Tata Tea Limited

Infobox_Company
company_name = Tata Tea Limited
company_type = Private
company_slogan = N/A
foundation = Calcutta, India (1964)
location = Kolkatta, India
key_people = Ratan Tata (Chairman) | Krishna Kumar (Vice-Chairman)
num_employees = 34,596 (2006)
products = Tea | Coffee | Rubber | Palm Oil | homepage = [http://www.tatatea.com/]

Tata Tea Limited, also known as Tata-Tetley, is the world's second largest manufacturer and distributor of tea [ [http://www.tata.com/tata_tetley/media/20020530.htm tata.com : Tetley's fiscal show to jazz up Tata Tea results ] ] . Owned by India's Tata Group, the Tata Tea Limited markets tea under the following major brands — Tata Tea, Tetley, Good Earth Teas and JEMČA.

While Tata Tea is largest tea brand in India, Tetley is the largest tea company in the United Kingdom and Canada and the second largest in the United States by volume [ [http://www.tatatea.com/comp_profile.htm Tata Tea Company Profile ] ] and JEMČA is Czech Republic's leading tea company. [ [http://www.tetley.com/Tetleycom/TetleyGroup/ : Tetley.com : ] ] Tata Tea Limited along with its subsidiary companies manufactures 70 million kilograms of tea in India, has 54 tea estates, 10 tea blending and packaging factories, and employs around 59,000 people. [http://www.tatatea.com/images/Corporate_Report.pdf] The company owns 51 tea estates in India and Sri Lanka, especially in Assam, West Bengal and Kerala. The company is the largest manufacturer of Assam tea and Darjeeling tea and the second-largest manufacturer of Ceylon tea.

History

Set up in 1964 as a joint venture with UK based James Finlay and Company to develop value-added tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley Group, is the world's second largest global branded tea operation with product and brand presence in 40 countries. It is one of India's first multinational companies, the operations of Tata Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in plantation activity in India and Sri Lanka.

The consolidated worldwide branded tea business of the Tata Tea Group contributes to around 86 per cent of its consolidated turnover with the remaining 14 per cent coming from Bulk Tea, Coffee, and Investment Income. The company is headquartered in Kolkata and owns 27 tea estates in the states of Assam and West Bengal in eastern India, and Kerala in the south.

The Tetley Group has been a member of the Tata Group since March 2000 and now contributes around two thirds of the total turnover of Tata Tea Ltd. Established in 1837, Tetley was the first British tea company to introduce the tea bag to the UK in 1953. The tea bag was followed by the first round tea bag in 1989, and the 'no drip, no mess' drawstring bag in 1997.

In 1983, Tatas bought the stake belonging to the James Finlay group to form the individual entity Tata Tea. In 1987,Tata set up a fully owned subsidiary, Tata tea Inc. in the USA. In 1991,Tata tea acquired 52.5% of the shares of the Consolidated Coffee Ltd to form Tata Coffee Ltd. In 1992, they enetered into a joint venture in Sri Lanka to form Estate Management Services (P)Ltd. In 1993, they entered into a joint venture with Allied Lyons PLC in the UK to form Estate Tata Tetley. In 1995,Tata tea attempted to buy Tetley tea of the UK. In 1995-96, the Lankan JVC acquired 51% shareholding in Watawala Plantations Ltd. In 2000,Tata tea acquired The Tetley Group Ltd., UK. In 2005,Tata tea decided to sell the Munnar Estate to its workers. Employee cost (of the standalone entity) dropped sharply by about 40 per cent.) They acquired the Good Earth Teas brand, which has a significant presence in the American specialty market. In 2006, they entered into an agreement to take over Jemca, which controls a 26 percent market share in the Czech Republic.

Tata Tea owns five brands in India - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini. The company has a 100% export-oriented unit (KOSHER & HACCP certified) manufacturing Instant Tea in Munnar, Kerala, which is the largest such facility outside the United States. Tata Tea has subsidiaries in Australia, Great Britain, United States, Czech Republic and India.

1980s – Moving up the value chain

In the early 1980s, the tea industry in India was experiencing rising input and labor costs and dwindling margins as well as high taxes. India was facing competition on the world market not just from China, but other countries entering the business.

In 1983, Tata tea decided to move from the commodities business to consumer branding. The first brand Tata tea was introduced. This was followed by other brands like Kannan Devan, Agni, Gemini, and Chakra Gold. In spite of being the largest market in the world, the concept of branded tea took time to be accepted.

1990s – Exporting Branded tea

In the 1990s Tata decided to take its brands into the global markets. It formed an export joint venture with Britain's Tetley tea in 1992. Other new enterprises included a majority interest in Consolidated Coffee Ltd. (Tata Coffee Ltd.) and a joint venture to manage agricultural estates in Sri Lanka. Tata Tea Inc. in the United States processed and marketed Instant tea from its facility in Florida, based on sourcing of Instant tea products out of Munnar, Kerala

By 1999, Tata’s brands had a combined market share of 25% in India. The company had 74 tea gardens and was producing 62 million kilograms of tea a year, two-thirds of it packaged and branded. Towards the end of 1999, the tea business was hit by a drought in much of India. In addition, Russia, once the largest buyer of Indian tea, temporarily withdrew from the market. The Indian tea industry being the second largest employer in the country has enjoyed the attention of the Indian Govt. For the last few years, the performance of Indian exports has not been encouraging. During these tough times, the govt. has been sympathetic to the demand of industry and cultivators. It has passed resolutions supporting the industry domestically and has also lobbied extensively with organizations like the WTO internationally.

1.Indian administration along with European Union and 6 other countries- Brazil, Chile, Japan, South Korea, and Mexico; filed a complaint with the WTO against Byrd Amendment formally known as Continued Dumping and Subsidy Offset Act of 2000 (CDSOA) legislated by the US.

The essence of this act was that non-US firms which sell below cost price in the US can be fined, and the money given to the US companies who made the complaint in the first place.

This act adversely affected the commodities business of the complainant states and has since been repealed after WTO ruled the Act to be illegal.

2.The Indian govt. took cognizance of the changed tea and coffee market and set up Inter-Ministerial Committee ( IMC ) to look into their problems in late 2003.The IMC has recommended that govt. share the financial burden of plantation industry on account of welfare measures envisaged for plantation workers mandated under the Plantation Labour Act 1951.IMC has also recommended to introduce means so that the Agricultural Income Tax levied by the state governments can be slashed and the tea industry be made competitive.It has recommended that sick/bankrupt plantation estates should be provided with analogous level of relaxation for similarly placed enterprises/estates as are available to industries referred to BIFR.

3.Special Tea Term Loan (STTL) for the tea sector was announced by the Indian govt. in 2004. It envisaged restructuring/rephasing of irregular portion of the outstanding term/working capital loans in the tea sector with repayment over 5 to 7 years and a moratorium of 1 year, which was to be on a case to case basis for large growers. The STTL also provides for working capital up to Rs. 2 lakhs at a rate not exceeding 9% to small growers

4.Latest initiatives by the tea Board

The tea Board plans to launch a new marketing initiative, which will include foray into new markets such as Iran, Pakistan, Vietnam and Egypt. It also plans to renew its efforts in traditional markets like Russia, UK, Iraq and UAE. Noteworthy is its intent to double tea exports to Pakistan within this year.

Assam orthodox tea is all set to receive the Geographical Indications (GI) exclusivity. A GI stamp identifies a certain product as emanating from the territory of a WTO member or region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographic origin.

Cabinet Committee on Economic Affairs (CCEA) on December 29, 2006 to set up the Special Purpose Tea Fund (SPTF) under the tea Board for funding replantation and rejuvenation (R&R) programme.

The CCEA gave its approval for pegging the subsidy at 25 per cent and adoption of a funding pattern of 25 per cent promoter's contribution, 25 per cent subsidy from the Government and 50 per cent loan from the SPTF. Also banks have been instructed to increase the lending period to over 13 yrs.

Global foray

In 2000, Tata tea was able to acquire Tetley tea in a £271 million ($432 million) leveraged buyout. Tata tea reportedly outbid the American conglomerate Sara Lee in what was described as the largest takeover of a foreign company by an Indian one to date. Tetley, based in the United Kingdom, was the world's second largest tea company after Unilever's Brooke Bond-Lipton and had annual turnover of £300 million. It was the market leader in Great Britain and Canada and a popular brand in the United States, Australia, and the Middle East.

It was the perfect blend. Tata tea was a leader in India in the packaged tea segment with a presence in developing countries through exports. Tetley was the second largest tea brand in the world, with a presence in developed geographies. The integrated vista offered access to new markets and products to both, not to mention the synergy in tea buying and blending operations. Tata tea could now offer tea to its consumers in any part of the world and in any form they wanted.

Present scenario

The consolidated worldwide branded tea business of the Tata tea Group contributes to around 86 per cent of its consolidated turnover with the remaining 14 per cent coming from Bulk tea, Coffee, and Investment Income. The Company is headquartered in Kolkata and owns 27 tea estates in the states of Assam and West Bengal in eastern India, and Kerala in the south.

The company has a 100% 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% teas, Iced tea Mixes and in the preparation of Ready-to- drink (RTD) beverages.

With an area of approx 159 km² under tea cultivation, Tata tea produces around 30 million kg of Black tea annually.

Research and development

Tata tea believes that their core competency is having an understanding of the needs and tastes of tea drinkers worldwide and an ability to consistently deliver value to consumers. To this effect they invest heavily in terms of R&D. Tata tea and the Tetley Group have full-fledged R&D Centres that focus on the branded business. In addition, Tata tea has an R&D Centre at Teok (Assam) and a product development centre at Bangalore focused on the entire gamut of tea operations.

Marketing strategy

Global business is also about recognizing that there are geographic blocks. The phrase, think global, act local, plays a very important role in Tata and Tetley. Tea is heavily rooted in local culture and its functional attributes and taste parameters are very influenced by it. There would have to be a modification of the blend to ensure levels of appeal for different markets.

In spite of a global presence, brand strategy and local distribution arrangement have to be appropriate for the local market. Tata tea is a powerful Indian brand and may never be as well known globally as in India. Tetley would therefore be the company's global face. In the UK, Tetley stands for flavour and strength and is associated with health. In developing geographies, flavour should be a matter of local orientation and Tetley should be positioned as an international brand with British credentials in the premium tea bag segment.

The largest markets will focus on the Tetley brand. Tata tea brand will be more successful in geographies with large Indian population. Wherever both the Tata tea and the Tetley brands co-exist in one market, Tetley will be positioned as the premium brand.

Operational synergy

Tata tea is working on for the right international mix - the integration of processes and the synergy of operations. The focus is on having common systems and creating a global database for market and data collection. The greatest synergy is in terms of new growth areas and in tea buying and blending operations. Under the new growth strategy, certain markets have been identified where Tata tea will introduce its brands by way of ‘soft launches’. These regions include the Gulf countries, West Asia North Africa (WANA) countries, Syria, Jordan and certain market in the Far East. The Tetley Group will offer the Tetley brand in most of the developed markets of the world, as also Pakistan, Bangladesh and Russia.

Tata tea’s presence in developing markets and Tetley’s in developed markets will help the cause of both. As a consequence of the differential growth rates, almost 70 per cent of the tea consumed in the world is in the developing markets. These markets largely have either loose or packet tea and this offers us a long-term opportunity to upgrade them to tea bags. The challenge lies in building the brand as Tetley is a late entrant and has limited awareness. The other challenge is that of distribution, which is critical to success. Creating distribution networks is expensive and time consuming. This is why we need to develop unique business models that enable us to leverage distribution either created by our partner, a joint venture or an alliance.

ee also

*Tetley
*Good Earth Teas
*JEMČA

External links

* [http://www.tatatea.com/ Tata Tea official website]
* [http://www.wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C356EC230]
* [http://www.thehindubusinessline.com/cgi-bin/bl2006.pl?subclass=065]
* [http://www.thehindubusinessline.com/cgi-bin/bl.pl?subclass=065]
* [http://www.blonnet.com/2007/01/01/stories/2007010101410700.htm]

References