Tata Global Beverages Limited (formerly Tata Tea Ltd) is an Indian multinational non-alcoholic beverages company headquartered in Kolkata and a subsidiary of Tata Group. It is the world’s second largest manufacturer and distributor of tea and major producer of coffee. Tata Global Beverages markets tea under major brands Tata Tea, Tetley, Good Earth Teas and JEMCA. Tata Tea is the biggest selling tea brand in India, Tetley is the biggest selling tea brand in Canada and the second biggest selling in United Kingdom and United States, and JEMCA is the biggest selling tea brand in the Czech Republic. In 2012, Tata Global Beverages ventured into the Indian café market in a 50/50 joint venture with Starbucks coffee company. The coffee shops branded as Starbucks Coffee – A Tata Alliance. The company was renamed as Tata Global Beverages to include the range of health and nutritional beverages it wants to enter into. Via subsidiary companies, Tata Global Beverages manufactures 7 crore kilograms of tea in India, controls 54 tea estates, ten tea blending and packaging factories and employees around 59,000 people. The company owns 51 tea estates in India and Sri Lanka, especially in Assam, West Bengal and Kerala. The company is the largest manufacturer of Assam tea and Darjeeling tea and second largest manufacturer of Ceylon tea. The consolidated worldwide branded tea business of Tata Global Beverages contributes to around 86% of its consolidated turnover with the remaining 14% coming from bulk tea, coffee , mineral water , health and nutritional beverages. With an area of approximately 159 square kilometers under tea cultivation, Tata Global Beverages produces 3 crore kg of Black tea annually. Instant tea is used for light density 100% teas, iced tea mixes and in the preparation of ready to drink beverages. Natural Mineral Water under brand Himalayan is marketed by Nourish Co, a joint venture between Tata Global Beverages and PepsiCo India. The water is bottled at source from a pure and pristine underground moving stream aquifer, which is about 400 feet below the surface, located at the foothills of the Shivalik range in the Himalayas. The catchment area has no human activity and its pollution free. Himalayan is bottled in Dhaula Kuan, Himachal Pradesh, and available in 200ml, 750ml, 1litre and 1.5 litre business. Tata Water Plus is India’s first nutrient water. Developed in collaboration with international scientists and Indian nutrition experts, Tata Water Plus represents the larger mission of NourishCO beverages – to mitigate nutritional gaps in the average Indian customer. An original and innovative concept in the area of health and nutrition, Tata Water Plus contains nutrients, such as copper which helps support body functions, and zinc with highlighted copy which helps strengthen the immune system . while it looks and tastes like normal water, every sip of Tata Water Plus is packed with copper and Zinc in a form that can be easily absorbed by the body. A litre of this wonder drink meets 40% of RDA for copper and 30% for zinc. An affordable re-hydration solution , Tata Gluco Plus comes packed with great taste and instant energy. Packed in a convenient , easy to use 200ml plastic cup, Tata Gluco Plus is available in the 7 tasty flavours Of Lemon, Orange, Mango, Grape, Apple Cinnamon, Jeera and rose. Hot Tea category is a US$ 44 billion industry; projected to grow at a CAGR of 5% between 2019 and 2023. Asia-Pacific dominated the, registering the highest CAGR of around 6% in the global tea market due to high demand in China and India. North America also witnessed the second highest demand growth rate owing to rise in demand in tea. The Canada tea market was valued at $606 million , and is expected to reach $838 million by 2023, registering a CAGR of 4.7%. Black/ Everyday black tea forms the largest category sub-segment globally, accounting for 42% of sales followed by Non black tea like green, fruit and herbal, rooibos, decaf etc. However Non-Black tea commands a much higher value-per-share in comparison to Black tea. In the developed markets, whilst Non-Black tea category is growing, Everyday Black tea category is shrinking. Growth within the Non Black tea segment is observed in the fruit & herbal and speciality segment. Green Tea category reflects a mixed trends with declines in some developed countries. The year saw an increase in both the North and south Indian crop prices, with North Indian teas seeing the highest prices in the last five years (auction average at Rs. 152.2 vis-à-vis Rs 144.7 in previous year) . The North Indian teas price firmed up at start of the year with strong domestic demand and exports. Demand for Indian orthodox teas witnessed an upswing in the international markets, since Sri Lankan tea production remained stagnant and the competitively priced Indian teas were able to find entry in the Middle East/ Persian Gulf Regions. In line with strategic business objectives , company focused on investing behind core brands in India as well as international markets. Company kept up the momentum on leveraging innovation to build scale in the Non Black tea category – Launching cold infusions in UK, piloting new variants of Eight OClock coffee in US, piloting Kombucha in Australia, entering USA with Himalayan water and expanding the supers range into Canada. To improve effectiveness, unlock synergies, optimize cost and streamline operations company have restructures its international operations EMEA ( UK, Europe, Middle East and Africa) and CAA ( Canada, Australia, and America) under a single business operating unit “International” . Company also embarked on corporate entity reduction plan to simplify the corporate legal entity structure and for better administration of UK subsidiaries. Accordingly , Tata Global Beverages service Ltd, Tata Global Beverages Investments Ltd and Tata Global Beverages Holding Ltd transferred its net assets and activities to its UK holding company, Tata Global Beverages Group Ltd fellow subsidiary . It is expected that in the absence of any future transaction, the restructured entities will cease to trade and plan to be dormant in the forseeable future. The large Indian opportunity, over the years head , will see tens of millions of Indian consumers across this vast country to use reputed brands that offers them very good quality and value. This will undoubtedly lead to accelerated in India for several categories of consumer packaged goods, including tea, coffee and water. Company plans to set a new tea packaging unit with an investment of Rs 1billion at Tata Steel Special Economic Zone In Orissa. The company has entered into a letter of Intent with Tata Steel Special Economic Zone Ltd, a wholly owned subsidiary of Tata Steel ltd, for setting up a tea packaging unit in Gopalpur Industrial Park, Orissa. Is Estimated capacity of new the new unit is expected to be 36 million kgs per annum and it would be operational by 2020. The planned unit will be used for the operation of manufacturing and storage of tea and will also be used as warehouse of all products of the company. Tata Global Beverages proposes to scale up its tea retail venture Tata Cha as intial feedback to its pilot stores in Bengaluru remains positive. Company plan is to take Tata Cha to more cities as the company looks to expand into adjacencies. Tata Cha was launched last year in the tech capital with one store, which was subsequently scaled up to total of six outlets this year. The stores provide hot and cold tea based beverages, traditional snacks and meals, all aimed at elevating the neighbourhood tea stall experience. The concept has become a hit with office goers and millennials in the city, who are constantly on the lookout for good places to eat and hang out. Tea retail is a concept company is testing and is an interesting area to explore as consumer seek innovative beverage option and formats. The overall food services market in India would grow at a compound annual growth of 10% over the next 10 year to touch Rs 5.52 trillion from Rs 3.4 trillion now. Tea services is already a large constituent of the existing overall food services market, pegged at 44% ( or Rs 1.5 trillion) of the total size ( Rs 3.4 trillion). Tata group announced the transfer of its branded food business from Tata Chemicals Ltd to Tata Global Beverages Ltd in an all share that will create an over Rs 9,000 crore giant. Tata Global Beverages Ltd will buy the business of selling edible salt, spices and lentils and give shares in return to Tata Chemicals Ltd. Tata Global Beverages will rename itself after the deal as Tata Consumer Products. The proposed transaction will create a focused consumer products company with a combine turnover of Rs 9,099 crore and an EBIDTA of Rs 1,154 crore. The branded consumer products to Tata Chemicals – Tata Salt and Tata Sampann, among others contributed 16% ( Rs 1,847 crore) and 19% ( Rs 314 crore) to company’s total revenues of Rs 11,296 crore. However , since salt is manufactured from the same complex ( Mithapur in Gujarat) that also makes chemicals like soda ash, Tata Chemicals will be retaining the manufacturing operations. The deal will increase the Tata Global’s Revenue. Tata Chemical deal will solve major issues faced by Tata Global. The core 3 problems are: in the recent past, the black tea market in developed countries , including the EU, UK and US, has stagnated , affecting TGBL’s topline. The company is heavily dependent on its black tea portfolio and around 40% of its business comes from international operation. Management feels unless the company is able to put focus on India and increase the share of Indian Revenues, the company’s earnings may short of acceptable levels. The other big issue the company faces is that it needs to have optimal scale of operations and needs to increase it product portfolio. Company need large portfolio and while tea and water is good , it won’t give the scale. The third problem is the need to improve financial matrix as the return on capital and investment is low. The company believes that the proposed merger will help it to widen the product portfolio, as product like salt, spices and others from the Tata Chemicals stable will land up in its kitty. The amalgamation will also help TGBL focus more on India operations. After the merger fructifies, the share of tea in the total revenue will be 57% followed by salt at 18% and coffee at 13%. The rest of the portfolio , comprising spices and others , will make up the remaining 12%. TGBL has made up its mind to strengthen its India’s business , this year will mark the company consolidating its subsidiaries and exiting non core foreign markets, where the company finds itself unable to scale up. The group is also set to expand its detergent brand Tata Dx nationally and across other formats ( liquid detergents, home cleaners etc) as part of strategy. Tata Dx that Tata Chemical launched as a pilot in West Bengal has been transferred to TGBL as part of demerger. Tata Consumer Products will have significant heft, given their strong brands in food ( Tata Salt, Tata Sampann), beverages and the huge distribution synergies they will enjoy. At first, Tata’s already strong player in stapes ( Salt and staples) could impact branded food and staple major – ITC ( Aashirvaad), HUL ( Annapurna) . However , as these categories are still largely commoditised, Tata’s foray will ensure the consolidation and growth of the branded product share of the market. More importantly, Tata Consumer’ width of offerings will get them enhanced shelve space and better access across modern trade, supermarkets and grocery stores. Post consolidation of its consumer product business, Tata will be able to build a sharper and stronger consumer product focus and use the scale of the mega brands for retail, distribution, communication, and media efficiencies and will seriously look at acquisitions to enhance its portfolio. There is a great opportunity for Tata to look at moving consumer from commodities to quality brands. The success of Tata Tea and Tata Salt are both excellent examples where a well packaged brand managed to convert from commodity by offering value. The Tata’s have recently ventured into unpolished daal and value added spices; that is a great opportunity to scale up and expand. In similar vein, there should be many more such opportunities in the food space. The entry of Tata as a combined entity in the FMCG space is good for Indian Consumers and retailers. Tata Starbucks is looking to aggressively expand its foot print in Indian market with eyes on the rapidly picking up coffee culture among the millennials and upwardly mobile consumer. Tata Starbucks looks to set up significantly more number of stores this fiscal than it did in the past. Starbucks is optimistic about strong business growth in India over the next one year as it aims to come out of red in financial numbers afer 2020. The continued growth in topline and sensible approach towards expansion will help company to achieve breakeven by March 2020. First time in India company has opened five stores in any state in one go. Gujarat is an important market for company. After opening of these five stores the total number of stores have gone up to 157 in India. Of the 157, the company has opened total 11 stores so far in this fiscal, as against total 30 stores opened during 2018-19. It caters to 2,70,000 customers per week in India. The company had reported turnover of Rs 442 crore for the fiscal 2018-2019. In an effort to enhance customer experience, Starbucks is introducing new food items, catering to all needs including breakfast, lunch. On consolidated bases company income from operation grew to Rs 7,251.50 crore in March 2019 from Rs 3,059.13 crore in March 2015. During same period company posted only one year loss of Rs 30.25 in March 2016. Other all years between 2005 and 2019 were in profits. FY18-19 revenue from operation was at Rs 7252 crores, higher than the previous year by 6% ( 3% on a constant-currency basis). Excluding the impact of business exit, revenue from operation grew by 8% ( 5% on constant currency basis). The increase in revenue is led by the growth in Indian tea brands, the Pods model change in US coffee and improvements in coffee extractions in India. Profit before exceptional items and taxes at Rs 768 crore, marginally lower than previous year. This is due to higher tea commodity costs in India and increase in promotion and adverstisement spend to support brands, which was partly offset by some softening of tea and coffee commodity cost in the international market. Exceptional items include redundancy costs due to organizational restructuring operations to the tune of Rs 25 crores and past service cost for the UK pension scheme of Rs 8 crore. Company net profir for the year was at Rs 457 crore, lower than previous year mainly due to higher exceptional items, onetime tax credit mainly in the US in the previous year coupled with the lower share of profits from associate companies and joint ventures, due to one-off times. Net debt of Company is around Rs 4.53 crores . Means almost Debt free company. Contingent liabilities of company is around Rs 49.08 crore which is 1% of company’s networth. Cash in hand of company is around Rs 472.95 crore. Company has total assets of worth Rs 4,080.43 crores. company looks healthy in both fundamentals and financials. By these I prefer buy call on Tata Global Beverages.