After Eight O'Clock, Tata Coffee times its US entry

MUMBAI: After its recent Rs 1,015 crore acquisition of US-based Eight O’Clock Coffee Company (EOC) from Gryphon Investors, Tata Coffee now plans to expand presence in the US first and other countries subsequently.

“Right now, EOC is confined to the eastern side of the US and we want to invest in launching it throughout the US by the end of this year or early next year,” said MH Ashraff, MD, Tata Coffee. Possibly, Gryphon had a sharper focus on returns rather than an expansion.

Tata Coffee will use EOC for introducing its own freeze-dried coffee variant in the US markets and will later take it to Europe and CIS countries. The company, which is a 51% subsidiary of Tata Tea, will look at tapping the UK market as their next step by using the distribution system of UK-based Tetley, which is 85.7% owned by Tata Tea.

In terms of further acquisitions, Mr Ashraff said that they would be looking at companies in the US, Europe and Russia. Barbara Roth will continue as CEO of EOC and two members from Tata Coffee (yet to be finalised) will be on the company’s board of directors.

“Going forward, Tata Coffee may look at acquiring a coffee company which is number four or five in the US market in order to consolidate its position,” said an industry analyst.

EOC is the third-largest coffee brand by volume behind Folgers and Maxwell House in the $21bn (Rs 97,000 crore) US coffee market and has approximately 67% of All Commodity Volume (ACV) penetration of the US retail coffee market, according to a statement issued by Tata Coffee.

Headquartered in Montvale, New Jersey, EOC operates its roasting and packaging facility in Landover, Maryland, both on the east coast of North America. In ’05, EOC had net sales of $109m (Rs 505 crore) and EBITDA of $27m (Rs 125 crore). It has a 54% market share of the branded whole bean coffee market, according to agency reports.

For the year ended March ’06, Tata Coffee reported a net turnover of Rs 190 crore and a net profit of Rs 22.6 crore. Some of the Tata Tea group’s earlier acquisitions include, besides Tetley, Good Earth in the US and Jemca in the Czech Republic.

Good Earth is a speciality tea brand with a 3.7% share of the US speciality tea market with an estimated turnover of $16m.