Rayroth Kuttampali Krishnakumar, 64, is always dressed impeccably. When one met him at the Taj Hotel in Mumbai, he was clad in a natty pinstripe suit and sported a maroon tie and a gold ring on the little finger of his right hand. A 38-year Tata veteran, Krishnakumar radiates inner strength and speaks in a soft but careful voice about how Tata Tea acquired one of the hottest global tea brands, the 160 year old Tetley, last year in a Pound 271 million buyout, the biggest acquisition in Indian corporate history.
The takeover made Tata Tea the second largest tea company in the world, after Unilever. Now Krishnakumar is getting ready to launch Tetley in the South Asian market, besides the Middle East and Russia. Tata beat bids by Sara Lee, the American owner of Wonderbra, and Nestle to acquire Tetley. "We were meticulous in planning," said Krishnakumar, chairman of Tetley and vice chairman of Tata Tea. "We raised the entire cost through debt from abroad, without denting Tata Tea or its profits in India."
However, markets and media speculated whether Tata Tea would be able to handle the huge repayment responsibilities: the total debt amounted to Pound 201 million. But the current low interest rates globally has worked in favour of the company. "We will refinance the debt structure as we want to take advantage of the low interest rates," Krishnakumar said. "During the past two years, we have paid off a considerable part of the debt."
Krishnakumar has come a long way. The son of police officer who was originally from Mahe, he was brought up in Chennai and completed his Master’s in Personnel Administration in 1962 from Madras Christian College before joining the Tata Administrative Service. When he entered the tea industry in 1991, people were skeptical whether he could make it. "I was an outsider," Krishnakumar said. Within three years, Krishnakumar adopted a radical way of packing tea. "I had noticed during my visits to shops that tea chests were not adequately preserving the taste and aroma of tea," he said. "If it was kept close to soap packets or any other commodity with a strong smell, the tea invariably lost its original aroma.""
Krishnakumar set up a small shed in the backyard of the main factory at Munnar in Kerala and employed four women to do polypacking. When veterans heard about it, they scoffed at his idea. "People thought that my experiment would be shortlived."
The Kannan Devan tea from the hills of the same name in Munnar hit the stores in a new, attractive polypack and became an instant success. Customers liked the fact that the aroma and the flavour had been preserved. The tea was also delivered to the end user in less than 15 days. Today, polylaminated packaging is de rigueur in the industry.
Krishnakumar also noticed another anomaly. "Tea producers were just getting one-third of what customers paid for the final product," he said. "In between, blenders and brokers took away the cream." Krishnakumar just snapped this link and sold directly to retailers, increasing the profit margins by about 20 per cent.
Krishnakumar next decided to target the tea drinkers in North India and struck a chord with the ‘Asli Taazgi’ slogan. "The brand gained volumes faster than we expected," he said. "In 1994, we produced 1.5 million kg. Within four years, it reached 15 million kg. We passed the benefit to workers." Today, Tata Tea has a market share of 23 per cent in India, behind leaders Hindustan Lever which has 27 per cent. He also expanded overseas when Tata Tea formed a joint venture with the Sri Lankan Watawalla group.
But in India, the unorganised sector has successfully copied the Tata Tera model of packaging and has been eating into the market share of both Tata Tea and Hindustan Lever. For the moment, Krishnakumar appears unperturbed.
"Most of these regional players appear and disappear and hence, there is little to be concerned about," he said. "But we are countering this by launching local brands."
The company launched ‘Chakra Gold’ in Tamil Nadu and ‘Gemini’ tea in Andhra Pradesh, which became instant hits. "Our advantage is we have a quality product at an affordable price, helped by large scale promotion," he said.
Krishnakumar was given major assignments since 1983 when he was in charge of the South Indian operations, based in Kochi, and gained a reputation as a crisis manager. When there was a spat between Ajit Kerkar, Indian Hotels managing director, and Ratan Tata in 1997, Krishnakumar, then at Tata Tea, was quickly pressed into service. In no time, he had solved all the problems and brought Indian Hotels back on keel. But for now, his focus is on Tetley.
Tetley is the second largest brand in the US (over 11 per cent market share) while it is No.1 in Britain (23 per cent) and Canada (43 per cent market share).
Tata Tea has come up with an ambitious plan to promote Tetley. Since the market for black tea is shrinking worldwide, it is shifting its focus to herbal tea, green tea and flavoured tea. The US is a prime target because the consumers there are shifting from coffee to tea because of health reasons.
This man of simple habits is currently spearheading the globalisation of the Tata group. Vision is an absolute necessity, says Krishnakumar. Also a must is a pilgrimage to the Sabarimala temple in Kerala every year.
Krishnakumar, whose wife Ratna promotes handicrafts and son Ajith is an MBA student in Michigan, is a man with a vision and is able to think fast on his feet and make swift, sometimes tough, decisions. And this visionary is going to ensure that the Tatas will be on the top of the heap in the highly competitive global economy.