Tata Tea Limited
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| Type | Private |
|---|---|
| Founded | Calcutta, India (1964) |
| Headquarters | Kolkata, India |
| Key people | Ratan Tata (Chairman) |
| Products | Tea |
| Employees | 34,596 (2006) |
| Parent | Tata Group |
| Website | http://www.tatatea.com |
Tata Tea Limited, also known as Tata-Tetley, is the world's second largest manufacturer and distributor of tea [1]. 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[2] and JEMČA is Czech Republic's leading tea company.[3]
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[edit] The company
Along with its subsidiary companies, Tata Tea manufactures 70 million kilograms of tea in India, has 54 tea estates, ten tea blending and packaging factories and employs around 59,000 people.[4] The company owns 51 tea estates in India and Sri Lanka, especially in Assam, West Bengal in eastern India and Kerala in the south. The company is the largest manufacturer of Assam tea and Darjeeling tea and the second-largest manufacturer of Ceylon tea.
Set up in 1964 as a joint venture with UK based James Finlay and Company to develop value-added tea, the Tata Tea Group has now product and brand presence in 40 countries. It is one of India's first multinational companies. The operations of Tata Tea and its subsidiaries focus on branded product offerings in tea, but with a significant presence in plantation activity in India and Sri Lanka.
The consolidated worldwide branded tea business of the Tata Tea Group contributes to around 86 per cent of its consolidated turnover with the remaining 14 per cent coming from bulk tea, coffee and investment income. The company is headquartered in Kolkata. With an area of approx 159 km² under tea cultivation, Tata Tea produces around 30 million kg of black tea annually.[citation needed] Instant tea is used for light density 100% teas, iced tea mixes and in the preparation of ready-to-drink (RTD) beverages.
Tata Tea owns five brands in India - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini. The company has a 100% export-oriented unit (KOSHER and HACCP certified) manufacturing instant tea in Munnar, Kerala, which is the largest such facility outside the United States. Tata Tea has subsidiaries in Australia, Great Britain, United States, Czech Republic and India.
[edit] History
[edit] 1980s
In the early 1980s, the tea industry in India was experiencing rising input and labor costs and dwindling margins as well as high taxes. India was facing competition on the world market not just from China, but also from other countries entering the business.
In 1983, Tata Tea bought the stake belonging to the James Finlay group to form the individual entity Tata Tea. In the same year, the company decided to move from the commodities business to consumer branding. The first brand Tata Tea was introduced. This was followed by other brands like Kannan Devan, Agni, Gemini and Chakra Gold. In spite of being the largest market in the world, the concept of branded tea took time to be accepted.[citation needed]
In 1987, Tata Tea set up a fully owned subsidiary, Tata Tea Inc., in the USA.
[edit] 1990s
In the 1990s, Tata Tea decided to take its brands into the global markets. It formed an export joint venture with Britain's Tetley Tea in 1992. Other new enterprises included a majority interest in Consolidated Coffee Ltd. (Tata Coffee Ltd.) and a joint venture to manage agricultural estates in Sri Lanka. Tata Tea Inc. in the United States processed and marketed instant tea from its facility in Florida, based on sourcing of instant tea products out of Munnar and Kerala. In 1993, they entered into a joint venture with Allied Lyons PLC in the UK to form Estate Tata Tetley.
In the mid-1990s, Tata Tea attempted to buy Tetley and the Lankan JVC acquired 51% shareholding in Watawala Plantations Ltd.
By 1999, Tata Tea’s brands had a combined market share of 25% in India.[citation needed] The company had 74 tea gardens and was producing 62 million kilograms of tea a year, two-thirds of it packaged and branded. Towards the end of the year, the tea business was hit by a drought in much of India. In addition, Russia, once the largest buyer of Indian tea, temporarily withdrew from the market.
[edit] 2000s
An important step for Tata Tea was the acuivistion of the Tetley Group (based in the United Kingdom) in 2000. It was a £271 million ($432 million) leveraged buyout. Tata Tea reportedly outbid the American conglomerate Sara Lee in what was described as the largest takeover of a foreign company by an Indian one to date. At the time, Tetley was the world's second largest tea company after Unilever's Brooke Bond-Lipton and had an annual turnover of £300 million. It was the market leader in Britain and Canada and a popular brand in the United States, Australia and the Middle East.
Established in 1837, Tetley was the first British tea company to introduce the tea bag to the UK in 1953. The tea bag was followed by the first round tea bag in 1989 and the 'no drip, no mess' drawstring bag in 1997. Tetley now contributes for around two thirds of the total turnover of Tata Tea.
In 2005, Tata Tea decided to sell the Munnar Estate to its workers. Employee cost (of the standalone entity) dropped sharply by about 40 per cent. They acquired the Good Earth Teas brand, which has a significant presence in the American specialty market.
In 2007, Tata Tea launched the campaign Jaago Re! to awaken the youth to social issues. The campaign was successful[citation needed] and has been continued into 2008 as well.
[edit] Marketing strategy
In spite of a global presence, the brands are distributed differently depending on the location. As Tata tea is far better known in India and a powerful brand there, it is pushed on this market and countries with a large Indian population. Therefore Tetley is the company's global face and the largest markets focus on the Tetley brand. Where both brands co-exist in one market, Tetley is positioned as the premium brand.
[edit] Operational synergy
Tata Tea is working for the right international mix. The focus is on having common systems and creating a global database for market and data collection. Recently Tata Tea has started expanding in new markets, where the brands will be introduced by way of "soft launches". These regions include the Gulf countries, West Asia North Africa (WANA) countries, Syria, Jordan and certain markets in the Far East. The Tetley Group will offer the Tetley brand in most of the developed markets of the world, as well as in Pakistan, Bangladesh and Russia.
[edit] Government and the Indian tea industry
The Indian tea industry as the second largest employer in the country has enjoyed the attention of the Indian government. When the export sales went down, the government has been sympathetic to the demand of the industry and its cultivators. It has passed resolutions supporting the industry domestically and has also lobbied extensively with organizations like the WTO internationally.
The Indian administration along with the European Union and six other countries (Brazil, Chile, Japan, South Korea and Mexico) filed a complaint with the WTO against the Byrd Amendment which was formally known as the Continued Dumping and Subsidy Offset Act of 2000 legislated by the US. The essence of this act was that non-US firms which sell below cost price in the US could be fined and the money given to the US companies who made the complaint in the first place. The act adversely affected the commodities business of the complainant states and has since been repealed after WTO ruled the act to be illegal.
Furthermore, the Indian government took cognizance of the changed tea and coffee market and set up an Inter-Ministerial Committee (IMC) to look into their problems in late 2003. The IMC has recommended that the government share the financial burden of plantation industry on account of welfare measures envisaged for plantation workers mandated under the Plantation Labour Act 1951. Moreover, IMC has recommended to introduce means so that the agricultural income tax levied by the state governments can be slashed and the tea industry be made competitive. It has recommended that sick or bankrupt plantation estates should be provided with analogous level of relaxation for similarly placed enterprises/estates as are available to industries referred to BIFR.
A Special Tea Term Loan (STTL) for the tea sector was announced by the Indian government in 2004. It envisaged restructuring of irregular portions of the outstanding term/working capital loans in the tea sector with repayment over five to seven years and a moratorium of one year, which was to be on a case to case basis for large growers. The STTL also provides for working capital up to Rs. 2 lakhs at a rate not exceeding 9% to small growers.
In addition to these measures, the Tea Board plans to launch a new marketing initiative, which will include foray into new markets such as Iran, Pakistan, Vietnam and Egypt. It also plans to renew its efforts in traditional markets like Russia, the UK, Iraq and UAE. Noteworthy is its intent to double tea exports to Pakistan within a year.
Assam Orthodox Tea is set to receive the Geographical Indications (GI) exclusivity. A GI stamp identifies a certain product as emanating from the territory of a WTO member or region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographic origin.
The Cabinet Committee on Economic Affairs set up the Special Purpose Tea Fund (SPTF) under the tea Board on December 29, 2006. The aim is to fund replantation and rejuvenation (R&R) programme. In the same year, Tata Tea entered into an agreement to take over Jemca, which controls a 26 percent market share in the Czech Republic.
The CCEA gave its approval for pegging the subsidy at 25 per cent and adoption of a funding pattern of 25 per cent promoter's contribution, 25 per cent subsidy from the government and 50 per cent loan from the SPTF. Banks have also been instructed to increase the lending period to over 13 years.
[edit] References
- ^ tata.com : Tetley's fiscal show to jazz up Tata Tea results
- ^ Tata Tea Company Profile
- ^ : Tetley.com :
- ^ http://www.tatatea.com/images/Corporate_Report.pdf
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