Tata Global Beverages looks to enter dairy business
Tata Global Beverages Limited (TGBL, formerly Tata Tea Ltd) on Wednesday said it was looking to enter the dairy business as it scouts for opportunities to expand beyond tea, coffee and bottled water.
Addressing shareholders in Kolkata on Wednesday at the company’s annual general meeting, Tata group chairman Cyrus Mistry said there are plenty of opportunities in the dairy business, “particularly in India”. He, however, said there was no immediate time frame for the launch of dairy products.
TGBL is a global beverages company with substantial business interests outside India.
Dairy is attracting a lot of new entrants. Biscuit maker Britannia Industries Ltd is preparing to launch its dairy products. ITC Ltd, which produces cigarettes and other consumables, has also recently entered the business.
Mistry said TGBL was now looking to grow inorganically, and that it was ready to make “aggressive moves to acquire”. But at the same time, if a target company does not measure up to expectations or doesn’t come at the right price, “we should not be shy to drop (the plan)”.
TGBL is also going to “restructure” its Chinese joint venture, Zhejiang Tata Tea Extraction Co. Ltd, which reported a net loss of Rs.15.34 crore on revenue of Rs.3.08 crore in the year ended December 2015. Its operations have not stabilized, TGBL said in its latest annual report.
Mistry said that while the firm has decided to restructure the loss-making venture, it is yet to decide on how to do it. “We are exploring multiple options,” he added.
Speaking about the water business, which is a joint venture with PepsiCo, Mistry said NourishCo Beverages Ltd continues to make losses despite gains in sales. To turn it around, the firm needs to rethink its strategy, he said. In fiscal 2015-16, NourishCo registered a turnover of Rs.125 crore and a net loss of Rs.16 crore.
On the goods and services tax (GST), Mistry said the regime will have an inflationary impact on the prices of tea and coffee across the board. The industry is in discussion with the government, trying to explain that tea and coffee are widely consumed beverages cutting across the economic strata, he said.
However, he added that GST should be “looked at in totality”—there could be an adverse short-term impact but the “long-term benefit is going to be significant for both the industry and consumers”.
The firm is also looking to tap e-commerce as it is seeing “shifts in consumption pattern” with the emergence of alternative channels for sales such as online retail platforms.
Mistry said Starbucks in the US would now offer single-origin coffee sourced from Tata Coffee Ltd’s Nullore estates, located in the Coorg region.
According to Mistry, the company should take “bolder steps” in the coffee business and its contribution to the company’s financials must increase. While TGBL will focus more on growing organically in the coffee business, it would also look at inorganic avenues of growth in the future, he added.
In developed markets, TGBL will continue to focus on expanding sales of green tea and specialty tea. Back home, it will strengthen black tea sales, Mistry said.