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Tata Tea Ltd
Merrill Lynch
Investor Conference
Presentation
February, 2006
Presentation Overview
Tata Tea Overview
Tea Market Overview
Brands – Overview & Initiatives
Plantations – Overview & Initiatives
Instant Tea Business
Coffee Business
Way Forward
Tata Tea - Overview
Tata Tea Overview
Among the top three players in the global tea market in terms of market share
Market capitalization in excess of US $ 1 billion Consolidated Revenues of over US $ 700 million 29% ownership by the Tata group; FII ownership 22
%; Domestic institutional share holders 15% Primarily a branded tea operation with presence in
over 40 countries with significant market share - Tata Tea in India - Tetley overseas Plantation ownership in India and Sri Lanka Includes Tata Coffee (Asia’s largest coffee producer)
The Tata Tea Group - Structure
Tata Tea Ltd
SBU’s Subsidiaries Associates
Brands
Plantations
Instant Tea
Tata Tea GB(Tetley)
Tata Coffee Ltd
Tata Tea Inc
Rallis India Ltd
Watawalla PlantationsSri Lanka
Exports
Tata Tetley
Consolidated Turnover 2004/05
Instant Tea3%
Coffee/Instant Coffee5%
Spices etc1%
Investment Income1%
Others1%
Bulk Tea 4%
Branded Tea85%
Bulk Tea Branded Tea Instant Tea Coffee/Instant Coffee Spices etc Investment Income Others
Segment wise turnover
Details 2003/04 2004/052005/06
9 Months*
Revenues 838 950 804
PBT (Before Exceptionals) 120 162 177
Margin % 14% 17% 22%
PBT (Post Exceptionals) 120 162 204
PAT 92 129 168
Margin % 11% 14% 21%
Rs in Crores
Performance Highlights – Tata Tea Standalone
* The Tea Industry is seasonal in nature and the nine months results do not necessarily reflect the pro-rata performance for the full year.
Details 2003/04 2004/052005/06
9 Months*
Revenues 3099 3077 2329
PBT (Before Exceptionals) 298 357 330
Margin % 10% 12% 14%
PBT (Post Exceptionals) 301 314 339
PAT 205 215 248
Margin % 7% 7% 11%
Rs in Crores
Performance Highlights – Tata Tea Consolidated
* The Tea Industry is seasonal in nature and the nine months results do not necessarily reflect the pro-rata performance for the full year.
Tea Market Overview
Top Five Tea Producing Countries
Sri Lanka9%
Kenya10%
Indonesia5%
China21%
India30%
Others25%
Top Five Tea Consuming Countries
India23%
China16%
Russia / CIS6%
U K 6%
Japan5%
Others44%
India is the largest tea producing and consuming country in the world.
Global Tea - A Snapshot
World Tea production in 2004 – 3200 mn kgs (approx)
Global Opportunity for ‘Tea’
• Growing Black tea markets define opportunity for geographical expansion of portfolio in overall Black tea although stagnancy is reported in world markets
- Potential sector revenue of Rs 48,000 Crs.• Top 30 ‘Tea’ markets account for 90% of the market volume in
the packaged black tea segment• Tata Tea & Tetley present in only 35% of this market – with a
combined revenue of Rs 3000 Crs.• Green / Fruits & Herbal / Flavours / Specialty tea account for
49% value of all global packaged tea revenues !
- Potential sector revenue of Rs 48,000 Crs. • RTD operates in a beverage arena that is at Rs 128,000 Crs.
SIGNIFICANT POTENTIAL FOR ADDRESS OF REVENUE GROWTH
Brands
India - Overview
• 2nd largest player after Hindustan Lever• Value market share of 21.6% (A C Nielson)• Brand presence across segments and price
points represented by Tata Tea, Agni, Chakra, Gemini and Tetley
• Super brand ranking for Tata Tea Premium• Distribution network connecting over 2200
stockists and 1.5 mn retailers
India - Initiatives
Existing brands restaged in India Launch of Kanan Devan Strong leads to a
major jump in market share Sania Mirza drives double digit growth of
Tata Tea Tata Gold captures 2% of market share
within 14 months of launch Restage of Tata Tea Agni
Launch of specialty teas under the Tetley brand – “new face of innovation”
Overseas - Overview
GB–Tetley continues to outperform major competitors with brand leadership at 27%; Growth in specialty teas segments
Canada –Specialty tea market leader at 23%; black tea at 44%
Australia – Growing market share of tea bags at 21% USA –USA share up year on year. Value share of
black tea 10%. France – Growing market share of tea bags at 11% Poland, Portugal, Spain, Jamaica & Baltic’s improved
performance during the period Russia, Pakistan, Bangladesh & South Africa - new
market entry shows promising results
Overseas - Initiatives
Acquisition of Good Earth in the USA Brands
– Fruit & herbals new launches in various geographies across the globe
– Test marketing of iced teas in UK– Increased market share in developing
markets. Success in opening up of new markets like Bangladesh, Pakistan, South Africa and Russia.
Redefining Innovation
Plantations
Tata Tea Plantations Restructuring
Pre Restructuring
TTL
NIPO SIPO
Est: 24 26
Emp: 31K 18K
TEA
Current Status
TTL
NIPO SIPO KDHP TCL
24 2 17 6
31K 2K
TEA
Alternative Crops
100%
Objective
TTL
Plantation
Business
51%19%100%
Minority Interest
Tourism
Alternative Crop
TEA
Plantation Restructure - rationale
Company focused on brand growth
Management skills different for plantation and brands
Global Sourcing opportunities
Complete ownership not essential
Some long term supply arrangements needed
Considerable scope to enhance plantation value with focus
Plantation Restructuring Initiatives
In South India
17 estates recently transferred to a new company formed under the EBO model : Majority ownership of employees including over 10000
Workers 19% ownership with TTL with special rights
6 estates sold to a subsidiary Intention to exploit tourism potential in balance two estates
In North India
Options for similar reconstruction being evaluated for North India Alternative crops and usage of land to enhance value and returns
20
30
40
50
60
70
80
90
0 1 2 3 4 5 6
Citronella
Gestation Period (Years)
GrossMargin
(%)
Relative Size of Revenue (per hectare)
Animal
Innovative
Fishery
High demand
High revenue and good returns
Returns can be enhanced by combining with duckery and piggery
Dairy
Good demand
High revenue and good returns
Tea and nature tourism
Complementary to tea
Agriculture – Traditional and Non Traditional
An economic evaluation revealed that there are several economically viable alternate models
Agriculture - Traditional Vegetables: Chilly. Tomato Fruits: Banana, Pineapple,
Papaya Spices: Ginger, Turmeric
Agriculture – Non Traditional Medicinal and herbal Floriculture
Shortlist
Patchouli
Periwinkle
Aracenut
BananaPepper
Lemon
Orange
Chilly
Pine-apple
Ginger
Papaya
Turmeric
Tomato
Chilly
Glory Lily
Low gestation, revenue higher than tea
High gestation, revenue higher than tea
Revenue lower than tea
Welfare activities
Progressive shift of existing welfare activities in South India to an independent trust
Upgradation of Schools and Hospitals which offer potential
Dedicated senior managerial responsibility- Director projects
Upgradation and outsourcing possibilities for select North India institutions
Instant Tea & Coffee
Instant Tea
Instant tea plant in Munnar with 4.5 mn lb capacity supplying instant teas across the world with specific emphasis on Tata Tea Inc, USA
Products from Tata Tea Inc’s packing facility at Florida present in many famous labels (Kraft, Snapple)
Global turnover of instant tea at Rs 94- 100 crores
Group exploring growth opportunities
Tata Coffee’s Businesses
TCL Businesses
Pepper
Coffee
Plantations
Timber
Soluble Coffee
Agglomerated
Spray Dried
Freeze Dried(In Progress)
Marketing
Brands
Vending
TCL Coffee Business - Coffee Plantations
4% share of Indian Production
Leader in Quality: International Recognitions Best Robusta in the World,2004 Selected for supply of Premium Coffee to leading
coffee chains – Starbuck,Illy Café Series of “ Flavor of India-Fine Cup Awards
Expansion plans of freeze dried coffee
Cost consciousness Rationalized employee strength Stringent cost controls
Details 2003/04 2004/052005/06
9 Months
Coffee Sales (Lakh Kgs) 132 110 73
Turnover 185 207 130
PBT (Before Exceptionals) 23 30 18
PBT (Post Exceptionals) 22 34 18
PAT 17 30 14
Dividend % 50% 65% -
Rs in Crores
Tata Coffee
Way Forward
Brands Prioritize growth agenda across the globe and
meet growth challenge through: Organic growth Appropriate strategic partnerships Acquisitions
Sustain growth in key markets through Value added segments e.g. Fruit & Herbal
Launches Consumer driven insights
Utilize distribution networks to leverage product/category extensions
Way ForwardPlantations Enhance sustainability of model Discharge of social responsibility Improve returns to Tata Tea’s shareholders
Drive Cost Rationalization Supply chain Overheads
Instant Tea Explore growth opportunities
Coffee Initial focus on B2B model with product expansion in instant
and freeze dried coffee Selective forays into out of home and consumer segments
Thank You