhstan have since been identified. Tata Tea, with its experience of marketing packet tea in India and in West Asia, will aid Tetley's efforts.
The collaboration and coordination exercise now also extends to R&D. Tata Tea has joined hands with the R&D wing of Tetley and the spheres in their purview are new products, packaging materials, improvement in tea quality and analytical methods.
For e.g… launch of ready-to-drink teas and flavoured teas in which Tetley already had experience.
Strategies:
The premium tea bag offering of Tata Tea, which was launched in the last quarter of 2001-02 and whose content has fine Assams and a Sri Lankan component, has been brand-named Tetley. (It, however, has to be mentioned that acting on the new `power brand' concept, the Levers have drastically reduced the number of tea brands in India.)
Under the control of Tata Tea, the UK outfit has already seen a phase of restructuring and consolidation. The relatively small Greenford tea factory in West London, whose product range included `Drawstring' tea bags, black tea bags and a range of speciality, fruit-flavoured teas and fruit/herbal infusions, was de-commissioned last year and its capacity re-located at the large Eaglescliffe facility near Middlesborough in Northeast England. The next phase of the UK firm's consolidation may involve its nine subsidiaries.
In fact, an in-principle decision on the fate of the Kochi-based 50:50 joint venture, Tata Tetley Ltd, is likely in not a too distant future. If on stock taking the board of Tata Tetley
finds that continuation of a separate joint venture is not necessary, it may be merged with either of the joint venture partners and earmarked to foster international business.
In the course of 2001-02, the company `demised' the Tata Tetley brand in the domestic market and wound up its domestic market activity. This would enable the company to focus on exports. Its role in the domestic market is now restricted to that of a tea bag converter for Tata Tea.
Conclusion
Tata Tea contributes significantly to social and community development on its estates through comprehensive labour welfare programmes that offer free housing, healthcare and other benefits. The company has set-up and manages hospitals, adult-literacy centres, childcare centres and schools to educate the children of its nearly 40,000 employees. In addition, the company has special facilities to look after "differently abled" children of the workers who are taught how to operate in the environment by enhancing their skills and abilities.
Tata Tea has institutionalised a process of Annual Welfare Audit conducted by renowned WHO experts, among the first Indian companies to do so.
Committed to running its business responsibly, Tetley works with stakeholders around the world to understand the social, ethical and environmental impacts of its business and identify how to manage and improve the most significant of these. This approach results in a range of local activities and corporate initiatives - from waste management programmes at our Eaglescliffe Tea Factory to the provision of safe water for people in the tea growing areas of Malawi.
The Tetley Group also manages its social impacts by building partnerships with charities and non government organisations, focusing on causes with a clear relevance to its business. These partnerships go beyond traditional corporate fundraising, involving activities that change both the Tetley business and the partner organisation for the better. This means encouraging our staff to become personally involved in the partnerships, donating their time and skills, as well as money.
Bibliography
1. http://www.indiabrands.org/artdisplay.aspx?cat_id=84&art_id=13725
2. http://www.mit.gov.in/eg/article-indiawired.asp
3. http://www.india-now.org/artdispview.aspx?art_id=4218&cat_id=387&page=1
4. http://www.icmr.icfai.com
5. http://www.tatatea.com
6. http://www.tetley.com
7. Philip Kotler