India, Inc. brews up special chai
Indian tea bigwigs witnessed a spate of acquisitions in 2006, the going may just be as good in 2007.
KOLKATA: It’s been a rocking 2006 for many in India Inc. Especially for tea bigwigs like Tata Tea, Apeejay Tea Group and BM Khaitan’s tea conglomerate McLeod Russel India (MRIL). With the players once again on the prowl, the going may just be as good in 2007.
At the vanguard of domestic players is Tata Tea which seems to be contemplating acquisition of a tea-based beverage brand. Even Apeejay Tea Group and MRIL are open to acquisitions in domestic and overseas markets like Kenya.
“Though the Indian tea industry will see consolidation during the year, Tata Tea may go out for another acquisition. This time, for a tea-based beverage brand,” RK Krishnakumar, VC, Tata Tea, told ET. Mr Krishnakumar, who has been closely associated with the Tata group’s tea business hopes the industry will turnaround significantly.
The Khaitans too are bullish on the industry. Said MRIL vice chairman Deepak Khaitan: “Why not... Whatever we had acquired over the past two years have been doing well.”
Cut to 2006. The tea industry witnessed a spate of acquisitions at a time when overseas tea producers were beset with sporadic droughts and labour strife.
With health-conscious consumers increasingly keen to make tea consumption an exciting experience, Tata Tea acquired UK’s Tetley brand. Not content, the Tatas pitched their sights higher and began gobbling up global tea brands. It acquired two US-based speciality tea-producing companies, Good Earth Corporation and FMali Herb and also picked up 33% stake in a South African tea company, Joekels.
The group, it is understood, is also looking at coffee, non-carbonated soft drinks and other forms of beverage. With its strategy in place, the company consciously decided to get out of plantation business, in North and South India.
The strides made by Tata Tea created ripples in the industry. “With negligible movement in other tea-producing nations, Tata Tea’s move in the global market will make it a leader in the international arena. The company has been able to achieve this by not remaining confined to black tea - the demand for which is steadily declining in several key Western markets,” a senior Indian Tea Association official said.
Nearly 88% of Tata Tea group’s turnover of Rs 3,151.12 crore comes from the branded tea business. The company, which is the second largest branded tea player in the country, witnessed an 8-9% growth in the branded tea business in the past three years and hopes to maintain these levels in 2006-07 fiscal.
Unobtrusively, players like Apeejay Tea also made inroads in the global tea industry. It acquired UK’s third largest tea brand Typhoo from Premium Foods to give itself a new face in the global market.
At the vanguard of domestic players is Tata Tea which seems to be contemplating acquisition of a tea-based beverage brand. Even Apeejay Tea Group and MRIL are open to acquisitions in domestic and overseas markets like Kenya.
“Though the Indian tea industry will see consolidation during the year, Tata Tea may go out for another acquisition. This time, for a tea-based beverage brand,” RK Krishnakumar, VC, Tata Tea, told ET. Mr Krishnakumar, who has been closely associated with the Tata group’s tea business hopes the industry will turnaround significantly.
The Khaitans too are bullish on the industry. Said MRIL vice chairman Deepak Khaitan: “Why not... Whatever we had acquired over the past two years have been doing well.”
Cut to 2006. The tea industry witnessed a spate of acquisitions at a time when overseas tea producers were beset with sporadic droughts and labour strife.
With health-conscious consumers increasingly keen to make tea consumption an exciting experience, Tata Tea acquired UK’s Tetley brand. Not content, the Tatas pitched their sights higher and began gobbling up global tea brands. It acquired two US-based speciality tea-producing companies, Good Earth Corporation and FMali Herb and also picked up 33% stake in a South African tea company, Joekels.
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The group is still looking at organic and inorganic growth in the coming years, but an e-mail to Tata Tea on December 21 on details of the company’s global strategy did not elicit any response. With MD Percy Siganporia in the US, the high command was not available for comment. Mr Krishnakumar had, a couple of months earlier, told ET Tata Tea was keenly looking at the US and wanted to become a strong player in Europe, Russia, China and even the Middle East. “China too is an interesting destination with developments in green tea. The aim is to become a leading beverage player with tea as a base,” Mr Krishnakumar had then said.The group, it is understood, is also looking at coffee, non-carbonated soft drinks and other forms of beverage. With its strategy in place, the company consciously decided to get out of plantation business, in North and South India.
The strides made by Tata Tea created ripples in the industry. “With negligible movement in other tea-producing nations, Tata Tea’s move in the global market will make it a leader in the international arena. The company has been able to achieve this by not remaining confined to black tea - the demand for which is steadily declining in several key Western markets,” a senior Indian Tea Association official said.
Nearly 88% of Tata Tea group’s turnover of Rs 3,151.12 crore comes from the branded tea business. The company, which is the second largest branded tea player in the country, witnessed an 8-9% growth in the branded tea business in the past three years and hopes to maintain these levels in 2006-07 fiscal.
Unobtrusively, players like Apeejay Tea also made inroads in the global tea industry. It acquired UK’s third largest tea brand Typhoo from Premium Foods to give itself a new face in the global market.
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Apeejay Tea Group MD Deepak Atal said, “Typhoo will not only introduce its tea bags in India, but also intends to market its wide range of speciality teas like Typhoo Fruit & Herb, Typhoo Green Tea and Typhoo QT instant white tea. The company is open to acquisitions of more tea estates in Assam and Kenya.”
India leapfrogged to new heights on the tea plantation front as well. Courtesy the Khaitans of McLeod Russel.
When business wasn’t as good and the biggies like Tata Tea and Hindustan Lever were coming out of production due to low price realisation, the Khaitans bought back Williamson Tea Assam from the Magors of UK. They also purchased Doom Dooma Tea Company from Hindustan Lever. The industry was stunned. With BM Khaitan an ageing force and the sons still to get a grip on the business, there was widespread speculation about the wisdom of McLeod’s decision to acquire gardens when almost everyone was quitting them. What perhaps everyone miscalculated was that ageing or not, the venerable old BM was, vision-wise, as potent as ever and the sons capable of executing their father’s plans.
“Eyebrows were raised when we were going in for the acquisitions. But today, things have changed. Today, we are the largest integrated tea company in the world. The industry is looking up and the domestic consumption of tea is increasing at 3.5% per annum,” MRIL managing director Aditya Khaitan said.
A senior official with the Calcutta Tea Traders Association said, “With MRIL becoming the largest contributor to auctions, tea auction has become more vibrant. Besides, the company is being able to command a premium of about Rs 9-10 per kg for its tea at the auctions.”
Post-acquisition of Moran Tea Company (India), MRIL today runs some 56 tea gardens with an annual tea production of 75 million kilos. Its packet tea business, which was at a low-key, is also being given a renewed emphasis.
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MRIL hopes to clock a turnover of Rs 620 crore in the financial year 2006-07, a 17% growth over Rs 530 crore recorded last fiscal, excluding Moran Tea. Operating profit during the year is expected to grow by nearly 186 % to Rs 100 crore from Rs 35 crore as on March 31, 2006.
sutanuka.ghosal@timesgroup.com
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