MOSL: TATA GLOBAL BEVERAGES (INITIATING COVERAGE): Brewing a heady mix! Focus back on high-RoIC India business
Tata Global Beverages (initiating coverage): Brewing a heady mix! Focus back on high-RoIC India business; Initiating with Buy
(TGBL IN, Mkt Cap USD2.7b, CMP INR300, TP INR347, 16% Upside, Buy)
Tata Global Beverages (TGB) is a natural beverages company with interest in tea, coffee and water. It is the second largest branded tea player globally with operations spanning over 40 countries. Branded products represent ~90% of its consolidated sales, of this, tea accounts for ~80%.
Focus back on India
Winds of change are blowing within TGB. To achieve its aim of building a dominant, natural beverages brand in the country, the company has shifted its focus back to the highly profitable India beverage business. Besides, the merger of Tata Chemicals’ (TTCH) consumer business with itself marks the company’s entry into an additional segment of staples with an addressable market size of INR770b (apart from the current addressable market of INR270b in tea and coffee). Currently, the India brand business contributes 50% to TGB’s consolidated revenue, which should increase to ~60% post amalgamation of TTCH’s consumer business. Plans are afoot to deepen its core by strengthening its leadership position in tea and salt and aggressively expanding its new products (spices, pulses, liquid beverages, packaged foods etc.)
Tata Tea is a holding company based in India. Through its subsidiaries, Co. is engaged in the cultivation, manufacture, sale and export of tea, instant tea, coffee, instant coffee, pepper and in investment holding operations. Co. has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini -- catering to all major consumer segments for tea. Co. has a 100% export-oriented unit (KOSHER & HACCP certified) manufacturing Instant Tea in Munnar, Kerala. The Tata Tea and Tetley portfolios of branded offerings caters specifically to the Australian, Middle East, West Asia, North Africa, Poland, Russia and Kazakhstan markets.
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