Turning over a new leaf

VINAY KAMATH | Updated on March 12, 2018





Harish Bhat reaches out for a bottle of Himalayan mineral water and holds it up. The pride evident in his voice, he says, “This is a great example of strong brands that we want to develop as we go along.” It’s been a few months since Bhat took over as Managing Director & CEO of Tata Global Beverages Ltd, but given his long stint in Titan Industries as the head of its watches division, Bhat is looking to bring a relentless focus to the company’s brands as he did in his erstwhile watch.

Himalayan, he says, has a rich story to tell, tapped as it is at a glacial source in its own aquifer in the foothills of Himachal Pradesh. “It offers a taste of pristine Himalayan water, enriched with minerals. It’s a brand much like water from the French Alps is one,” says Bhat.

Himalayan in future will get further ‘globalised’ through various initiatives, including the tie-up that Tata Global has entered into with Starbucks as it offers a new distribution avenue with many of the coffee chain’s outlets around the world.

This year, in some sense, is a milestone for TGB’s key brands – it’s 175 years since the brand Tetley was launched in Yorkshire (a brand which Tata Tea acquired in year 2000) and 25 years since the brand avatar of Tata Tea was unveiled in India. Along the way, the Tatas made several other acquisitions, including that of Mount Everest Mineral Water, which owned the Himalayan brand, and many brands abroad (evolution chart alongside), which transformed the company from being a major player in tea alone to include coffee and water as well.

The Tatas bought a 30 per cent stake in 2006 in Energy Brands which makes flavoured water under the Glaceau brand, which it sold for a handsome profit to Coca-Cola the subsequent year. However, the play in flavoured water, which it would have had with Energy Brands, TGB will make now through Himalayan, under which it plans its own flavoured and sparkling water.

“We see ourselves today as a natural beverages company rather than a tea company,” says Bhat. TGB earns 70 per cent of its revenues from abroad, with a presence across 40 countries. “Broadly, if you look at our revenues across the globe, about 70 per cent is tea, about 20-25 per cent is coffee, and the remaining 5 per cent is water. So we are certainly looking at enhancing the proportion of coffee and water in our portfolio even when we grow tea,” he elaborates.

How the group focus has moved to consumer brands from being largely in the commodity business is evident from these figures. Today, more than 90 per cent of its turnover of Rs 6,631 crore is from its branded products and only 10 per cent is from non-branded commodites.

Over five years ago, nearly all the group’s turnover came from tea interests, but is now 70 per cent, underpinning a successful diversification strategy.

TGB has taken several initial strides in growing its portfolio of brands in water. While Himalayan is a premium brand, targeting hotels, top-end restaurants and retailers, it launched earlier this year through NourishCo, its joint venture with PepsiCo, two water brands for the mid-segment of the market. Tata Water Plus and Tata Gluco Plus were launched in the Chennai and TN markets. Tata Gluco Plus alone has sold, according to a report by Axis Capital, over one million cases, making it the second largest packaged water brand in Chennai city. However, a senior NourishCo official said the distribution model is still being fine-tuned and it could take a few months for the brand to establish itself.

This nutrition-enriched beverage has cut ice with consumers as they come in single-serve cups apart from being sold in one-litre bottles. Priced at Rs 7 a cup, it’s a product clearly targeted at the bottom of the pyramid market.

Strides with Starbucks

Bhat says TGB’s mandate is clearly to increase the share of coffee and water business in its portfolio mix and that’s where the Starbucks tie-up comes in. Earlier this year, TGB and Starbucks formed a joint venture, Tata Starbucks Ltd, to roll out the iconic cafes across India. Three of them have been launched in Mumbai and more will be opened soon this financial year.

“Starbucks is present in many markets of the world; India is one of the final frontiers, one of the large markets it was yet to enter. There is equal keenness on both sides to make it successful,” explains Bhat. He’s confident that the timing is just right for Starbucks’ entry. “I think the premium coffee experience is something that is waiting to happen in India. Indian consumers are getting increasingly affluent, are looking out for experiences which elevate them or which make them feel good about themselves.”

The other reason for the alliance with Starbucks is forward integration for its coffee business. Tata Coffee, a TGB affiliate, has set up a new Rs 3-crore, 375-tonnes-a-year roastery in Coorg, which will supply to Starbucks. “The entire offtake from that will be for Starbucks, initially for India, but at a later stage it may even go to Starbucks in other locations,” adds Bhat.

Acquisitions spree

TGB has never been chary of acquisitions. In the early ’90s, Tata Tea had snapped up Consolidated Coffee, the earlier avatar of Tata Coffee. In 2000 it was Tetley, the largest acquisition India Inc had made ever till that time. Since then, at periodic intervals, TGB has picked up brands such as Eight O’Clock Coffee in the US, Grand Coffee in Russia, Joekels in South Africa, Activate brand of water in the US and Polish tea brand Vitax. While Tata Tea is the largest tea brand in India, some of its brands are market leaders in the countries they operate in. Tetley is the largest brand in the UK, with a 25 per cent market share and strong in the US and Canadian markets too. Brands such as Eight O' Clock coffee are leaders in their niche market of gourmet coffee. TGB through the Wattawalla plantation it has a joint venture with in Sri Lanka, is a top brand there as well.

But, as Bhat points out, it’s not enough just to keep acquiring brands. TGB needs to keep innovating new products that will delight consumers. “It’s not just about serving tea, coffee and water but also transform those categories with innovative new products. How well and how rapidly we can introduce them will be key,” he adds. (See box).

Brand consultant Harish Bijoor, a former marketing head of Tata Coffee himself, says TGB’s focus on being a natural beverages player will help contribute to growth. “The future is about focussed companies that leverage themselves and Tata Global is a company anatomically focussed on the bladder with its offerings and that’s going to give it its strength.”

Bijoor points out to some clever strategic moves the group has made in targeting the low end of the market with single-serve offerings with brands such as Tata Gluco and Water Plus. “They’ve taken their learnings from the tea business where small packs will eventually outsell larger packs in volume though it will be slow.” Bijoor adds that TGB’s focus should not stray from on the beverage business and also come up with physically relevant brand propositions after its emotional brand campaigns it did with its Tata Tea brand with the ‘ Jaago re’ campaign.

Apart from growing its large portfolio of brands, TGB is also looking to grow through its alliances, two of which are up and running – the one with Starbucks and with PepsiCo. The group itself is not shy of either more alliances or acquisitions, given its track record of both such initiatives in the past decade. For TGB’s Bhat it won’t be trite to say that the world is his oyster as Tata Global seeks more share of throat. And, should we say bladder as well!

What’s in that cuppa?

Lots, actually, going by what Tata Global does. Some are blending innovations and some technological innovations.

Its Tata Tea Gold brand in India is a leaf tea, but 15 per cent of the blend is long, orthodox leaf which gives a very distinct flavour to the tea.

In the UK market, TGB launched a brand called Tetley Blend of Both which is a blend of green tea and black tea. Tea drinkers still get the health benefits of green tea, while they retain the flavour of black tea. That’s an innovation in the world of tea.

In Australia one of the recent innovations GB unveiled is called Chai Latte, a thick, rich, indulgent tea drink spiked with cinnamon, nutmeg and spices which comes as a powder. It dissolves in hot water and it forms a very thick brew which looks like hot chocolate dissolved.

Tata Gluco Plus and Water Plus are local innovations which are glucose-, zinc- and calcium-enriched water-based beverages which help give vital minerals to those who are deficient in it.

TGB has innovated with its Activate brand of water in the US, where the vitamins and minerals are stored as powders in the bottle cap and which dissolve in the water as soon as the cap is twisted and bottle opened.

SWOT analysis

Strengths: Strong position in tea, strong brands in markets such as India / UK / Canada / Sri Lanka, strong distribution network, passionate team

Weaknesses: Weak position in Russia and Eastern Europe, relatively weak position in coffee

Opportunities: Growth in coffee and functional waters is a big opportunity

Threats: Volatility of commodity (tea & coffee) costs poses a threat; recessionary environment in Europe is also a continued threat

Published on November 22, 2012

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