Tata Coffee eyes Russian brand
The Economic Times — November 14, 2007

As part of a strategy of adding value and not expanding on the commodity-cultivation front, Asia's leading coffee plantation corporate is looking at buying an existing Russian brand to market its instant coffee in that country. Tata Coffee exports 5,000 tonne of instant coffee a year, with Russia accounting for 60 per cent or 3,000 tonne, sold under private labels.

Tata Coffee managing director MH Ashraff told ET here today that buying an existing Russian brand was one of three options the company was looking at. Another option was to market coffee for the Russian market under the Tata brand name.

The third option was to leverage the Eight O'clock coffee brand name to market instant coffee in Russia. The American heritage brand Eight O'clock, which sells 35,000 tonne of pure R&G (roast and ground) Arabica in the US market, had been acquired by Tata Coffee 16 months ago from Gryphon Investors for $220 million.

Ashraff said Tata Coffee had taken a conscious decision not to expand on the cultivation front. "We grow coffee on 8,000 hectares. Our last acquisition was some 18 months ago when we bought five tea estates and an 800-hectare coffee estate from Tata Tea.

The focus is now on value-addition, with instant coffee being a key segment in the wake of the commissioning in March of our state-of-the-art freeze-dried plant at Theni, with a capacity of 2,000 tonne. Our older spray-dried agglomerated instant coffee manufacturing plants at Theni and near Hyderabad have capacities of 1,600 and 2,600 tonne, respectively."

Ashraff said the setting up of Tata Coffee's $20-million freeze-dried instant coffee plant in Uganda, which has a manufacturing capacity of 3,600 tonne to cater to the European and Chinese markets, could be delayed by a year because of delays in the allocation of land. As per the original schedule, construction was supposed to start in January 2007 and take 24 months. "We do not have any plans to set up plants anywhere else," he said.

Asked whether Tata Coffee was looking at re-entering the coffee cafe segment after selling out its stake in Barista some years ago and once the five-year no-compete-clause period ended within a year or so, Ashraff said, "We have no such plans. Last year, we set up in Kochi a Mr Bean Coffee Junction where consumers can buy our brands of coffee powder. We also provide a few tables where they can sit and sip the coffee brewed to their personalised blends. More such junctions will be coming up."

For the fiscal year ended March 31, 2007, Tata Coffee's total income rose to around Rs268.50 crore (from around Rs191.23 crore for the previous fiscal). PAT dropped to around Rs20.23 crore (around Rs22.32 crore). EPS fell to Rs13.94 (Rs17.05).