The Largest Tea Manufacturing Company In India Marketing Essay

The Largest afternoon afternoon afternoon tea metre leaftime leaf leaf leaf Manufacturing Company In India Marketing EssayTata teatime, one of the important meeting companies of Tata conference, is the widest afternoon teatime manufacturing fri cobblers lastship in India by volume and shortly holds second purview as telephoner representing tea operations in planetary merchandise. The company apply the policy of learning, sum- jeopardy and sustainability as their key st calculategies for world(a) growth. During their journey in achieving their milestone in spheric grocery store, Tata tea faced many political, social, economical and technical issues. For example acquisition of Tetley-UK was the most challenging one as it land Tata tea into short term debt. But the adoption of house policies and monetary restructuring helped Tata tea to regain their momentum and now it is the second largest company representing tea operations in global tea market.Tata Group, established in 1868 in India, comprises of 7 business sectors namely communications and in miscellaneaation technology, engineering, materials, services, energy, consumer products and chemicals. Each initiative operates independently and has their take board of directors and sh arholders. The revenue for Tata group in pecuniary division 2008-09 is $62.5 billion with a profit of $5.4 billion and 64.7 % of revenue advancement shot from foreign market. Tata group employ virtually 357,000 people worldwide and has established great reputation in India for 140 years by viscid to its strong protects and business ethics. They get hold of 27 publicly listed Tata enterprises with combine market chapiterisation of $60 billion, and a sh atomic matter 18holder base of 3.5 jillion. Tata group has operations in 85 countries and its products and services atomic number 18 exported to 80 nations. The major(ip) companies of Tata Group argon Tata teatime, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Steel, Indian Hotels and Tata Communications.Tata tea Limited was constrain in 1983 from the formerly Tata Finlay Company, a collaborated company organize in 1964. It is amongst the group company of Tata group that produces 5 major brands of tea and holds the 2nd role in domestic tea business in India. It acquired Tetley Group in year 2000 and became the second largest branded tea producer globally with its goods heraldic bearing in to a greater extent than 40 countries. The operations of Tata teatime and its subsidiaries focus on character product with significant presence in plantation activity in Sri Lanka and India. The global tea business of the Tata Tea group contri howeveres around 86% of the boilers suit business with the remaining 14% glide path from coffee, start tea and investment income. Tata Tea Limited is headquartered at Kolkata and owns 27 tea estates in eastern and southern India.Importance of Tata tea in Tata groupImportance of Tata tea can be determined by analysing the BCG matrix of Tata Group in token1 jut out 1 BCG Matrix ascendant (Abhinav-Parakh-Pdf)From the overall Tata group, Tata tea and two more Tata enterprises has been allotted a star status. champ status is given to those enterprises that are the market leader in their own product field. For example Tata Tea brand leads market share in terms of capacity and value in India and has been complemented Super Brand science in the landed estate. Moreover all the star industries have growth rate above 12%. And to maintain the growth rate the industries has spend large amount of property in their respective sectors. For example Tata Motors has invested in sundry(a) projects such(prenominal) as Nano project, etc. excessively Tata tea did invested lot of money in preserving its image by investing in jaago re campaign. Furthermore, Tata tea is contributing 9% of overall profit of Tata group. (Abhinav -Parakh-Pdf)Strategies for global growth-Tata teaTata teas global strategy is to become the market leader in tea outturn in India, improver its reach in the global market and end up being the global tea market leader where Unilever is currently positioned. For this the company has adopted the approach of forming subsidiaries and entering into alliances in countries that have appreciable amount of presence in the tea market twain form consumer as well as producer side. History of the acquisitions and spliff ventures formed by Tata tea are listed in control board1. (Tata Tea limited-pdf)Table1-History of acquisitions and joint ventures of Tata tea LimitedEntityYear of informationStatusRoleTata Tea, Inc, regular army1987 degree Celsius per penny subsidiaryTo process and market instant tea from its installing in Florida, based on sourcing of products from facility at MunnarConsolidated java Ltd(Tata Coffee Ltd)1991 learnedness of 52.5 per cent menaceTo diversify into coffee via a company which was Asias largest seller of coffeeEstate ManagementServices (P) Limited, Sri Lanka1992 articulate ventureTo manage 22 plantation companiesinvolved in tea, rubber, coco and palm oil, that were privatised by the Sri Lankan governmentTata Tetley, India(merged with Tata Tea with effect from April 1, 2005)1993100 per cent subsidiaryKochi-based EOU that services thebranded business of specific Tetley and Tata Tea markets orthogonal IndiaAsian Coffee Ltd (latermerged with Tata Coffee)1995 learning of 55 percent stakeTo get into selling instant coffee globally.Watawala PlantationsLimited, Sri Lanka1996Acquisition of 49 per centstake thourgh EMSPLProduction and marketing of tea, oil palm and rubber in Sri LankaTata Tea (GB) Limited2000100 per cent subsidiarySpecial object Vehicle (SPV) established for the acquisition of Tetley, UKTetley Clover Pvt Ltd.,Pakistan20035050 joint venture of Tetley with Lakson group in PakistanTo import and sell tea in Pakistan as well as build a tea portmanteau fa ctory in BaluchistanTetley ACI, Bangladesh20035050 joint venture of Tetley with advance(a) ChemicalIndustries (ACI) in BangladeshTo distribute Tetleys products inBangladeshGood Earth, USA2005Acquisition of 100 per cent stake by TetleyEstablish Presence in the US andacquisition of strong product portfolioJemca, Czech Republic2006Acquisition of 100 per centstake by TetleyMarket Leadership in Czech republic with a product portfolio which goes across both(prenominal) mainstream and specialisation8 O Clock Coffee, USA2006Acquisition of more than 50 percent stake, along with Tata Coffee and Tata Enterprises OverseasTo help establish global presencein coffee and facilitate movementup the value chainGlaceau, USA200630 per cent minority stake along with Tata SonsPresence in unfolding crossover space of the beverages market through and through enhanced body of waterYear of Source Tata Tea limited-pdfAmongst all that are listed in table1, the acquisition of Tetley, UK was the most benefici al and too challenging for Tata tea.4.1 outcome Study-Acquisition of Tetley by Tata Tea4.1.1 IntroductionTata Tea acquired Tetley from the venture capital investors in February 2000. For this Tata Tea competed with Sara Lee to acquire Tetley, completing its own initial public offering. The acquisition was important for Tata tea because its competitor Hindustan Levers Limited, subsidiary of Unilever was gaining market share and overall growth rate of tea market in India had slowed fling off at that moment. Before the acquisition, some of the important statistics of both the companies are shown in Table 2.Table 2 Comparison of Tata Tea and Tetley onwards acquisition(31/3/00)-(31/3/01)Tata TeaTetleyTurnover$207 million$417 millionEmployees59,7401,100Operating profit$36 million$42.6 millionKey marketsIndiaBritain, Canada, US, AustraliaTea estates540Source A Partnership Brewing, Far east sparing Review (May 17, 2001)/ Darden Business Publishing, University of Virginia, Tata tea Lt d and Tetley, plc (A)As shown in Table 2, Tata Teas motivation to acquire Tetley was that it provided Tata Tea, to access the market of US, Canada, Europe and Australia. Tata Tea also hoped to earn important marketing and packaging expertise from Tetley. Some of the expect utilitys of acquisition wereTechnology Tetley would provide Tata tea access to unique products such as flavoured tea, herbal tea and organic tea. This introduction could be a functional addition at the top end of the Indian market.Brands Tata tea could help show the Tetley brand in India, Middle East and Russia, conventional bastions of Tata tea.Cost synergies Both companies could together relocate manufacturing of tea and take advantage of global supply chain approach and shared platform for InfoTech and finance function. While geographical spread of operations can be a constraint of moving people around, but it was expected that virtual teams utilise information technology, could report together without phy sically travelling across country boundaries.InfoTech the acquisition can help Tata Tea to ameliorate InfoTech infrastructure and improve connectivity to distant plantation and adopting an enterprise resource planning (ERP) system to create a global supply chain based on Tetleys SAP-based ERP solution.4.1.2 Challenges for Tata Tea after acquisitionTata Tea acquired Tetley group for 271 million and it was clear that Tata Tea paid too much for Tetley as it was 100 million more than the next spunkyest bid. After acquisition Tata tea hoped to cover the debt created by leveraged buyout, but during that period many factors such as deteriorating pecuniary performance of Tetley (29 million in 1999), increasing raw material prices, great subscribe to of substitutes of tea such as coffee, juices and soda and pressure to generate affix coin flow created pressure and conflict internally at Tata tea and surrounded by the two makeup.Some of the challenges Tata tea has to come across areTa ta tea was half the size of Tetley in terms of revenue and number of upper management and so it feared a domination of Tetleys corporate civilization. dealing with diverse skill set, working Culture of employee and objectives of both the organisation.Financial constraints such as legal and capital control in India that made the listing of Tetley shares in India unattractive.Problem arising with integration of processes of both the companies to accomplish supply chain.As it is a leveraged acquisition, there is always a problem of bank coming in between and enforcing constraints in operations carried out by both the companies.There is a great deal of concern of how British employees would fight to Indian manager as India was a part of former British Colony.http//papers.ssrn.com/sol3/papers.cfm?abstract_id=9079524.1.3 Tata Tea Market after AcquisitionThe market of Tata tea suffered a lot after the acquisition as it experienced disaster fiscal performance. The companys overall sales was dropped by 8.3% and reached Rs 621.58 crore from Rs 677.86 crore. Also operating profit was dropped down by 19.37% and reached Rs 121.43 crore from Rs 150.60 crore. Market share price considerably dropped within a year as shown in Figure2. (THE HINDU group of publications, Sunday, April 15, 2001)Figure2 Share value of Tata tea in 2000-01 crisis after acquisition of Tetley grouphttp//www.hinduonnet.com/businessline/iw/2001/04/15/images/15b053c1.jpgSource THE HINDU group of publications, Sunday, April 15, 20014.1.4 Factors fuelling Tata Teas global initiativesThough the acquisition of Tetley was seen negatively by the market for the next 3 years, Tata tea cautiously chose the approach of integrating the processes and exploring synergies between the two companies with absence of any time pressure, plot of land maintaining operational independence. For this, the overall emphasis was on growth rather than salute reduction. Also a structure that supports joint working in several(pr enominal) areas was adopted. A thoughtful process was adopted for integrating the two companies with some of the utmostschoollight beingIdentification of common belief An international consulting firm was commissioned to identify the common belief between the two companies and intimate ways to bring them closer.Creation of structure A strong culture was developed to create a group that includes steering committee, their task forces and managers of both the companies.Refinement of structure Tata Tea adopted the hierarchical structure and assign responsibilities to every aim from top to bottom as shown in figure2.Figure 2 Refinement of Tata Tea organisational structure after acquisitionSource Tata Tea limited-pdfImplications that both companies has gone through after merging are described in table3.Table3- Merger implicationsMerger implicationTata tea- pre acquisitionTetley -pre acquisitionConsolidated-post acquisitionGlobal footprintDomestic operations in IndiaUK and USA were th e major marketGlobal presenceIncreased outsourcingProduced 95% of the tea requirements in-houseOutsourced entire requirement from 35 countries70% of the Tata teas requirement are outsourced from 20 countries, thus reducing risk associated with fluctuation in production nurture chain positioning40% overthrow came from tea packet/tea bags100% turnover came from tea packet/tea bags84%of turnover came from tea packet/tea bagsSource Tata Tea limited-pdfEnd of grapheme studyApart from all the acquisitions, Tata tea has adopted the policy of Sustainability as their key business strategy, which addresses many socio-economical and environmental issues that have the potential to increase competitive advantages in the business, if addressed effectively. Some of the global values that Tata tea has adopted areConsumer focused Consider consumer as their heartbeat careen management Adapting to changes by going beyond the ways of doing things.Motivation embolden employees to innovate in what the y do and take up challengesSustainability Use of ethical conducts in business implicationsPlayfully professional Encourage employees to make organisation as a personal space by improving the working condition.(Sustainability Report, 2008-09)4.2 Financial AnalysisIn order to support all the acquisitions and joint venture listed in table 1, Tata Tea has actively followed operational and financial restructuring. The effect of this is evident from the combined financial results of the company. That is though the sales between 2003 and 2005 remained flat, the operating margin did improved from 14.1% to 18%. Since the acquisition of Tetley the company have taken initiatives such as strict cost control and quality improvement with the help of its RD centres in order to improve its operational performance. As a result of these initiatives, Tata Tea was successfully able to lower its high cost debt of gearing 2.2 in year 2002 to gearing 1.1 in year 2005. Also there was a significant improve ment in Tetley Groups cash flow which helped the company to invest more behind its brand globally, launch new products and merge its market share in key geographies. (Tata Tea limited-pdf)4.2.1 Financial restructuring done by Tata TeaTata tea changed their orientation from producing tea company to selling tea company as they realised that the level of profit can be increased by selling high quality branded tea products rather than owning plantation. To execute their restructuring process, Tata tea decrease its total wage earnings by 12.5%, provident fund payment by 43% and welfare payment by 40%. Also Tata tea also reduced its employee strength from 58,888 workers to 34,596 workers as shown in Figure 3Figure3 Tata tea directly employed work-force, 1999-2007Source Tata Tea annual Report (various), IFCCurrent Positioning of Tata TeaAfter the financial give in the year 2000, Tata Tea is now moving forward toward the growth. soon share value of Tata tea has moved up to Rs 700 per s hare as shown in Figure4Figure 4 Share value of Tata tea (2008-09)http//www.blonnet.com/2009/05/25/images/2009052551110401.jpgSource Business Daily from THE HINDU group of publications, Monday, May 25, 2009Tata tea exceeded its performance with a volume share of 19.2% as compared to its competitors 18.6% and acquired the leadership position with respect to volume share of packet tea segment in India as shown in Table 4Source http//www.tatatea.com/TATA_TEA_TAKES_OVER_THE_NO_1_POSITON_IN_VOLUME_TERMS.docTata tea has been stratified as the most trusted beverage brand in India (The Economic Times, 2007) The companys marketing strategy of focusing on continuous innovation in all direction of brand marketing and sales, has helped Tata Tea to achieve splendid growth in recent years (Ms Sangeeta Talwar, Executive Director-Marketing, Tata tea Limited). completely products of Tata Tea such as Tata tea premium, Tata tea gold, Tata tea Agni, Tetley verdure tea and Tata tea life are being w ell standard by the consumer and hence experience great success.Future plansAs full-blown markets such as USA, UK and Canada are changing and with the declination of black tea products, Tata tea Limited are now concentrating on sectors that are developing rapidly such as fruit and herbal infusion, green tea and many more. The company has been structuring its business in these high value sectors by supporting key products, responding to changing consumer needs by introducing new products and make acquisition. Recently Tata tea is looking for joint venture with a chinaware based company Zhejiang Tea import and export to manufacture and market green tea extracts, liquid tea concentrates, cold and hot water soluble instant tea and former(a) value added tea beverages (Tata Tea limited-pdf). Also the company entered the Russian market through joint venture with European bank of reconstruction and development to obtain the hydration opportunities in the Russian market (Sustainability Report 2008-09).ConclusionTata teas overall success was much depended on its strategies in the critical time. Though acquisition of Tetley-UK was analyzed as a negative move at that particular time i.e. in the year 2000, Tata tea overlooked the acquisition as an opportunity to compete in global tea market. Apart from use of some firm strategies, other key factors that played a crucial role in Tata teas global success areUse of unspoilt strategy at the right timeUse of wait and watch approach during critical timeEstablishment of understanding between Tata tea and Tetley-UKIt is said that use of high risk results in two ways in business. If the risk doesnt work the company can go to ground of debt. But if the risk works, the company can experience success like never before and thats what happened to Tata tea.ReferencesAbhinav-Parakh (Pdf file) online available http//www.scribd.com/doc/24386829/Abhinav-Parakh (4/01/2010, 1440)Darden business publishing-University of Virginia, Tata te a Ltd and Tetley, plc (A) online on hand(predicate) http//papers.ssrn.com/sol3/papers.cfm?abstract_id=907952 (5/01/2010, 2108)Sustainability Report, 2008-09 (pdf file) online Available http//www.tatatea.com/TataTea_Sustainability_Report_2008-09.pdf (12/01/2010, 1903)Tata tea limited (Pdf file) online Available http//www.ibef.org/download/Tata_Tea_Limited.pdf (5/01/2010, 2308)