Organic or inorganic, domestic or global: It really does not matter. Growth in all spheres is the goal of Tata Tea Ltd chairman, Mr Ratan Tata. In line with the Tata Group’s growth target through the acquisition route, both global and domestic, Tata Tea has also outlined an ambitious target to go for aggressive acquisition of businesses globally. 

In fact, Mr Tata has clearly stated his vision for tomorrow at the 41st annual general meeting of Tata Tea Ltd recently in Kolkata. Addressing the shareholders at the AGM, Mr Tata clearly spelt out his two-pronged vision, the first being to be among the top three market leaders and the second one is to be a strong global player in the tea segment. 

Mr Tata had also made it clear that the acquisitions, which will be principally global in nature, would play the most vital role in enabling Tata Tea to achieve its vision on growth. Tata Tea will be the most formidable player in the entire group, where the experiments of global acquisitions will take place in a major way, according to the vice-chairman, Mr RK Krishna Kumar. 

The company is looking for acquisitions of businesses which will come with a huge brand size, on the lines of Tata Tea’s first-ever global acquisition, the UK-based, Tetley. “We will not go in for acquisitions of supply chains or plantations, but rather for businesses with high brand size,” the Tata Tea managing director, Mr PT Siganporia says. 

Tata Tea acquired Tetley in 2000 at pound sterling 271 million ( Rs 1,800 crore). Mr Siganporia said Tetley is doing extremely well in markets like Canada, Australia, USA and France. “The Tetley management is currently working with an aim to further improve its market position in the existing markets they are operating,” Mr Siganporia says. 

Global Acquisitions
Meanwhile, Mr Krishna Kumar also says that Tata Tea would be mainly going for global acquisitions in those markets where there is immense potential for growth in consumption of black tea. He also says that specialty teas and ready -to -drink tea segments would also be under focus while going for global acquisitions. On the funding for global acquisitions, Mr Krishna Kumar feels the company had enough reserves along with comfortable debt equity ratio to go for funding of these global acquisitions. Although the company has informed its merchant bankers on its intention, it is yet to decide on the time frame to go in for such acquisitions. Currently, Tata Tea controls around five per cent of the global tea business. 

While going aggressive on global acquisitions, the Tata Tea management is also open to the idea of domestic acquisitions. However, according to Mr Krishna Kumar, the company will venture into domestic acquisitions only after it is through with its global acquisitions. Mr Siganporia also believes that branded products of Tata Tea are already enjoying a double digit growth during the last year and the acquisitions have been planned to accelerate the growth further. 

Co-operative Management
Besides, going aggressively for global aquisitions, the Tata Tea management will also make one last attempt to revive its tea gardens by taking the co-operative route. According to Mr Krishna Kumar, the management will run these tea estates through joint ownership and joint association with the employees. “This will help us in bringing down the operating cost to a great extent,” he says. Mr Krishna Kumar adds that the tea estates where the company will go in for co-operative experiments are mainly located in south India.

According to him, the entire exercise will be completed within a period of 12 months. Tata Tea currently has 26 tea estates in south India. “This will be our last attempt to revive these tea estates and if it does not work, we will have no other option but to sell off these tea estates,” Mr Krishna Kumar adds. 

During the financial year 2003 -04, Tata Tea recorded a net profit of Rs 91.53 crore, a 30 per cent growth over the previous fiscal’s figure of Rs 70.60 crore. The net profit of Rs 91.53 crore, during the fiscal under review was reported over a total income of Rs 839.15 crore, up from the previous fiscal’s figure of Rs 806.84 crore. The company has recommended a dividend of 85 per cent for the shareholders, up from the previous fiscal’s figure of 70 per cent. 

The consolidated turnover of the company including all its subsidiaries of Rs 3112 crore, includes as much as Rs 2,668 crore on account of turnover of branded products representing 86 per cent of the consolidated turnover. However, the exports of the company during the financial year 2003 -04, total export of the company declined marginally. According to him, exports of instant tea powder declined due to a shift in the seasonal consumption pattern of US customers.

The division, however, Mr Tata says has successfully developed a new instant tea for the Japanese market which has been well received by the overseas consumers. “The company has decided to close down the spices centre at Kochi as the operations are not part of our core activity and in the process of doing so, the exports of that unit have shown a decline. To a certain extent, the turmoil in the Middle East also impacted tea exports,” Mr Tata adds. Clearly, it is brewing a new recipe.