Tata Tea: Managing the Tetley

Acquisition

Lalit Verma
09BS0001124
 Contents
• Introduction
• Background
• Vision & Values
• Evolution of TTL
• Tetley Acquisition
• Synergies
• Closing of deal
• Integration
• The road ahead
• Financial Highlights
• Conclusion
 Introduction
• Tata Tea Limited, also known as Tata-Tetley, is the
world's second largest manufacturer and distributor
of tea. Owned by India's Tata Group, the Tata Tea
Limited markets tea under the major brands Tata
Tea, Tetley, Good Earth Teas and JEMČA. While Tata
Tea is the largest tea brand in India, Tetley is the
largest tea company in the United
Kingdom and Canada and the second largest in
the United States by volume and JEMČA is Czech
Republic's leading tea company.
 Background
• TTL,S operations spanned the entire value chain
• It had an area of 26,500 hectares under tea cultivation
• Produced around 60 mkg of black tea & 2 mkg of
instant tea annually
• Growth Strategy: Strengthening business in existing
geographies , expanding into new geographies
• It had four major subsidiaries:
1) The Tetley group, UK 2) Tata Coffee Ltd, India 3) Tata
Tea Inc.,USA 4) Watawala Plantations Ltd, Sri Lanka
 Vision

• Challenging for leadership in tea around the world

Challenging…
A state of mind
Leadership…
Not just in size
Tea…
The product scope of vision
The World…
The Geographic scope of vision
 Values
• Consumers & customers define the success
• People are the heart of the organization
• Firm believe in tea & our products
• Believe in earning respect
• Positive contribution to the communities
• Creating more valuable business
 Evolution of TTL
• Incorporated in 1962
• Formation of Tata Finlay Ltd in 1960
• Packet tea & instant tea divisions
• TTL commenced operations in 1964
• Acquisition of Finlays business in 1976
• 1985, set up a tea factory in kerala to process black
tea
• 1984, investment company called Bambino
Investment & trading company pvt ltd
• 1986, set up a 100% subsidiary in the U.S
• 1993, set up a jv Tata Tetley Ltd
• 2000, acquired the worldwide tea business of Tetley
tea
• Issued GDR,s for funding the acquisition
• Tata Tea had 6 major brands – Tata Tea, Tetley, Agni,
Kanan Devan , Chakra Gold & Gemini
 Tetley Acquisition
• Company always had an ambition to expand in
Africa
• Mr. Andersen informed them about Tetley which
was up for sale
• TTL hired Anderson to broker the deal
• 2000, acquired the shareholding of the Tetley
group
• Tetley was the world's second largest tea brand
• Sourcing of tea by Tetley from 35 different
countries
• Others bidders were companies like Nestle & SARA
Lee
• JP Morgan was appointed as the investment bank
• But the deal couldn’t fall through because of the
opposition of some of the top management
executives
• IPO of Tetley backfired & those executives resigned
from their posts
• This cleared the path for acquisition by TTL
 Synergies
• Competition was likely to be intense in the future
• TTL realized the need for global brands
• TTL believed that it can use Tetley as a vehicle for
its packet teas in the developing world
• Opportunity to launch “ready to drink”
• Diversion of strategy by TTL
 Closing of Deal
• International takeovers were tricky for Indian
companies
• Huge price tag of Tetley
• Mobilization of funds
• Formation of SPV
 Integration
• Integration of two companies was a major
challenge
• Formation of TPG & GEG
• R&D
• Restructuring & consolidation
• Change in focus
• Issues like D:E ratio
• Cultural differences
• Leveraging mfg & distribution networks
 The Road Ahead
• Tetley was expected to bring volumes in short term
& opportunities in the long run
• Strategies for different markets
• Major decisive moves
• Creation of task forces
• Challenges in the market
 Financial Highlights
• 1998-99, TTL reported a turnover of Rs. 901 Cr &
PAT of Rs. 129 Cr.
• Tetley reported a worldwide turnover of Rs. 2240 Cr
& profits of around Rs. 182 Cr. In the same period
• Tata tea income has shown upward trend for most
of the time in the period 1993-2003
• PAT was highest during 1997-98 to 2000-01