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Tata Tea Quest for Growth 19832001

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Awarded Category Partner status in Tesco (27% brand leading retailer) Issues ... New launches of speciality/F&H teas (Tesco) Eveil des Sens. Tetley and herbal ... – PowerPoint PPT presentation

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Title: Tata Tea Quest for Growth 19832001


1
Tata Tea Ltd The Tetley Group Half Yearly
Results 2003/04
November 4, 2003
2
Presenter Panel
  • H. R. Khusrokhan (Managing Director Tata Tea)
  • P. T. Siganporia (Deputy Managing Director Tata
    Tea)
  • P. Unsworth (Managing Director Supply
    Support- The Tetley Group)
  • A. P. Goel (Vice-President Finance I.T. Tata
    Tea)

3
Outline of Presentation
  • Highlights of Performance (HRK)
  • Branded Tea Scenario in India (PTS)
  • The Tetley Group Review (PU)
  • Tata Tea Financials (APG)
  • Questions Answers

4
Highlights of Performance
  • H R Khusrokhan

5
Highlights
  • A strong H1 performance for the Group
  • Tata Tea performance continues to improve,
    despite a continuing recession in the Indian Tea
    Industry
  • Revenues for H1 up 3
  • PBT for H1 up by 11
  • PAT for H1 up by 14
  • ORG Market Share restored to 2002 levels in a
    market that has continued to slip by 12
  • Tetley H1 performance well above previous year
    PAT 6.32 m (PY- 2.97 m) PBT 9.97 m (PY-
    4.79 m)

6
Strategies that have helped
  • Clear separation of focus between Branded and
    Plantation Operations
  • Transfer pricing of all Teas used captively by
    our Brands at Auction Equivalent Prices and
    freedom to brands to buy the components required
    for blends
  • EVA driving decisions in branded and plantation
    operations
  • Clear Brand positioning
  • Innovator (Tetley)
  • National /Flagship (Tata Tea)
  • Economy (Agni)
  • Regional (Kanan Devan Gemini Chakra Gold)
  • Improved distribution effectiveness
  • Launch of new Variant Tata Tea Gold

7
Strategies that have helped
  • Plantations
  • Re-engineering of SI Estates (5 Clusters)
  • Labour Productivity up by 10-12
  • Man-days reduced by 12
  • Productivity linkage in wages
  • Mechanisation of plucking operations
  • Productivity Linked Bonus Payments now both in
    North South
  • Overheads
  • Network Optimisation
  • Improved Working Capital Efficiency
  • Aggressive Treasury Management

8
Strategies that have helped
  • Geographical Growth
  • Domestic Brands now in the Middle East, (Gulf,
    Syria, Iraq) WANA Countries (Yemen, Sudan)
  • Tetley Brand in Kazakhstan and other CIS
    Countries
  • Far East incl. China, HK, Singapore Thailand
  • Pakistan for Bulk Tea

9
Revenue Mix (2002/03 Actuals)
N.B. Branded Teas now constitute 86 of Total
Revenues of the Group
10
Outline of Presentation
  • Highlights of Performance (HRK)
  • Branded Tea Scenario in India (PTS)
  • The Tetley Group Review (PU)
  • Tata Tea Financials (APG)
  • Questions Answers

11
Branded Tea Scenario in India
  • P.T. Siganporia

12
Market and Competition
ORG Volume Market Shares
  • Decline in Volume Market Share arrested and now
    growing -
  • back to 2002 levels
  • Share of Regional Brands stagnant/ falling for
    last 3 quarters

13
ORG Market Shares
  • Brand Tata Tea at 7.2 Volume Share for Q2,
    grows by 6.4 over Q1 records 8.6 Value Share
    for Q2, grows by 7.4
  • Agni, Tetley grow Volume and Value shares while
    Kanan Devan, Chakra Gold and Gemini shed shares
    in Q2 compared to Q1
  • Kanan Devan, Gemini and Chakra Gold report growth
    in volume share during September,2003 over
    previous month
  • Overall Company portfolio gains volume and value
    shares in Q2 over Q1 with Volume share of 16.6
    growing by 2.2 and Value share of 19.7 growing
    by 2.3

14
Brand Performance Initiatives
  • Turnaround in brand performance, via several
    marketing initiatives during the last 12 months
  • Tata Tea Brand re-launched. Upgraded variant Tata
    Tea Gold launched in September 2003
  • Kanan Devan, Chakra Gold and Gemini brands
    re-staged
  • Tea Sourcing and Blending track consumer driven
    formulations
  • Tetley teabag volumes grow
  • Major enhancement of AP funding

15
Brand Performance Initiatives
  • Key Challenges
  • Tea becoming a low involvement category, leading
    to commoditization
  • Threat to volume and profit from regional and
    local brands
  • Negative market growth due to reverse migration
    to loose and store-packed tea
  • Recent competitor initiatives

16
Brand Performance Initiatives
  • Strategy
  • Invest behind building the Tata Tea brand
  • Drive consumer insight based innovation to
    modernize category and enable profitable growth
  • Selective strengthening of sales and distribution
    to drive
  • - Top and bottom ends of the opportunity pyramid
  • - Geographic brand thrust
  • Enhance processes and culture to drive change

17
Outline of Presentation
  • Highlights of Performance (HRK)
  • Branded Tea Scenario in India (PTS)
  • The Tetley Group Review (PU)
  • Tata Tea Financials (APG)
  • Questions Answers

18
The Tetley Group H 1 Review 2003/04
  • Peter Unsworth

19
Tetley - Key Financials
m
20
Key Financials
  • Sales down year on year
  • Disposal of the US RPLT - 11m impact
  • GB share at record levels but sales down in soft
    market and changed promotional environment
  • Canadian sales up 4 - Continued market
    leadership
  • Challenging for brand leadership in Australia but
    sales down after last years new broker sell in
  • French sales up 7 - Strong trading and exchange
    rate benefit

21
Key Financials
  • EBITDA up 9 to 20.2m
  • Reduced promotional spending
  • Cost savings from US and Australian
    reorganisation
  • Lower tea prices
  • Cash generation remained strong
  • cash conversion 88 of operating profit before
    restructuring costs
  • lower capital expenditure
  • 174m refinancing took place on 28th February 2003

22
Market Shares
23
TETLEY GB (153m, Rs1100cr)
  • Previous 12m Latest 12m
  • Tetley brand share 27.5 27.6
  • PG Tips (Unilever) brand share 23.6 21.9
  • Good News
  • Established value share leadership vs PG Tips
    (now 26.3 vs 25.5)
  • Awarded Category Partner status in Tesco (27
    brand leading retailer)
  • Issues
  • Likely sale of Safeway retailer, changed
    promotional mix
  • Market performance -5 through 2003
  • Current Agenda
  • New launches of speciality/FH teas (Tesco)
  • Eveil des Sens
  • Tetley and herbal black teas
  • Test launch of T of Life

24
TETLEY USA (48m, Rs345cr)
  • Previous 12m Latest 12m
  • Tetley brand share 11.1 11.7
  • Lipton brand share 46.8 46.7
  • Good News
  • USA business re-structure implemented created a
    new platform for growth
  • British Blend teabags growing
  • Strong position maintained in decaffeinated
    sector
  • Much planning for future growth
  • Issues
  • Relatively low brand equity
  • But.high recall as strong base for growth
  • Current Agenda
  • Ready-to-drink tea
  • Speciality teas
  • Mainstream range extensions

25
TETLEY CANADA (24m, Rs173cr)
  • Previous 12m Latest 12m
  • Regular sector Tetley brand share 43.0 43.3
  • Regular sector Unilever brand share 31.6 31.5
  • Speciality sector Tetley brand share 21.1 22.1
  • Speciality sector Celestial brand
    share 13.0 12.0
  • Good News
  • Strengthened leadership of speciality teas
  • New Canister pack launched September 03 for all
    speciality products
  • Issues
  • Continued decline of regular black tea market
  • Unilever focus
  • Growth of speciality
  • Current Agenda
  • New products and formats

26
TETLEY AUSTRALIA (14m, Rs100cr)
  • Previous 12m Latest 12m
  • Tetley brand share 15.7 17.9
  • Lipton brand share 22.6 21.7
  • Good News
  • September 03 the smallest gap vs Lipton ever
  • Tetley 19.4
  • Lipton 20.7
  • Issues
  • Black tea market down in 03
  • Broker settling down
  • Current Agenda
  • Packaging developments
  • New market entries

27
Key influences on EBITDA
  • Positive trading in Canada and France
  • Changed promotional environment in GB and France
  • Phasing
  • UK brand re-launch at start of 2002/3
  • Cost of sales benefiting from
  • Lower raw tea prices
  • Labour savings from US and Australian
    reorganisations
  • Overhead benefit from US and Australian
    reorganisation
  • EBITDA up 1.6m at 20.2m

28
4 Year EBIT summary (6 months to August)
29
The Tetley GroupHalf Yearly Results - 2003/04
m
30
Other Issues
  • Raw tea price outlook
  • Exchange rates
  • New market entries
  • UK pensions environment
  • Cash position and debt management

31
Outline of Presentation
  • Highlights of Performance (HRK)
  • Branded Tea Scenario in India (PTS)
  • The Tetley Group Review (PU)
  • Tata Tea Financials (APG)
  • Questions Answers

32
Tata Tea LtdH 1 Financials - 2003/04
A.P. Goel
33
Operations Highlights
  • Sales Income
  • Main line branded tea portfolio witnesses healthy
    growth volumes up by 4
  • Auction volumes up, albeit with pressure on
    prices
  • Branded tea export volumes improve
  • Commodity export volumes under pressure
  • Instant tea export volumes marginally up
  • Overall top-line improves by 3 during the first
    six months

34
Operations Highlights
  • Expenditure
  • Increased expenditure largely linked to 15
    increase in production across plantations
  • Labour costs controlled with improved plucker
    productivity and lower bonus
  • However, in aggregate staff costs increased due
    to higher production/salary revisions
  • Consumption of raw materials higher due to
    increased purchase of green leaf in plantations
  • Higher promotional spends behind brands
  • Increased investments to manage supply chain

35
Operations Highlights
  • Treasury
  • Cost of term debt declines from 11.3 to 7.25 pa
  • Raised Rs 75 crores in May,2003 _at_ 5.85 to retire
    existing debt in 2003/04
  • Interest expenditure down by 35 to Rs 10.08
    crores
  • Interest Income declines by 16 to Rs 5.57 crores
  • MF portfolio earns returns _at_16
  • Tight working capital management-debtors/sales _at_
    7
  • Fixed Deposit scheme being phased out

36
Tata Tea LtdHalf Yearly Results - 2003/04
37
Other Issues
  • Consolidated Tata Tea Group Results will be
    tabled from 3rd quarter of the current year
    onwards

38
Tata Tea Ltd Share Price Movement
39
Outline of Presentation
  • Brand Scenario in India (PTS)
  • Tata Tea Short Medium Term Strategies (HRK)
  • The Tetley Group Review (KP PU)
  • Tata Tea Financials (APG)
  • Questions Answers

40
Thank You
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