just the Answer – Tata Global Beverages CEO, Peter Unsworth
This month, just-drinks talks to the chief executive of Tata Global Beverages, Peter Unsworth
In this month's just the Answer, just-drinks talks to Peter Unsworth, chief executive of Tata Global Beverages.
just-drinks: In the last year, Tata has been busy making acquisitions, forming joint-ventures and ultimately consolidating its business. What are your reasons for wanting to do this?
Peter Unsworth: In 2000, Tata Tea acquired Tetley and you had the start of a global business, but it was still being run as a series of separate entities, partly because of the way the deals were done and the funding. The way the beverage world is going, ambient tea and coffee products are not that exciting from a consumer perspective - they are flat. Some brands are growing within that, but overall you are struggling to get the excitement that you are finding in some other categories. So, the view was that, longer-term, we had to broaden the business from tea and coffee into other beverage areas. We decided we had to then integrate the business. In 2008, when I took over as chief executive … everything we have been doing from then on has been about transformation. Tea will continue to be critical to us, but it is also about what new beverages we can focus on.
j-d: Last year, Tata purchased a stake in Activate in the US. You said at the time that it would allow you to reach consumers in a different way. How are you are hoping to achieve this?
PU: What we've got with Activate is a bottle-based system, but it's a very innovative way to deliver functional flavours to consumers. The cap holds the nutrients separate from the water until you release them, so there is some science behind it, but also there has to be a consumer hook, which is the theatre that is involved in the release of the flavour. But, it is absolutely a new area for us and Activate is a US west coast business moving out across the US.
j-d: What stake did you purchase in Activate and will you consider increasing your share?
PU: It was less than 50% … and yes. With a lot of these things there is a balance. For example, particularly small businesses that are growing very quickly, one of the things you want in these businesses is to retain the motivation of the original founders and owners and to allow them to grow with what they have created. I have no ambitions to absolutely own a business, particularly these small dynamic businesses. Let's keep founders with the business and we will grow with them.
j-d: You recently formed a joint-venture with PepsiCo in India. What are you hoping the venture will achieve for Tata?
PU: We both have an ambition to grow in 'good for you' beverages, but we are approaching it from a very different place. We are clearly a lot smaller than [PepsiCo] and we think differently than they do. Yet, we are both trying to achieve the same aim. We have been investing in some product technology that they are interested in, while they have distribution that clearly we are interested in. Tata in India is a massive organisation, so that is their motivation to begin with. The key focus at this point in time with the joint-venture is to put the plans together to really grow the 'good for you' beverage sector in India with some of our products and some of their products. Longer term, you have to make sure you grow in a positive way, so I think where we go next and what we do next depends on the success with which we can get the products into the market in India.
j-d: Is the joint-venture with PepsiCo about Tata throwing down the gauntlet to the likes of The Coca-Cola Co and Danone, who are both present in India in a big way?
PU: The simple answer is yes, but the thing is, the beverage market across the world is so huge and there are so many different opportunities that are developing and the market is almost fragmented now, so you don't even need to think of it in that way. It's not about throwing the gauntlet down but about trying to finding a way of operating and competing in the world as it is going to be in the future.
Peter Unsworth, chief executive of Tata Global Beverages
j-d: What about beyond India? Last year you talked about the possibility of acquiring brands in Russia, Asia Pacific, Africa and South America. How is this progressing?
PU: For me, a successful strategy based on acquisitions is not a quick fix, but often people see it as a quick solution, and it often destroys value. What we are doing is making sure we have got the strategy right. We have identified parts of the world, beverage sectors and even companies that we would be interested in, not being acquired but working with, because for me, an acquisition is just one way of building the relationship. It could be partial acquisitions, it could be partnerships, it could be joint ventures, it could be distribution relationships. I am not going to tell you what we are looking at, but if you look around the world, there are clearly some markets in tea which are growing very quickly and where there are big businesses. So, Russia and the US are big tea markets and we are clearly interested in those markets. India continues to be a place where we have opportunities. So, if you think where we are big, we will continue to look at opportunities in those areas in tea and coffee but also look at developing relationships in 'good for you'.
j-d: Of the markets you are in currently, are there any that you are finding particularly challenging to succeed in?
PU: 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. In the US, we bought a stake in VitaminWater and then subsequently sold it to Coca-Cola.
j-d: Are you pleased about that now given the amount of negative publicity it has received?
PU: Our bank manager was very pleased! I think we did a very good job [with VitaminWater] … but there were some underlying questions that were dissident with the overall brand image. Eventually consumers will find you out.
j-d: What is next for Tata in terms of expansion?
PU: We are looking at the extent to which it is possible to get consumers excited about drinking beverages, either flavour or function but not in a bottle. So, we not only sell single-serve sachets, we sell liquid concentrate, and we have taken the bottle off the shelf. If you look at coffee, you are seeing a complete disruption of the coffee category because of single-serve premium pods. What do you have to do to get consumers to buy the same thing in cold drinks?
j-d: In five years time, how do you see your portfolio weighted in terms of tea and coffee and soft drinks?
PU: We have set a target. 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. And when I say tea, it will be tea or something that people refer to as tea. We might broaden the tea portfolio more and some of it may be linked with tea, single-serve formats. So, that will still be a big chunk of a our business.
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