Tata’s beverages arm may rejig JV in China

Tata Global Beverages (TGB) is exploring the possibility of restructuring its China operations, Chairman Cyrus P. Mistry said.

“There are challenges in these operations and we are looking at multiple options,” he said in response to a shareholder query at the company’s annual general meeting here.

TGB’s Chinese joint-venture, Zhejiang Tata Tea Extraction Company, has reported a pre-tax loss of Rs.15.34 crore on Rs.3.1 crore turnover, for the year ended December 31, 2015, according to the annual report.

On the Brexit effect, Mr. Mistry said that while there were promising signs of growth in the U.S. market, U.K.’s exit from the European Union is expected to pose some risks in trading and buying and may have an inflationary impact on the company’s businesses.

International operations account for a substantial part of TGB’s revenues. It is present in over 40 countries with international brands including Tetley, Eight O Clock, Good Earth, among others.

While 73 per cent of its revenues come from tea, 26 per cent is from coffee and 1 per cent from other beverages including water.

Mr. Mistry said that GST would have an inflationary impact on tea and coffee prices although “in the broader spectrum, it is good for the industry.” The industry has taken up the issue with the government, he said. “Our initial view is that GST would have an inflationary impact on our current coffee and tea (business) as they have a low tax-incidence.”

He indicated that the company was open to pursuing the acquisition route to growth but only if prices were right. Himalayan, TGB’s premium mineral water offering, was still making losses even though it has witnessed top-line growth.

“We are looking at a different strategy going forward. The sales have increased significantly. It still continues to lose money. But what we have seen is significant top-line growth. Now we need to translate that into bottom-line growth,” Mr. Mistry said. Himalayan was `source water’ and not normal mineral water.

“Hence it is priced differently,” he said., adding that the water business reflected a good growth on a year-on-year basis.

He listed three key trends that were creating opportunities for TGB. These included people’s increased focus on health, consumer-convenience and the need for new beverages and customised offerings.

To a query on investment plans for West Bengal, he said that the group was willing to do so when opportunities arise.

“Opportunities have to show themselves (up) in West Bengal,” he said.

“We take an apolitical stance in business. West Bengal has a special place in our heart and history. We will look at West Bengal as a place to grow, if there are opportunities.”

The Tatas hold a vast tract of land in Singur from where it was forced to drive out its small car project following the violent land agitation by the All India Trinamool Congress, now in power.