project on tata tea

Tata Tea Ltd

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

Tata Tea GB (Tetley)

Rallis India Ltd

Plantations

Tata Coffee Ltd

Watawalla Plantations Sri Lanka

Instant Tea

Tata Tea Inc

Exports

Tata Tetley

Consolidated Turnover 2004/05 Segment wise turnover

Investment Income 1% Others 1%

Spices etc 1% Coffee/Instant Coffee 5%

Bulk Tea 4%

Instant Tea 3%

Branded Tea 85%

Bulk Tea

Branded Tea

Instant Tea

Coffee/Instant Cof fee

Spices etc

Investment Income

Others

Performance Highlights – Tata Tea Standalone Rs in Crores

Details

2003/04

2004/05

2005/06 9 Months*

Revenues

838

950

804

PBT (Before Exceptionals)

120

162

177

Margin %

14%

PBT (Post Exceptionals) PAT Margin %

11%

17%

22%

120

162

204

92

129

168

14%

21%

* The Tea Industry is seasonal in nature and the nine months results do not necessarily reflect the pro-rata performance for the full year.

Performance Highlights – Tata Tea Consolidated Rs in Crores

Details

2003/04

Revenues

2005/06 9 Months*

3099

3077

2329

298

357

330

PBT (Before Exceptionals) Margin %

2004/05

10%

12%

14%

PBT (Post Exceptionals)

301

314

339

PAT

205

215

248

Margin %

7%

7%

11%

* 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

Global Tea - A Snapshot World Tea production in 2004 – 3200 mn kgs (approx) Top Five Tea Producing Countries

Others 25%

Indonesia 5% Kenya 10% Sri Lanka 9%

T o p F iv e T e a C o n s u m in g C o u n trie s

India 30%

O th ers 44% China 21%

In d ia 23%

C h in a 16% J a p an U K R u s s ia / C IS 6% 5% 6%

India is the largest tea producing and consuming country in the world.

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

Current Status

Objective

TTL 100%

TTL

TTL

100% NIPO

SIPO

NIPO SIPO

Est: 24

26

24

2

Emp: 31K

18K

31K

2K

TEA

19% 51% KDHP 17

TCL

Minority Interest

Plantation Business

6 TEA

TEA

Alternative Crop

Alternative Crops

Tourism

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

An economic evaluation revealed that there are several economically viable alternate models Shortlist

Agriculture – Traditional and Non Traditional

90

Tomato

Patchouli

Agriculture - Traditional

Glory Lily

80

Chilly

Turmeric

Chilly

Periwinkle

Gross Margin (%)



Fruits: Banana, Pineapple, Papaya



Spices: Ginger, Turmeric

Papaya

Pineapple

Agriculture – Non Traditional

Ginger

60

Vegetables: Chilly. Tomato

Pepper

Banana

70



Citronella



Floriculture



50

40

Medicinal and herbal

Animal

Orange

Aracenut



− High revenue and good returns − Returns can be enhanced by combining with duckery and piggery

Lemon

Low gestation, revenue higher than tea 

30

High gestation, revenue higher than tea

Innovative

20 1

2

Dairy − Good demand − High revenue and good returns

Revenue lower than tea 0

Fishery − High demand

3

4

Gestation Period (Years)

Relative Size of Revenue (per hectare)

5

6



Tea and nature tourism − Complementary to 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

Plantations

Soluble Coffee

Marketing

Coffee

Spray Dried

Brands

Pepper

Agglomerated

Vending

Timber

Freeze Dried (In Progress)

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

Tata Coffee Rs in Crores

Details

2003/04

2004/05

2005/06 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%

-

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 product/category extensions

to

leverage

Way Forward Plantations  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