Tata Tea closes in on S African co
Tata Tea is said to be in talks to buy a South African tea company for an undisclosed sum.
By Shuchi Vyas, TNN |
MUMBAI: “The company is a relatively small player in the SA market and we would be looking at either an acquisition or a JV. It is a black tea producer with a good distribution system in place. We are looking at leveraging this for our brand,” said a top company official. Some of the popular brands in the SA tea market are Lipton, National Brands and Cape Natural, among others.
“There is a huge NRI population in SA, which Tata Tea would be tapping by making acquisitions in this region. Apart from SA, the company is also looking at markets like the US and Russia very seriously,” said an FMCG analyst.
The company is also looking at acquiring green, herbal and fruit-based tea companies and soft drink companies in the developed markets as these are growing faster than normal or black tea.
“We are looking at areas in which we are not present either through our brands or through acquisitions. The areas we would be looking at are special tea, ready-to-drink (RTD) and black tea,” said PT Siganporia, MD, Tata Tea.
The other businesses that the company will focus on are out-of-home consumption and new businesses like iced tea and tea concentrate, which is popular in fast food chains in the US and Canada. Some of the countries on Tata Tea’s radar are Russia, Poland, Bangladesh and Pakistan, among others.
One of the problems that the company is facing, while negotiating deals with local players in foreign markets is that companies are asking for huge multiples. For instance, a company with a $6m turnover and making losses quoted a price of $100m, according to a source from The Tetley Group.
Good Earth is a speciality tea brand with a 3.7% share of the US speciality tea market and an estimated turnover of $16m. The acquisition was financed through borrowings and set an important milestone in Tata Tea’s plans for further acquisitions around the world. Last month, Tata Tea subsidiary Tata Tea (GB), UK signed an agreement to acquire the assets of tea company ‘Jemca’ in the Czech Republic, from food processing company Alima Znackova Potravina. The acquisition was funded by The Tetley Group. JEMCA has an estimated 26.6% volume share of the tea market in the Czech Republic and turnover of $12.5m. The company sells black, green, fruit and herbal teas.
“There is a huge NRI population in SA, which Tata Tea would be tapping by making acquisitions in this region. Apart from SA, the company is also looking at markets like the US and Russia very seriously,” said an FMCG analyst.
The company is also looking at acquiring green, herbal and fruit-based tea companies and soft drink companies in the developed markets as these are growing faster than normal or black tea.
“We are looking at areas in which we are not present either through our brands or through acquisitions. The areas we would be looking at are special tea, ready-to-drink (RTD) and black tea,” said PT Siganporia, MD, Tata Tea.
The other businesses that the company will focus on are out-of-home consumption and new businesses like iced tea and tea concentrate, which is popular in fast food chains in the US and Canada. Some of the countries on Tata Tea’s radar are Russia, Poland, Bangladesh and Pakistan, among others.
One of the problems that the company is facing, while negotiating deals with local players in foreign markets is that companies are asking for huge multiples. For instance, a company with a $6m turnover and making losses quoted a price of $100m, according to a source from The Tetley Group.
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If the SA deal comes through, Tata Tea would be adding one more to their recent series of acquisitions. In October ’05, Tata Tea acquired FMALI Herb and Good Earth through its US subsidiary Tetley US Holdings for an undisclosed amount.Good Earth is a speciality tea brand with a 3.7% share of the US speciality tea market and an estimated turnover of $16m. The acquisition was financed through borrowings and set an important milestone in Tata Tea’s plans for further acquisitions around the world. Last month, Tata Tea subsidiary Tata Tea (GB), UK signed an agreement to acquire the assets of tea company ‘Jemca’ in the Czech Republic, from food processing company Alima Znackova Potravina. The acquisition was funded by The Tetley Group. JEMCA has an estimated 26.6% volume share of the tea market in the Czech Republic and turnover of $12.5m. The company sells black, green, fruit and herbal teas.
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