Re: {LONGTERMINVESTORS} Tata Global / Thread for Discussions
RAJESH DESAI
Tata Starbucks, the 50:50 joint venture between Starbucks Coffee Company and Tata Global Beverages, today, 28 September 2012 confirmed that the first store in India will open in the Horniman Circle area of Mumbai by the end of October 2012.
The store will also be the first Starbucks location to feature espresso sourced and roasted locally from India through the coffee sourcing and roasting agreement with Tata Coffee. Espresso sourced from India will be a hallmark feature of all Starbucks stores in the market, highlighting the quality espresso available in India and Tata Starbucks commitment to delivering a truly unique and authentic Starbucks Experience to customers throughout India, Tata Global Beverages said.
“We are delighted to be able to announce our progress toward opening our first store in India and to introduce locally sourced espresso,” said John Culver, president, Starbucks China and Asia Pacific. “Being able to use the highest quality espresso, sourced and roasted in India, is an important part of delivering a locally relevant experience to our customers in the market.” Culver went on to state, “This is the first step Starbucks and Tata Coffee are taking toward developing and improving the profile of Indian-grown arabica coffees around the world by elevating the stature of Indian coffee, as well as improving the quality of coffee through sustainable practices.”
“Tata Global Beverages is a company known for bringing memorable tea consumption moments to consumers in India, stated Harish Bhat, CEO, Tata Global Beverages. “The joint venture is in line with Tata Global Beverages' strategy of growing through strategic alliances in addition to organic growth. We are excited about the opportunity to innovate in the retail space and bring new beverage moments to more consumers.” Tata Starbucks today, 28 September 2012 also announced the appointment of Avani Saglani Davda as CEO.
Avani, who has worked for the Tata companies for more than ten years, joined the Tata Group as a TAS (Tata Administrative Service) probationer in 2002. Most recently, she worked in the Vice Chairman's office for Tata Global Beverages, where she was responsible for driving and facilitating key strategies and initiatives for the company as well as Marketing and Business Development assignments. She also played a pivotal role in the development of the joint venture relationship between the two companies in preparation for entry into the India market.
Tata Starbucks will own and operate Starbucks cafés in India.
Since 1971, Starbucks Coffee Company sources and roasts the highest-quality arabica coffee in the world. Today, with more than 17,000 stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world.
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CA. Rajesh Desai
RAJESH DESAI
| Is Starbucks JV too early to celebrate at Tata Global? |
| Tata Global shares closed up 1.79% at Rs 145.35 on the BSE on Monday, adding to their Friday' gains |
| Raghavendra Kamath / Mumbai Oct 02, 2012, 00:07 IST |
Shares of Tata Group’s beverages company, Tata Global Beverages, have shot up over 11 per cent in the last two trading sessions after the company announced that the joint venture (JV) with global coffee chain Starbucks Coffee would open its first store here by the end of this month. But, is it too early to celebrate?
Tata Global shares closed up 1.79 per cent at Rs 145.35 on the Bombay Stock Exchange (BSE) on Monday, adding to their Friday’s gains.
“If you look at the fundamental perspective, there is no data available to ascertain what kind of business prospects it will have. Once the numbers come out, analysts can do analysis on returns on capital employed and returns on investment,” says Ajay Parmar, co-head, investment banking, Emkay Global Financial Services.
Tata Starbucks, the equal JV between Starbucks Coffee and Tata Global Beverages on September 28 announced that the first store in India will open in the Horniman Circle area of Mumbai by the end of October 2012. Tata Starbucks also announced the appointment of Avani Saglani Davda as chief executive officer.
“Though it is a positive news for the company, the stock has also gone up, riding the increase in stock indices. Investors are preferring defensive stocks such as FMCG,” Parmar said. The BSE Sensex has risen 1.32 per cent since the company announced its plans.
Added Rikesh Parikh, vice-president-markets strategy and product development - equities, Motilal Oswal Financial Services: “It (celebrations) could be slightly early. These are for the launch of the first store. I think few more stores would be lined up. Investors will be waiting for the execution part as to how many stores the JV would open every year. The stock could react accordingly,” Parikh said.
The store will also be the first Starbucks location to feature espresso sourced and roasted locally from India through the coffee sourcing and roasting agreement with Tata Coffee, Tata Starbucks said. Ganesh Ram, an analyst with Kim Eng Securities, says investors are looking at the venture as the one which has higher margins.
“It is a good start for the venture. For Tata Global it is getting into high margin business, that is why investors are bullish about it. Moreover, Starbucks has been successful in whichever markets it has entered in Asia. Investors must be thinking that the Indian venture will also have good amount of traction,” said Ram.
“Tatas are looking to move beyond tea and coffee and it is a step in that direction,” Ram added.
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CA. Rajesh Desai
RAJESH DESAI
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CA. Rajesh Desai
RAJESH DESAI
Bhat expects raw materal prices to trend upwards in the near-term. However, he says the company's brand strength will help it to pass on additional costs. "We see no risks to our margins as pricing remains supportive," he told CNBC-TV18.
Net sales of the company rose to Rs 1,842.57 crore during the second quarter as against Rs 1,612.03 crore during the same period of 2011-12 fiscal.
Bhat sees the overall volume growth at 8-10 percent next year. "We are hopeful of our tea business picking up to match our coffee business growth," he said.
On its JV with Starbucks, Bhat said, the company plans to rollout 100 stores soon. Last month speaking to reporters after the first store launch, the Starbucks management had categorically refused to give any specific number as far as store openings are concerned. When the JV was first announced, Tatas had said they planned to open 50 stores by year end.
Below is the transcript of his interview with CNBC-TV18.
Q: Do you see any pressure on margins because of the way tea prices have spiked due to production concerns?
A: We have strong brands. Tata Tea is the market leader in India. We also have strong brands in the UK, Canada and in many parts of the world. Yes, there is upward commodity pressure on tea costs. However, I think our brands are strong enough to pass on cost increases to the consumer, which we have been doing consistently.
Q: Will the price increases at the end of the quarter adequately compensate for the raw material hike that you have witnessed?
A: Yes, it would. We have taken more than one price increase over the last quarter. We believe that wherever commodity costs are on their way up, we would do our best to compensate them fully. I believe consumers would understand the fairness of doing that.
Q: Your margins came off too just over 7 percent in the quarter gone by. With these price increases do you see yourself getting back to the 10 percent margin that you enjoyed in the same quarter last year?
A: Yes, our objective is to get back to where our margins were. This is important as to ensure that prices fully reflect what is happening on the commodity front. Also onto emphasize that we have grown market share in many parts of the world including India. In India of course our portfolio remains the volume and value market leader within the branded tea segment.
Q: What kind of volume growth are you witnessing in the domestic business? As part of this 14 percent sales growth how much is the volume?
A: About 4-5 percent is the volume growth. The volume growth has been in the single digits in the 5 percent league. The rest of the growth that you are seeing is on account of the price enhancements that we have been able to implement in the market and the favourable mix changes that we have seen within the Indian market.
It’s Coffee Time ENAM DIRECT
Tata Global Beverages Ltd’s (TGBL’s) Q2FY13 result was a mixed bag -- revenue growth was in line but operating margin was weaker than expected. Consolidated revenue grew 13.5% YoY to Rs 18.4 bn (vs. our estimate of Rs 18.3 bn) primarily led by its coffee business (includes translation gains due to rupee depreciation). However, EBITDA margin at 7.8% (up 40 bps YoY) was lower than our estimate of 8.9% on higher tea prices. Adjusted PAT at Rs 1.3 bn (vs. our estimate of Rs 1.1 bn) was aided by lower tax rate (at 15% in Q2FY13 vs. 34% in Q2FY12).
Price hikes to offset impact of high tea prices: Tea production in major tea growing countries of India, Kenya, and Sri Lanka has fallen 4-6% in last 9 months. Consequently, tea prices have been on upwards spiral with likelihood of further rise. In fact, standalone domestic business, which largely consists of branded tea, is already facing margin headwind with a sharp 900 bps YoY decline in gross margin in Q2. Management indicated the company will be taking price hikes in coming quarters to pass on the impact of higher input costs to consumers. This along with improvement in Tata Coffee margin (benign coffee prices) will lead to 70 bps expansion in overall gross margin for FY13E. However, further rise in tea prices pose a risk to our estimate.
Star Bucks JV café rollout begins: Tata Starbucks JV has launched three café stores in Mumbai with plans to roll out to more cities (Delhi rollout in Jan '13).
Maintain SELL with revised TP of Rs 130: We have raised our target multiple to 17x from 15x on the back of improved profitability in its coffee business and aggressive launches across water and café business. The stock has risen 28% over the last six months and trades at 20x FY14E (above its 5-year mean of 18x), which prices in most positives. Maintain SELL with revised TP of Rs 130, which implies 13% downside from CMP.
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CA Mihir Desai
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CA. Rajesh Desai
Rajesh Desai
Tata Global Beverages’ 50:50 joint venture (JV) with Starbucks Coffee Company - Tata Starbucks - has marked its entry in Delhi with the opening of two stores at the New Delhi Indira Gandhi International (IGI) Airport. The store is located in the Domestic Terminal’s Gate 27 and International Terminal’s Gate 15. The store will be open 24 hours at the international terminal and from 5 a.m. to 9 p.m. at the domestic terminal.
Besides, the company is planning to extend its presence in this segment with the launch of Starbucks stores at the Chhatrapati Shivaji International Airport in Mumbai by the end of March 2013. Starbucks entered India in October 2012 and has four stores in Mumbai.
Tata Global Beverages’ 50:50 joint venture (JV) with Starbucks Coffee Company - Tata Starbucks - has opened its fourth store at Powai in eastern suburbs of Mumbai. The store will be open to customers from 7 a.m. till midnight every day.
Located at G2, Prudential Building, Hiranandani Business Park in Powai, the store is spread over 2,400 square feet with a seating capacity of over 65 and promises to serve as a unique third place for customers.
Tata Global Beverages formerly Tata Tea is a multinational non-alcoholic beverages company headquartered in Kolkata, West Bengal, India and a subsidiary of the Tata Group. It is the world's second-largest manufacturer and distributor of tea. Tata Global Beverages markets tea under the major brands Tata Tea, Tetley, Good Earth Teas and JEMCA.
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CA. Rajesh Desai
Rajesh Desai
Tata Group firm Tata Global Beverages today reported a 25.28 per cent
rise in its consolidated net profit to Rs 80.26 crore for the quarter
(Q3) ended December 31, 2012, mainly on account of robust sales in tea
and coffee verticals.
The company had posted a net profit of Rs 64.06 crore for the
corresponding period previous fiscal, Tata Global Beverages said in a
statement.
Consolidated net sales of the company stood at Rs 1,901.99 crore for
the quarter under consideration as against Rs 1,793.20 crore for the
year ago period.
"Tata Tea branded business in India, Eight O'clock sales in US and
Tata Coffee plantation business have been main drivers for growth
during the quarter," Tata Global Beverages Group CFO L Krishna Kumar
said.
Canada business also contributed to a good quarter, he added.
Tata Global Beverages focus on category expansion and innovation in
tea, coffee and water continues to yield very good results, the
company said.
Commenting on the results, Tata Global Beverages MD and CEO Harish
Bhat said: " The significant growth in our operating profits is led by
an unrelenting focus on margins, costs, innovation and execution..."
We are also delighted that our strategic partnerships with Starbucks
and Pepsico have recorded rapid strides during the quarter, he added.
Integrated beverage firm Tata Global Beverages has global brands
including Tetley and Tata Tea under its banner and has significant
interests in tea, coffee and water. It has brand presence in over 40
countries.
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CA. Rajesh Desai
Rajesh Desai
Tata Global Beverages - Sharekhan
Recommendation: Buy
Price target: Rs175
Current market price: Rs146
Upgraded to Buy with revised price target of Rs175
Result highlights
Decent operating performance: Tata Global Beverages Ltd (TGBL) posted a decent operating performance in Q1FY2014 in the challenging market environment. Though the consolidated revenue growth was just in mid-single digits, the improvement in the gross profit margin (GPM) due to the benign input prices (especially the green coffee prices) led to a growth in the high-teens in the bottom line during the quarter. Going ahead, we believe the drop in the international tea prices would further aid in the GPM improvement in the coming quarters. Most of the markets, including India, Australia and Canada, posted a strong operating performance during the quarter. However, the decline in revenues of UK and Russia was a drag on the overall revenue growth. The strategic alliances and joint ventures (JVs) are performing extremely well for the company. Its water business posted a strong performance with the revenues of Tata WaterPlus growing by 150% year on year (YoY). The TGBL-Starbucks alliance is currently operating 18 stores and the JV is making a cash profit.
Performance snapshot: In Q1FY2014, TGBL's consolidated revenues grew by 5.1% YoY to Rs1,813.5 crore (marginally lower than our expectation of Rs1,843.0 crore). The mid-single digit growth was largely driven by an organic initiative with no foreign exchange (forex) translation gain due to the rupee's depreciation against the key international currencies. The revenues of TGBL's stand-alone business grew by 19.2% YoY to Rs679.6 crore (driven by a mix of volume and value), while the revenues of Tata Coffee's consolidated business stood flat on a year-on-year (Y-o-Y) basis during the quarter. The benign coffee prices and holding of product prices in the key geographies aided the consolidated GPM and the operating profit margin (OPM) to expand by 127 basis points YoY to 51.1% and 94 basis points YoY to 11.4% respectively in Q1FY2014. Hence, despite the mid-single digit revenue growth, the OPM grew by 14.6% YoY to Rs207.1 crore while the adjusted profit after tax (PAT) before minority interest and profit from share of associates grew by 18.8% YoY to Rs121.5 crore during the quarter.
Upward revision in estimates: We have revised our earning estimates upwards for FY2014 and FY2015 by 5% and 4% respectively to factor a higher than earlier expected GPM. We believe the company would gain from the lower Kenyan tea prices as its large portion of international business raw material requirement is from Kenyan imports. Also, we believe any correction in the Indian tea prices would be beneficial for its stand-alone business.
Outlook-decent earning visibility: We believe that TGBL is inching towards its aim of becoming a natural beverage player in the international market. The company has taken several initiatives in the recent past (such as enhancing the speciality tea portfolio in key geographies, enhancing the water business and promoting its pillar brands). However, we believe the company has to change its gears from a conservative approach to an aggressive approach toward its growth strategies, which will help it to achieve a strong profitability growth in the medium term. We expect TGBL's top line and bottom line to grow at a compounded annual growth rate (CAGR) of 12% and 18% respectively over FY2013-15. Any significant increase in the raw material prices or slowdown in the performance of key geographies would act as a key risk to our earning estimates.
Upgraded to Buy: The current valuation of 19.1x its FY2014E earnings per share (EPS) of Rs 7.7 and 16.8x its FY2015E EPS of Rs8.7 are at a substantial discount to the current valuation of the fast moving consumer goods (FMCG) basket. In view of a decent earning visibility and an upside, we have upgraded our recommendation on the stock from Hold to Buy. In line with our upward revision in our earning estimates, our revised price target stands at Rs175 (valuing the stock 20x its FY2015E earnings).
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CA. Rajesh Desai
Rajesh Desai
Tatas to focus on beverages 'power brands'
The brands that will be given a global push are Tetley, Tata Tea, Himalayan and Eight O' Clock Coffee
The beverage arm of the $100-billion (Rs 6 lakh crore) Tata Grouphas prepared a blueprint that will see it devote its attention to four "power brands" in its quest to achieve a turnover of $5 billion (Rs 30,000 crore) in the next three years.The list will include products such as Tetley, Tata Tea, Himalayanand Eight O' Clock Coffee, which will be given a global push. At the same time, the Rs 7,271-crore Tata Global Beverages (TGB) will not take its eyes off regional products either, pushing these aggressively in their home markets. On this list are brands such as Kanan Devan, Chakra Gold and Gemini in South India, Vitax in Poland and Joekels in South Africa.
The blueprint, explains TGB Managing Director Harish Bhat, is in keeping with company Chairman Cyrus Mistry's vision to invest significantly behind the firm's brands. At the company's recently-concluded annual general meeting in Kolkata, 44-year-old Mistry, who became chairman last year, said that the foundation for investment behind the firm's products had been laid. "It is crucially important to grow our brands in India and overseas. There is also a need for innovations which need funds," he said.
TGB derives 65-70 per cent of its revenues from international markets and the balance from India.
Tetley, one of the products on the global power list, already sells in a number of markets outside its home turf of the UK. This includes India, where it competes with Twinings and Brooke Bond Taj Mahal from Hindustan Unilever. Tata Tea, an Indian product, meanwhile, has been taken to markets such as Canada and West Asia, while plans are afoot to take Himalayan packaged water, also an Indian product, which was acquired in 2007 by the company, to Southeast Asia in the near term.
Bhat declines to indicate whether new products would be added to the global or regional list through new acquisitions. Outgoing Vice-Chairman R K Krishna Kumar, at the TGB AGM, had hinted that the company was looking at a new acquisition. He had said, "TGB will make a major acquisition and be a truly worldclass company, not in the tea or coffee space but in new beverages."
As things stand, TGB derives nearly 70 per cent of its revenues from tea, 20 per cent from coffee and five per cent from water. The plan is to take the contribution of water and coffee to 10 per cent and 25 per cent, respectively, in the next three years, Bhat said. Tea's contribution, on the other hand, would come down to about 60 per cent, he added.
TGB proposes to achieve this by pushing its joint ventures with PepsiCo and Starbucks aggressively in the next few years. "A total of 18 stores have been opened so far by Tata Starbucks in Mumbai and Delhi. This count will go up as we move forward," he said.
On the joint venture with PepsiCo (called NourishCo), Bhat indicated that in-house brands Tata Water Plus and Tata Gluco Plus were doing well.
"Tata Water Plus has seen higher growth than Himalayan packaged water (in the June quarter). But this is in the markets of Tamil Nadu and Andhra Pradesh, where the brand is currently present. The plan will be to take it to other markets in the country," he added.--
CA. Rajesh Desai
Rajesh Desai
“In the next five years, there could be more tea products from the US and UK markets,” said Harish Bhat, MD and CEO, Tata Global Beverages
Tata Global Beverages Ltd (TGBL) may have grown in the tea business through global acquisitions beginning with Tetley, but it does not plan to repeat the same growth strategy in the domestic market.
One of its key challenges is competition from regional tea companies across the country. The company has thus decided to focus on its own brands rather than extend its domestic portfolio through acquisitions.
“We are looking at organic growth in India. There is no need to acquire local tea brands and companies. There is a plethora of nearly 250 regional tea brands, which are both a challenge and an opportunity for us today. We plan to get shares away from these brands and convince consumers to buy the brands created by us,” says Harish Bhat, Managing Director and CEO, Tata Global Beverages.
Focusing on the mid and premium end of the tea category, TGBL would also be open to bringing in more offerings from its international portfolio, as and when required, to fill the gaps in the category. “Nothing stops us from bringing in more products from the global portfolio. In the next five years, there could be more tea products from the US and UK markets. For the moment though, we would like to grow the flavours liked by Indians in the Tetley portfolio,” said Bhat.
However, the company has decided to stay away from the super premium or luxury segment of the tea category. In the past, it had launched the Tea Veda brand to enter the luxury segment. “Tea Veda was a niche brand and is no longer a strategic or focus area for us,” he added.
The company, at present, has brands such as Tetley and Tata Gold at the premium end, followed by mid-market brands such as Tata Tea, Gemini Dust and Kanan Devan, while Agni is at the lower end of the category. “While we have a balanced tea portfolio, it is the premium end of the category which is growing faster,” said Bhat.
Going forward, TGBL may also explore premium variants in the organic tea segment. One of its group plantation companies in the north-east is already making the blend. “Organic tea is a good segment to get into,” he said. Even in water, it has segmented the category with Himalayan natural mineral water at the premium end and Tata Water Plus to cater to the mass segment. “Today, Himalayan is a profitable brand and its volumes have grown by 30 per cent over last year,” added Bhat. Selling the brand through the Starbucks network is also expected to give a boost to the brand. A pilot test is also being conducted across certain overseas markets. Starbucks is also selling the Tata Tazo brand of tea, a brand created by the Tata brand and the Tazo brand of Starbucks.
However, Tata Water Plus is still restricted to two markets down south (Tamil Nadu and Andhra Pradesh) with the company initiating a national roll-out soon.
http://www.thehindubusinessline.com/companies/no-need-to-acquire-local-tea-brands-says-tata-global-beverages/article4992689.ece--
CA. Rajesh Desai