TATA TEA TETLEY

GLOBAL EXPANSION THROUGH INORGANIC ROUTE

Submitted to: GROUP 2
Prof. Rojers P Joseph Hiteshi Patel (PGP09188)
Kriti Nagori (PGP09198)
Neha Singh (PGP09212)
Nidhi Gupta (PGP09214)
Nishi Gogia (PGP09215)
Tanu (PGP09242)
 AGENDA

Tata TeaTetley Flavour of

1 Introduction 5
Synergies

2 Types of Global 6 Merger and

Expansion Challenges
TATA TEA TETLEY

3 PESTEL 7 Current
Analysis Status

4 Porter Forces 8 Conclusion

 • Tata Tea was set up in 1964 as a joint venture. Tata Tea & its
subsidiaries focus on branded product offering in tea but
with significant presence in India & Sri Lanka

• The major driving force behind Tata Tea – Tetley deal was the
fact
Weak thathigh
Tetleyend
filled perfectly into Tata
management Tea’s globalisation
consultancy
device and could be perfect launch vehicle to achieve greater
synergies
INTRODUCTION
• Greater market penetration, better operating efficiency, and
instant expansion of product line were some of the
advantages of the merge

• Deal Worth In the year 2000, Tata Tea acquired Tetley brand
in a 450 million three times of worth Tata with 114 million.
The deal was second largest broad acquisition
 Types of Global expansion

Organic route Inorganic route

Why Inorganic Route:

Organic route: International growth can be accelerated through
Advantages – inorganic growth , Expansion through merger and
• It is inherently incremental acquisition or other ownership activity such as joint
• It allows companies to step into exporting venture
• Specific market gradually with minimum
investment and low risk
• Companies are cautious about making a large The route provides
greenfield investment in entering a new market • Revenue
so most international expansion tend to be • Profit
organic growth • Existing relationship
• Captive customer
Disadvantages – • In house market savvy
• Limited resources and competition • Brand Equity
• Infrastructure
•FDA
P E S T •The imminent •Tata tend to use •Tetley had a history
E
•Tata Tea’s main
L
•Indian
Regulations for threat of an integration of innovation and markets were accounting
non-alcoholic foreign entrants strategy for the successfully India, West Asia rules did not
beverages with new new companies it commercializing the and Middle East. allow
•Significant products acquires in innovations. It was also consolidation
capital outflows •Local various •The draw-string tea selling in USA of account of
abroad required competitive continents bags were also first through its parent and
various official threat from the •The two popularized by subsidiary Tata subsidiaries,
approvals likes of HUL companies had Tetley. Besides this, Tea Inc. USA. making it
•Restricted different sourcing Tetley had also However, it did difficult to use
norms for models. Tata Tea introduced teas in not have a the target
banks to was vertically various new formats strong position company’s
provide funding integrated with such as ready- to- in other balance sheet
for the M&As 51 own estates in drink tea and drink- developed to raise funds
India and 20 in Sri cool teas markets like for a takeover
Lanka Europe and
Australia
 • FDI
Porter’s Forces: • Untapped
rural market

• Biscuits Threat of
New
• Cookies Entrants

• Bread Bargaining
• Large number of
Complement Power of
Suppliers
producers
ary Products
• Low switching cost

• Energy drinks Porter’s

• Coffee Forces
• Pepsi Rivalry
• Coke Threat of
Substitutes
Among
Existing
Firms

Bargaining • Approximately 700 Tea

• Large number of buyers Power of
Buyers Companies
• Product differentiation • Unorganized players
• Other options available • Industry growth at 2%
• Large number of consumers
• Low switching cost
 Flavour of Synergies
• The concept of synergies is about creating added value by sharing resources
and acquire benefits that otherwise would not have been possible to achieve or
would have cost much higher
• Synergies can take different forms such as efficiency gains, entry speed gains,
competitive gains, consolidation gains, resource gains & many more
• Synergies are found and used all over the organizations and they take many
different forms depending on the type of mergers and acquisitions as well as the
nature of the organizations’ business

• In the case of the acquisition of Tetley by Tata Tea, the synergies that would
have accrued to the combined entity as a result of the deal were supposed to be
quite significant
 While Tata Tea was
Flavour of Synergies Contd. supposed to get access
to Tetley’s strong
brands and its
worldwide distribution
Tata Tea’s strong R&D network and about,
base and expertise in Tetley was supposed to
tea cultivation and benefit from Tata Tea’s
manufacturing proved competencies in
to be of immense help managing plantations
to Tetley and processing units.

Tetley’s well-
While Tata Tea catered
entrenched presence
primarily to the lower
across a wider range of
end of the market
categories such as
segment, Tetley had a
decaffeinated, herbal,
presence in the
lemon tea, and tea
premium segment
bags, etc. added to
which jointly allowed
Tata Tea’s brand
them to cover a large
strength in developing
share of the market
packaged tea.
How did merger take place between both companies?

1 2 3 4
Ratan Tata developed the Tata Tea had well in Tata Tea has requested the ap The second reason they
business as a marketing power location their worldwide proval of shareholders for Tat wished to know the global
house in India, but he had aspirations, as they a Tetley's merger with itself i distribution system from
worldwide aspirations for Tata wished to bring Tata Tea n an effort to compensate for Tata's side was the reality
Tea, which led him to purchase to the worldwide loss of income after lately di
Tetley and concentrate Tata Tea markets vesting portion of its tea gard
on a worldwide scene ens portfolio
Challenges in Merger And Acquisition
The Tea utilization, which developed quickly in the past USSR in the eighties, has really
declined after its breaking down

The quality and amount of the Indian tea harvest have some impact on tea costs; the
effect is restricted

Tea costs demonstrate variety because of gigantic assorted variety of value and
dissimilar to espresso

The rising challenge from African countries where the generation of tea is new and
growing, presented potential dangers to tea exporters from India

World market costs have declined the expense of creation and has expanded
relentlessly in this way, putting weight on the maker's edges
 CURRENT STATUS
1 2 3
In 2010 Tata Tea became Tata
Tetley’s expertise in brand and Global Beverages. A global
There were evident benefits of the marketing and Tata Tea’s strong management structure that will
acquisition. Tetley provided Tata base of plantations in India and Sri encompass all the acquired
Tea distribution access in Lanka seemed to be symbiotic and firms and joint ventures and
developed markets across 35 integrated the entire value chain create one big cohesive group of
brands which includes Tetley,
countries, including Western
Tata Tea, Tata Coffee, Eight O’
Europe and North America Clock Coffee, Himalaya

4 5
Tata Global Beverages Limited
will be renamed as Tata
Consumer Products Limited. It
will lead to the combining of key
brands such as “Tata Salt”, “Tata
Tea”, “Tata Sampann” and
“Tetley” under a single umbrella
The combined entity’s is
expected to reach over 200
million households hence giving
wealth
it an unparalleled ability to
leverage the Tata brand in
Consumer Products
 CONCLUSION
The use of inorganic route such as merger and acquisition to accelerate
growth is a well-established business strategy, and offers companies the
potential to enter new markets, access top talent and minimize costs
Tetley got benefitted from Tata Tea's competencies in managing plantations
and processing units. The deal got together the largest integrated tea
company (Tata Tea) in the world, while the other world's largest brand
(Tetley) thus making it a world class integrated outfit

As a result of the deal Tata Tea got access to Tetley’s strong brand, wide
distribution network and increased sales

Difficult Domestic scenario, lowering exports to

Russia, fall in tea prices and threat of imports from
rival companies were some of the major challenges
faced by Tata Tea

1 3 4
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