Tata Global to chase premium businesses as consumption falters

Tata group chairman Cyrus Mistry on Tuesday warned investors of Tata Global Beverages of a not-so-pleasant time in the current year when consumer sentiment across the globe would remain subdued.

But the silver lining is that even within such a scenario, a section of consumers continues to look for aspirational and premium products, a trend that Tata Global Beverages would continue to exploit through "innovation, category expansion and strategic alliances in addition to organic growth".

"Looking ahead while we see global economic revival, consumer sentiment is yet to show any definitive trend. But discerning customers are seeking values to pursue aspirational and premium products," Tata Global Beverages chairman Cyrus Mistry told shareholders at the company's annual general meeting.

Mistry has been warning investors to its various listed companies like Tata Motors of a difficult period in the current year.

After reporting just 5% growth in consolidated revenue at Rs 7,738 crore and a drop in operating profit at Rs 623 crore in the last fiscal, the trend has continued in the first quarter of this fiscal for Tata Global Beverages.

Mistry attributed decline in operating profit in the last fiscal to higher spending on brands, increase in costs to support new ventures and competitive pressures in some markets.

Outlining Tata Global's strategy to fight the continuing slowdown in consumer spending, Mistry said: "In a challenging market environment, we are leveraging key consumer trends addressing health and wellness and convenience and market differentiated product offerings in tea, coffee and water. In addition to organic growth, innovation, category expansion and strategic alliances will drive our businesses. We will continue to drive additional growth from joint ventures with Starbucks and PepsiCo," Mistry said.

While NourishCo's revenues have grown 50% during fiscal 2014, Tata Starbucks continues to increase number of stores in Mumbai, Delhi, Gurgaon, Chennai, Pune and Bangalore. "The store count is currently 53 and is continuously growing."

NourishCo had in 2012 launched Tata Water Plus, claimed to be country's first nutrient water product, and then followed it up by Tata Gluco Plus which is now being gradually expanded across the country.

In water space, Tata Global also has powerful brand, Himalayan, acquired from Mount Everest Mineral Water Ltd, which is now being merged with the former and Cyrus said necessary petition has been filed with the Calcutta High Court and the same is pending.

The brand has recently been launched outside the country, in Singapore and would be gradually taken to other markets, Tata Global managing director Ajoy Misra said.

In coming days, value-added water, or what Tata Global describes as hydration portfolio, would be a key component of innovation and revenue driver.

"Water division currently accounts for 1% (of revenues) and plans are there to take it to 10% and be profitable," Mistry said in response to a shareholder query.

After acquiring Tetley 14 years back, Tata Global has been actively scouting around and acquiring brands in the international market, mainly small and operating in niche areas, across the globe, the latest being coffee brand MAP in Australia.

Tata Starbucks, NourishCo and MAP are what Misra described as future businesses currently being incubated within the company.

Tata Global is also taking its existing brands to new markets.

"We have now successfully entered Kuwait, and this would be used as a beachhead for entering the Middle East market starting with Saudi Arabia," Misra said.