International Research Methods

The analysis of Tata Tea Ltd acquisition of Tetley Group

By:

Rahul Chaudhary MBA, AGBS SAP2014 Amity University

Introduction This study is to identify the strategic competitive advantages, drivers/motives, challenges and the outcome of Tata Tea Ltd. acquisition of Tetley Group Ltd. using various tools and theories. The research consists of secondary data, which provides different perspectives towards the research question. The differences between the two companies and the challenges might faced during the integration process, are the key foundation factors to the argument of whether this acquisition is a success or failure. The deal was worth 271m. It was the biggest acquisition in Indian corporate history. It represents the largest cross-border takeover of an international brand by an Indian firm. Research Objectives Identify the challenges faced by the two companies Identify the strategic advantages for both companies, as a result of the acquisition. To identify the potential Learning outcomes. Research Method Content analysis of secondary data such as data obtained from the interview, journal articles, books, news papers, social media, company websites. Discussion This deal challenged Tetley's ability, over and above covering its own debts, to service the loans Tata Tea had taken for the acquisition. As Tetley needed to generate 22 million pounds (interest alone on a loan of 190 million pounds). And at the same time, Tetley also has to pay back the principal of 110 million pounds over a period through half yearly installments which worked out to 12 million pounds per year. There were other factors adding to the problems of Tetley as in 1999 Major UK retailers slashed down on grocery prices which substantially reduced Tetley's pricing flexibility ability. Thus, the UK tea markets had been under pressure. According to the UK government's national food survey, there had been a substantial fall in the consumption of mainstream teas- tea-bag black teas drunk with milk and sugar. After the acquisition, They repaid 10 million worth of debt in FY2003 and this happened as a result of substantial restructuring of Tetley group's worldwide operations which included disinvestments in non-core activities and the private label tea business came through the acquisition of the Tetley group restructuring of global productions facilities with the new product launches entrance into emerging markets.

Thus, all of these factors contributed to the profitability of the business to improve since the acquisition was done. One more star was added as after acquisition Tetley Group achieved highest market share in the UK, Canada, Australia and France and the products were launched in Bangladesh, Pakistan and Russia. The Tetley brand and tea-bag technology provided Tata with access to European markets for its tea production. By this acquisition Tata beat competing interest from Sara Lee, the American owner of Wonderbra and Nestle, the Swiss food company which owns Nescafe. Even Tetley bought some of Indian tea annually from different sources and Tata tea could help Tetley in his requirement of Indian teas. Tetley also bought the teas worldwide, blend and package them.

Learning Both the groups were aware of the culture difference that existed and they adopted a focused approach to blend the two cultures. They worked towards adding to each other's knowledge and skills and create business with better value prospects. They moved towards defining a single company. The key learning : pre-estimating the importance of cultural differences, adopting a non-threatening approach and absence of time pressure

Referencing
BBC News | BUSINESS | Tetley bagged by India's Tata. 2014. BBC News | BUSINESS | Tetley bagged by India's Tata. [ONLINE] Available at:http://news.bbc.co.uk/1/hi/business/658724.stm. [Accessed 10 April 2014]. Tata group | Our businesses | Mergers and acquisitions. 2014. Tata group | Our businesses | Mergers and acquisitions. [ONLINE] Available at:http://www.tata.com/htm/Group_MnA_CompanyWise.htm?sectid=Mergersand-acquisitions. [Accessed 10 April 2014]. Tata group acquire the Tetley Story. 2014. Tata group acquire the Tetley Story. [ONLINE] Available at: http://www.articletrader.com/finance/tata-groupacquire-the-tetley-story.html. [Accessed 10 April 2014].