Tata Global Beverages is harbouring ambitions to grow beyond tea and coffee

Tata Global Beverages is harbouring ambitions to grow beyond tea and coffee

Reports this week that Tata Global Beverages is looking to sell a 20% stake in its international operations are further proof that the world's second largest tea company is firmly set on transforming itself into a truly global player.

Earlier this week, Tata Global's vice-chairman, RK Krishna Kumar, was quoted in the Financial Times as saying that the firm had received approaches from a "large number of strategic players". While the company stopped short of denying reports of a stake sale, it did say that no specific proposals had been placed before the board.

The news will come as no surprise to industry followers. The company has been more than open about the fact that it is harbouring ambitions to grow beyond tea and coffee and into a company that offers a wider variety of products, including health drinks and bottled water. And, all of this, beyond its stronghold of India and into countries including the US.

Last month, Tata Global's CEO, Peter Unsworth, said in an exclusive interview with just-drinks: "We are [worth] US$1.5bn now and we are aiming for $5bn in five years time, and at that point in time tea will probably be half [of our portfolio] as opposed to 85% now."

But, it is also no secret that the India-listed business is having a tough time. In May, the company recorded a decline in full-year profits, hurt by an increase in input costs. For the year to the end of March, net profits dropped by 53.7% to INR1.81bn (US$39.9m). Sales also slid, by 4.2% to INR19.14bn. Analysts responded by marking down their forecasts for the next two fiscal years.

Traditional tea and coffee businesses are struggling in today's challenging environment, so it is little wonder the firm is looking for greener pastures through higher-growth categories.

Tata has already made alliances with PepsiCo and Starbucks, both of whom have large distribution networks in the US. And, in October last year, the firm purchased a minority stake in US performance beverage firm Activate, offering new technological possibilities for Tata.

As the company's chief executive Peter Unsworth told just-drinks last month: "The US is challenging but the prize is huge if you can get it right. Just the cost of launching something into the market because of slotting fees is big ... You need to have quite a lot of money just to get to play there, and competition is huge."

It will be no mean feat, but Unsworth, who recently quit citing personal reasons, previously voiced his confidence in the firm's ability to become the leader in the ‘good-for-you' beverage segment.

Acquisitions in the health drinks space, whether it be in Russia, Asia Pacific, Africa or South America (all countries Tata has expressed an interest in acquiring in), are certain to fuel growth for the company in the face of high commodity costs. And, unlocking value from its international operations will certainly provide capital for Tata to fund these purchases.

Tata Global Beverages is increasingly looking like a company of two halves, and any imminent sales or purchases will become part of a long journey for the family-controlled business, which began from tea plantations and should hopefully end on shop shelves across the globe.