Tata Global Beverages to revamp associate plantation ops to earn profits

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Tata Global Beverages is reviewing plantation operations of its two associates — Amalgamated Plantation Private Ltd (APPL) and Kanan Devan Hill Plantations Ltd — to make them profitable, an official said on Friday.
Responding to shareholders’ query on company’s associate, APPL Chairman N. Chandrasekaran said: “It is a tough one. It is continuing to lose money. We need to take a call on both the plantations.”
When asked to elaborate on the matter, he said: “We are reviewing how to make them profitable.”
However, when asked whether the company was going back to plantation activities, he said it was “unlikely”.
Chandrasekaran indicated that the company may “prune” its portfolio, if required.
“The company will look for strong performance. In all dimensions, it will prune portfolios if it is required to be pruned. We will focus on returns,” he said while responding to shareholders’ queries at the company’s 54th Annual General Meeting.
Tata Coffee, a subsidiary of the company operating in non-branded business, would set up instant coffee plant in Vietnam with an installed capacity of 5,000 tonnes per annum.
“The capital expenditure for the Greenfield project would be Rs 350 crore. The Vietnam project will take 3-4 years to mature,” he said.
Tata Global Beverages has recently entered into an agreement with Skhodnya Grand Ltd of Russia to “transfer ownership and operational responsibility of its Russian business unit”.
However, the company will continue to retain ownership of its brands in Russia and Russian business generated a sales turnover of Rs 266 crore for the year 2016-17 and a loss after tax of Rs 29 crore for 2016-17.
“The new arrangement is a good one. The whole idea is not to continue incurring losses but to record the value of tangible assets of Rs 50-60 crore. As part of the brand licence, we will get to the range of Rs 2-5 crore depending upon the sales,” he said.
According to Chandrasekaran, the company will continue with innovation in the products portfolio and has launched series of products.
It would focus on new launches in the segments where it can scale, otherwise the growth will not come, he said.
During last financial year, under the Tata Tea brand portfolio, India’s branded operations had launched Tata Tea Elaichi, a tea brand with flavour of Elaichi (cardamom) and Teaveda, an offering of Ayurveda segment.
Last year, the Indian branded business launched “Super Green” teas which are expected to leverage the health and wellness segment which is growing across India.
He said reforms like the Goods and Services Tax (GST) will bring in lot of efficiency in distribution and supply chain, and such reforms will be advantageous for the company in the near to medium term.
According to Chandrasekaran, the company is expected to experience difficulties in certain markets like the UK due to Brexit. “The company gained the market share (in the UK) but though marginally.”
He also said the company’s joint venture Tata Starbucks had opened 94 stores and would cross 100 soon.
Speaking on the company’s digital strategy, Chandrasekaran said: “I would say we need to think what is the right digital strategy.”

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