Their strategy

Their strategy focuses on product innovation, building global brands, success in new
channels and more countries, plus greater efficiency.

Brands theyre building key global brands, including Tetley and Tata Tea, plus
exciting new regional brands such as Tetley Infusions and Good Earth

Products and disruptive innovation theyre challenging and changing the way
customers think about beverages and enjoy them

Sustainability theyre aiming for long-term success, so sustainability makes

business sense. Theyve identified four key issues to drive us forward: Ethical
Sourcing, Climate Change, Packaging and Water.

Process their new global information systems will help us improve efficiency and
share knowledge, today and in future

Distribution theyve moving into new markets and new channels to become truly
global

People thanks to their simplified global management system, emerging culture

and talent strategy, theyre making Tata Global Beverages the place to be

They also recognised that they would need to build or buy a brand which had global appeal.
They had two options before us one was to build the Tata name as a global brand, the
other was to acquire a global brand. They made some tentative efforts in the direction of the
former, but realised that it was a very expensive and risky proposition which required very
large outlays of funds. Building brands overseas is no easy task, so it became clear to us
that the most effective option was to acquire a brand.

Horizontal Integration
The company had many formal horizontal integration i.e it has acquired any company in
the same business. It saw the need for a production base outside India, so they formed a
joint venture in Sri Lanka where their plantations produce 11,000 million kg of very fine
quality tea. They plan to buy plantations in Africa as teas are imported from these
geographies India, Sri Lanka and Africa. All this is part of their global strategy.
It has horizontally integrated with many companies in both the tea as well as coffee
business. Tata Global Beverages does so to expand its operation oversees. Doing this it

caters to its strategy of going global. Some of the companies with which it has horizontally
integrated are as follows:
Tata Tea - Good Earth acquisition
In October 2005, Tata Tea Ltd, through its US subsidiary Tetley US Holdings Ltd, signed an
agreement to acquire FMALI Herb Inc and Good Earth Corporation for an undisclosed
amount.
Good Earth Corporation owns the `Good Earth' brand, which is licensed to FMALI Herb Inc.
Good Earth is one of the fastest growing specialty tea brands in the US, especially on the
west coast. It has a 3.7% share of the US specialty tea market and a turnover in excess of
$16 million. This acquisition is an important contribution to the Tata Group's plans for
growing the Tata Group's tea business around the world.

Tata Tea acquires Jemca

Tata Tea subsidiary Tata Tea (GB) Ltd., U.K., has signed a definitive agreement to acquire the
assets of the Czech tea company, JEMCA, from the food processing company Alima znackov
potravina a.s. The acquisition has been funded by The Tetley Group, according to a company
release.
JEMCA has a 26.6 per cent share of the tea market in the Czech Republic. JEMCA has been in
the tea business since 1974, originally as part of a state-owned company and later as part of
the Alima group of companies. It sells a wide range of black, green and fruit and herbal teas
which it produces at its factory in Jemnice,
Benefits:Through our Tetley brand we had a presence in Poland but were not able to make any
significant headway in the Czech Republic or the eastern European market. This acquisition,
therefore, is not only in line with growing the Tata Group's tea business around the world but
also make an entry into a market where the company was previously not represented i.e The
`buy' is likely to give the Tatas a market leading position in a high tea consumption market,
where it was unrepresented.
Tata Coffee Eight O Clock Coffee Company acquisition

Tata Coffee Limited, a 51% owned subsidiary of Tata Tea Limited signed a definitive
agreement to acquire Eight O' Clock Coffee Company ("EOC"), U.S.A. from Gryphon Investors
for a total acquisition price of US$220 million (Rs 1,015 crore). EOC has over 100 years of
brand history and retail coffee experience in the U.S. It is the # 1 player in the branded
whole bean market and the category leader in the value gourmet segment in the U.S. retail
market.
Benefits:

EOC provides a sizable entry platform and an established brand to Tata Coffee in the

US$21 billion (Rs 97,000 crore) US coffee market.

The acquisition which will be financed through a combination of equity and nonrecourse debt will transform Tata Coffee from a regional coffee player in the Indian
market to a significant global player with strong and powerful brands in the global

markets including in the US.

This acquisition is in line with Tata Coffee's objective to move up the value chain and
become a leading and fully integrated player in the global coffee industry

Vertical integration
Tata Global Beverages first acquisition with Tetley Group could be called as a forward
vertical integration. This is because Tata was into the plantation of tea all over India and had
no direct contact with the customers. Tetley had various strengths i.e its innovative
packaging, introduction of tea bags and its logistics management team. To leverage the
advantages of these strengths of Tetley, Tata forward integrated with them.

1. Tetley acquisition
Tata Tea was then a totally commodity-driven business, it sold all its produce in bulk and
had no direct contact with the consumer. It therefore suffered from all the disadvantages of
such an operation -- prices would rise and fall often due to global supply and demand, quite
independent of the consumer. Tata Tea was a leader in India in the packaged tea segment
with a presence in developing countries through exports. Tetley was the second largest tea
brand in the world, with a presence in developed geographies. The integrated vista offered
access to new markets and products to both, not to mention the synergy in tea buying and
blending operations.

Tetley was the most easily recalled tea brand in the world and had extremely good
innovation in packaging. They are the first company in the world to introduce tea bags. They
have an extremely fine track record for innovative packaging; they created, among others,
the round tea bags and the drawstring tea bags. Also, extremely good logistics management
skills

found that the price behavior of tea was a lot more stable at the consumer-end than
when auctioned. Since Tata Tea has the size and geographical spread, they decided

to go directly to the consumer

faced with competition from the worlds largest and most powerful consumer
products company, Unilever. This acquisition bring about a transformation, to
increase their market-share

Net
Sales

Mar '00

Mar '01

Mar '02

Mar '03

899.26

810.86

750.68

741.02

Net Sales
1000
800

Net Sales

600
400
200
0

Operatin
g Profit

Mar '00

Mar '01

Mar '02

Mar '03

Mar '04

143.59

105.96

79.37

73.36

86.96

Operating Profit
200
150

Operating Profit

100
50
0
Mar '00Mar '01Mar '02Mar '03Mar '04

From the financial reports of Tata Global Beverages it was found that after their acquisition
with Tetley Group its financial performance has not improved rather their overall net sales
and operating profits decreased drastically .
2. Tata Global Beverages Joint Venture with Starbucks
StarbucksenteringintotheIndianmarketwillbeintheformof50/50jointventurewiththe TATA
Global Beverages Group. Share prices of both companies soared following the
announcement of the pact. (Vasudha 2011, pp. 10) This is the first time Starbucks is
entering themarketwithalocalpartnerandwillbecobranding theirstoresandproductswith their
counterpart. The Indian outlets will be called Starbucks TATA Alliance. Thepartnershipwill
enableanexpandedrangeofbeverageofferingsforIndianconsumers.Oneof these being the
Starbuckss premium tea product Tazo that will be available in IndianoutletsrenamedasTATA
TazoTea.
Starbucks Coffee Company s non-binding Memorandum of Understanding (MoU) with Tata
Coffee Limited, one of the regions leading providers of premium arabica coffee beans. The
MoU will create avenues of collaboration between the two companies for sourcing and
roasting high-quality green coffee beans in Tata Coffees Coorg, India facility. In addition, Tata
and Starbucks will jointly explore the development of Starbucks retail stores in associated
retail outlets and hotels.
TATAGroupwillbenefitfromthepact.TATAsexperienceinretailingisnotsufficienttoopenacoffee
retailshopontheirown;so,byenteringinsuchalliancetheywillgainavastamountofknowledge.Also,
TATAGlobalBeveragesproducesbottledHimalayanwaterwhichmightbeofferedinStarbucksstores
aroundtheworld.
Themajoradvantageof thealliance to Starbuckswillbe thattheknowledgeandunderstandingof
theIndianmarketcanbebroughtbyTATAGlobalBeverages. (Vasudha2011,pp.10)Enteringintoa

strategicpactwiththeworldslargestintegratedcoffeeplantationcompanyshouldenable
Starbucks to ensure sustainable profit growth in India. Also, TATA Tea is the teamarketleader
with 18.4% share.Starbuckswillalsobenefit fromTATAsexperiencein theIndianmarket
regardingdifferent tastesindifferentregions; thusmakingsureitoffers themostpreferableblend
ofbothteaandcoffeetocustomers.
Apartfromproductandlocalpreferencesknowledge,StarbuckswillbenefitfromTATAGlobals
infrastructure.InIndia,thereisthechallengeofbalancinghigherrentalsandprofitabilitygiventhe
lackofinfrastructureinIndiaalongwithinflatingrealestateprices.Starbucksisastepaheadof
competitorsduetotheiralliancewithTATAGlobalGroup.TATAhasalocalknowledgeontherealestate
marketandtheyhaveopportunitiestoleveragetheircapabilitiesinthisarea.Starbuckswillbeableto
use TATAscurrentinfrastructuretoeffectivelygrowthebusiness.
Key notes:

Their first acquisition was Tetley which was 3 times bigger then Tata Global

Beverages
After each acquisition when Tata Group was asked about the overall cost of

acquisition they didnt disclosed it

It is evident that the Tatas joint venture with Starbucks is benefiting Starbucks

Corporation more than Tatas

They acquired JEMCA which is from the food processing company Alima Znackova
Potravina. They are concentrating on their frozen foods business and have divested
their tea business. They have not even given the thought that why Alima Znackova
Potravina want to divest it

Group think!!!!
In a statement, Ken Pringle, Executive Vice-Chairman and Chief Executive Officer of the
Tetley Group, and director of Tata Tea, said this was the Tata group's second tea acquisition
since October 2005 when it picked up Good Earth Corporation and FMALI Herb Inc to
increase its nominal share in the US speciality tea market.
It may be mentioned here that at its last annual meeting, TTL Chairman, Ratan Tata, had
obtained shareholders' approval for creating a `war chest' of Rs. 500 crore, which he said
was necessary for making acquisitions by TTL and Tetley.