Title: Tata Tea Quest for Growth 19832001
1Tata Tea Ltd The Tetley Group Half Yearly
Results 2003/04
November 4, 2003
2Presenter 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)
3Outline of Presentation
- Highlights of Performance (HRK)
- Branded Tea Scenario in India (PTS)
- The Tetley Group Review (PU)
- Tata Tea Financials (APG)
- Questions Answers
4Highlights of Performance
5Highlights
- 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)
6Strategies 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
7Strategies 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
8Strategies 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
9Revenue Mix (2002/03 Actuals)
N.B. Branded Teas now constitute 86 of Total
Revenues of the Group
10Outline of Presentation
- Highlights of Performance (HRK)
- Branded Tea Scenario in India (PTS)
- The Tetley Group Review (PU)
- Tata Tea Financials (APG)
- Questions Answers
11Branded Tea Scenario in India
12Market 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
13ORG 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
14Brand 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
15Brand 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
16Brand 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
17Outline of Presentation
- Highlights of Performance (HRK)
- Branded Tea Scenario in India (PTS)
- The Tetley Group Review (PU)
- Tata Tea Financials (APG)
- Questions Answers
18The Tetley Group H 1 Review 2003/04
19Tetley - Key Financials
m
20Key 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
21Key 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
22Market Shares
23TETLEY 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
24TETLEY 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
25TETLEY 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
26TETLEY 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
27Key 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
284 Year EBIT summary (6 months to August)
29The Tetley GroupHalf Yearly Results - 2003/04
m
30Other Issues
- Raw tea price outlook
- Exchange rates
- New market entries
- UK pensions environment
- Cash position and debt management
31Outline of Presentation
- Highlights of Performance (HRK)
- Branded Tea Scenario in India (PTS)
- The Tetley Group Review (PU)
- Tata Tea Financials (APG)
- Questions Answers
32Tata Tea LtdH 1 Financials - 2003/04
A.P. Goel
33Operations 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
34Operations 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
-
35Operations 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
36Tata Tea LtdHalf Yearly Results - 2003/04
37Other Issues
- Consolidated Tata Tea Group Results will be
tabled from 3rd quarter of the current year
onwards
38Tata Tea Ltd Share Price Movement
39Outline 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
40Thank You