Tata Global Beverages Ltd (TGBL), which is looking to gain scale by adding more products to its portfolio, is aspiring to be a consumer products company, an official said on Tuesday.
“In the FMCG segment, we need a large portfolio. We cannot just be a single tea player and depend on it to attain scale. Tea, water — these things are good, but they are not going to give scale. The company has to gain scale by a wide range of products,” TGBL Chairman N. Chandrasekaran told shareholders at the company’s annual general meeting here.
The company will have to “pay attention to improve its financial performance in terms of return ratio”, he said, adding that the amount of capital deployed in the company has been quite significant.
“We want to build a very high-class, premium consumer products company by leveraging the large consumer base in India. That is the goal we are working towards,” Chandrasekaran said.
TGBL and Tata Chemicals Limited (TCL) have recently announced the de-merger of the consumer products business of the latter into the former.
“We want to gain scale and focus on India market as we announced the combination of food business of Tata Chemicals and our business to create a broader consumer product company so that we can significantly leverage consumers in terms of more products and reach,” he said.
The proposed transfer of TCL’s consumer business to TGBL is expected to take 12-18 months, he said, adding that the group wants to build a very large consumer platform company with initial focus on “beverages and foods”.
Chandrasekaran said the company’s “branded tea performance has been very good” which essentially means that the company “needs to be moving up the value-added products line in terms of new launches” in order to meaningfully grow in the tea segment.
TGBL also recently announced that it has entered into a non-binding term sheet to acquire the branded tea business of Dhunseri Tea & Industries Limited, for an aggregate consideration of up to Rs 101 crore.
Dhunseri’s branded tea business currently has “Lalghoda” and “Kalaghoda” brands, which are among the leading local brands in Rajasthan, a market dominated by local players. This move is in line with TGBL’s ambition to grow its branded tea business in India.
Of the total revenue, 40 percent comes from the international business and there is hardly any growth in these markets, Chandrasekaran said while pointing out the challenges facing the company.
“We need to keep the growth momentum. We need a lot of focus on the Indian market and that is the plan. (This is) not to say that we wouldn’t really focus on the international market. We will be very selective… We don’t want to be in marginal businesses,” Chandrasekaran said.
In order to “improve effectiveness, unlock synergies, optimise costs and streamline operations”, the company also restructured its international operations — EMEA (UK, Europe, Middle East and Africa) and CAA (Canada, Australia and America) under a single business operating unit — “international”, according to the firm’s latest annual report.
Chandrasekaran said it could reduce the number of subsidiaries and exit some markets.
“We will be in specific areas where we can scale,” he said.
Asked whether the company is considering to expand “Tata Cha”, which is currently in Bengaluru with four stores, he said, “We will take a call on whether we will expand it. We are monitoring the performance and exploring store profitability.”
Responding to a shareholder’s query on the possibility of rolling out specialty restaurants under TGBL, he said the Indian Hotels Company is “planning” some speciality restaurants.
There are no plans to merge Tata Coffee with TGBL, Chandrasekaran added.