Professional Documents
Culture Documents
By:
Kiran A-05
Abhay Sakharkar A-10
Aditi Lakhe A-20
Industry Profile
India is world`s largest consumer and second largest producer of tea (26%) after China and
nearly 25 per cent of tea produced worldwide is consumed in India.
The total turnover of the tea industry in India is likely to reach Rs. 33,000 crore by 2015 from
the current level of about Rs. 19,500 crore.
With nearly 6 lakh hectares under tea cultivation, the domestic tea industry is growing at a
compound annual growth rate (CAGR) of about 15 per cent.
Around 35 lakh workers are employed in over 1,500 tea estates across India
Tea production during the current year is likely to stay over 950 million kilograms
Source: http://profit.ndtv.com/news/commodities/article-tea-industry-s-turnover-likely-toreach-rs-33-000-crore-by-2015-assocham-294343
The company derives nearly 70 per cent of its revenues from tea, 20 per cent from coffee and 5 per cent from water
Tata Tea
Incorporated as Tata Finlay Limited, and commenced business in
1962 1963 (JV)
Tata takes over marketing and production of James Finlay
1976 Bought out entire stake
1983
1991
1993
2000
Tata Tea merges wholly owned subsidiary, Tata Tetley with the
2005 company.
2010
Source: http://www.tataglobalbeverages.com/about-us/our-history
Tetley
In 1837, Edward and Joseph Tetley started to sell tea and became so famous that they set up as
tea merchants.
In 1856, in partnership with Joseph Ackland, they set up Joseph Tetley and Co., Wholesale Tea
Dealers
In 1989 the round tea bag was launched, 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.
On 10th March 2000, The Tetley Group was sold to Tata Tea Limited, one of the worlds largest
integrated tea businesses.
Source: http://www.tataglobalbeverages.com/our-brands/brands-overview/branddetail?brandid=fde0caaa-acb6-4094-ad53-0481902a6d19
Tetley Rooibos
Tetley Infusions
Tetley Cold
Source: http://www.tataglobalbeverages.com/our-brands/brands-overview/brand-detail?brandid=fde0caaa-acb6-4094-ad530481902a6d19
Key players
Tetley's profits fell to 4.98m in March 1999, compared with 35.7m in the
previous year
Increasing debts
yr 2000)
(Yr. 2000)
In the UK and Canada, Tetley already leads the market with 29.4 per cent
and 43.4 per cent shares, respectively
Recent Entrant into big tea-consuming markets like Pakistan and Bangladesh
MINDSHARE:
Tata tea had no marketing expertise, whereas Tetley is the most easily recalled
tea brand in the world, known for its innovation, whether in packaging or
marketing the brand.
NEW PRODUCTS
Tetley would give Tata Tea access to speciality products such as: flavoured teas,
herbal teas, organic teas, and decaffeinated teas.
NEW MARKETS
Tata Tea could help Tetley to launch the brand in India, to enter the premium
segment, as well as in the Middle East and Russia, traditional bastions of Tata Tea.
GLOBAL PRESENCE
Tetley had the second largest branded tea portfolio in the world and a foothold in
35 countries
Synergies
Tetley also bought teas worldwide, blend and package them, which is a very
special skill that Tetley possessed. It sourced teas from various countries and its
expertise in this area was unrivalled.
Tetley gets access to Tata Teas gardens and production base and the latter gets
Tetleys premium brands and global distribution network
Tetley could leverage Tatas R&D and expertise in tea cultivation and
manufacturing
Tata could benefit from Tetleys extremely good logistics management skills
Challenges
Acquirer company in this case was smaller than the company it acquired
A cross border acquisition, it was bound to have its fair share of cultural
problems
Leverage Buy-Out
Formation of SPV
Management Buyout
Advantages
Tax shield
Disadvantages
Financial distress
uncertainties
In Leveraged acquisition,
banks have a say in what is
being done
Before Merger
TATA TEA
TETLEY
Turnover
$114million(570 Cr)
operating profit
$42.6 million(213Cr)
Employees
59740
110
Tea Estates
54
Key Market
India
Merger Implications
Merger
Implications
Position in the
value chain
40% of turnover
came from packed
tea bags
Increased
outsourcing
produced 95% of
its tea
requirements in
house
outsourced entire
requirement from 35
different countries with
an estimated
procurement of 3 million
kgs of tea every week
Predictable
margins
Margins highly
correlated with tea
cycle
Margins inversely
correlated to tea cycle
Margins hedged
Global footprint
Domestic
operations
Global presence
Axis Title
2000
1500
1000
500
0
Sales
2000
899
2001
810
2002
750
2003
812
2004
820
2005
981
2006
1058
2007
1297
2008
1415
2009
1540
2010
2090
2011
1966
2012
2222
Axis Title
300
250
200
150
100
50
0
PAT
2000
124
2001
100
2002
72
2003
70
2004
91
2005
129
2006
187
2007
306
2008
312
2009
159
2010
391
2011
180
2012
302
Financials ( Tetley)
TETLEY FINANCIAL AFTER ACQUISITION
(Rs. Crore)
FY2001
FY2002
FY2003
03:01
1.7:1
1.3:1
EBIDT
17981.445
236.712
344.494
Sales
16313.11
1793.74
2008.18
-157.788
32.689
64.63
Post Merger
Tata and Tetley formed several groups tea procurement group, geographic
expansion group, R&D sharing
Legal merger took time as Tetley D/E ratio was too high and it needed to
come down to 1:1
As of FY12, Tetley is the only brand under Tata Global Beverages stable with
presence across the globe
Post Merger
Acquired other brands like Good Earth, Jemca, Joekels Tea, Vitax, Grand and
Eight O'Clock Coffees
Starbucks is also selling the Tata Tazo brand of tea, a brand created by the
Tata brand and the Tazo brand of Starbucks