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Tuesday, Sep 24, 2002

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Tata Tea, Tetley: A `seamless' venture to expand market

Rabindra Nath Sinha

KOLKATA, Sept. 23

IN just a few weeks after Tata Tea Ltd had clinched the deal on February 26, 2000 to acquire the UK-based Tetley (through a SPV), Bombay House had decided to extend the concept of `virtual company' to the two outfits. Mr R.K. Krishna Kumar, Vice-chairman of Tata Tea, and Mr Ken Pringle, CEO of Tetely, recently told newspersons here that the two outfits were operating as a `seamless' organisation and that the UK tea major was seriously working on market expansion plans with which the Indian outfit was closely involved.

The natural question, against this backdrop, is : What steps Tata Tea and Tetley have taken to achieve emotional and operational integration ?

It appears that they have already gone much beyond deputing executives in each other's organisation to share management practices and industry knowledge. They have formed several groups comprising executives from both outfits. Two of these are : the tea procurement group (TPG) and the geographic expansion group (GEG).

The main job of TPG is to strategise sourcing by Tetley of tea from India, in general and from Tata Tea, in particular. Tata Tea had made a small beginning as a supplier of both North and South Indian teas to Tetley about two years back. The process has since stabilised. Obviously, the quantum will depend on two factors — the incremental market share that can be garnered and the ability to make subtle changes in the blend so that the product quality, particularly in the existing markets, continues to be accepted.

GEG's principal responsibility naturally is to coordinate foray into new markets. Tetley, which is predominantly into tea bag business (92 per cent of sales), will target for growth in the packet tea segment, where it now has a minimal presence. Russia and Kazakhstan have since been identified. Tata Tea, with its experience of marketing packet tea in India and in West Asia, will aid Tetley's efforts.

The collaboration and coordination exercise now also extends to R&D. Tata Tea has joined hands with the R&D wing of Tetley and the spheres in their purview are new products, packaging materials, improvement in tea quality and analytical methods.

A new area of collaboration in India at a later date is likely to be the launch of ready-to-drink teas and flavoured teas in which Tetley already has experience.

Currently, the Tata Tea-Tetley combine has a four per cent share worldwide, against 11-12 per cent of the Levers ; a rather hefty gap for the former to bridge. This underscores the tough task that lies ahead of GEG. But, it may be argued that Tetley with the single brand that it uses throughout the world is better positioned vis-a-vis its rival in these days of convergence in media exposure worldwide.

Significantly, the premium tea bag offering of Tata Tea, which was launched in the last quarter of 2001-02 and whose content has fine Assams and a Sri Lankan component, has been brand-named Tetley. (It, however, has to be mentioned that acting on the new `power brand' concept, the Levers have drastically reduced the number of tea brands in India.)

Under the control of Tata Tea, the UK outfit has already seen a phase of restructuring and consolidation. The relatively small Greenford tea factory in West London, whose product range included `Drawstring' tea bags, black tea bags and a range of speciality, fruit-flavoured teas and fruit/herbal infusions, was de-commissioned last year and its capacity re-located at the large Eaglescliffe facility near Middlesborough in Northeast England. The next phase of the UK firm's consolidation may involve its nine subsidiaries.

In fact, an in-principle decision on the fate of the Kochi-based 50:50 joint venture, Tata Tetley Ltd, is likely in not a too distant future. If on stock taking the board of Tata Tetley finds that continuation of a separate joint venture is not necessary, it may be merged with either of the joint venture partners and earmarked to foster international business.

In the course of 2001-02, the company `demised' the Tata Tetley brand in the domestic market and wound up its domestic market activity. This would enable the company to focus on exports. Its role in the domestic market is now restricted to that of a tea bag converter for Tata Tea.

For the record it may be mentioned that Tata Tea had made a serious bid to acquire The Tetley Group Ltd in 1995 but as it then found the price tag rather high, it had to, in the words of Mr Krishna Kumar, ``walk out''. Subsequently, Tetley had new owners. The Bombay House outfit again made a bid in the course of 1999. By early February 2000, the Tetley owners had sold their coffee business and was left with the much larger tea business. Finally, after strenuous negotiations spanning over six months, on February 26, 2000, Tata Tea was able to "walk in''.

Tetley was founded in 1837 by Joseph and Edward Tetley. Blending and packing of lose tea for the UK grocery trade was its initial activity. Tea bag, which accounts for 90 per cent of the overall tea market in the UK, was introduced in that country by Tetley in 1953.

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