Indian conglomerate on acquisition rampage


In this article we are highlighting the strategy of an Indian conglomerate how they are speeding up to genuinely become a global leader. The subject matter is the case of the Tata group.

The Tata group seems to be on a single-minded mission to mould itself into a global player of significant consequence. The torrent of acquisitions by the group explains the single minded mission.

Tata Tea, the world’s second largest branded tea company, is close to acquiring a South African tea brand. This would be the fifth deal for the company in the past one year. While there is no official word from the company, sources close to the development say a deal is on the cards. Details on the brand and the cost of acquisition remain sketchy. The targeted brand is one of the top three tea brands in South Africa.

South Africans prefer ready-to-drink beverages against hot drinks. Tata Tea group’s arch rival Unilever dominates the flavored tea market in the region. Tata Tea has a presence in S. Africa through Tetley since 2004.

The move is seen as a part of Tata Tea’s strategy to expand globally. S. Africa is one of the key markets where Tata group would like to have a significant footprint. The group already has a presence in the country in other businesses like automobiles, steel, telecom and hotels.

Over the years, Tata Tea has been transforming itself from a commodity player to a branded one. Branded tea contributes over 85% to Tata Tea’s consolidated revenues of Rs. 3,077 crore. The company has been reducing its interests in plantations and has been building branded tea portfolio through acquisitions.

It went on to acquire the US-based Good Earth Corporation for $32 million. More recently, in May 2006, it picked up Jemca in the Czech Republic for an undisclosed sum. In August 2006, it paid $677 million for a 30% stake in Glaceau, the US-based flavored water manufacturer. To complete this acquisition, Tata tea is

raising $700millon. Standard Chartered and ICICI Bank are helping the company raise these funds.

Apart from S. Africa, the tea major is also looking at Chinese and Russian markets. In China, it is planning to produce and market green tea and instant tea through a joint venture and is currently test ,marketing Tetley in Russia, one of the largest tea markets in the world which consumes approximately 1,40,000 tons per annum.

This strategy makes Tata tea one of those companies in the world that is betting on its future in both the developed and emerging markets.