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India’s Tata conglomerate is on the hunt for food and drink acquisitions that it can grow internationally, as the Tetley tea owner sets out to become a major consumer goods player.
Sunil D’Souza, chief executive of Tata Consumer Products, told the Financial Times the company was in discussions with multiple people about possible acquisitions but ideally wanted to buy a brand with global reach.
The company, which generated $1.7bn in revenues last year and whose brands also include Teapigs tea bags, Eight O’Clock coffee and Soulfull cereals, was formed in 2020 following the merger of Tata Group’s beverages business and the consumer division of its chemicals company.
D’Souza said that when he was appointed chief executive of the consumer group, “we were literally given a blank sheet of paper”, to take the business in the direction of his choosing.
Since its formation, the consumer group has made three large acquisitions in an attempt to grow beyond its dominant beverages business, which makes up 70 per cent of revenues.
Rumours of potential buyouts by the group have swirled this year, including reports that Tata was in talks to buy a majority stake in Indian snack giant Haldiram, but was not prepared to shell out for the $10bn price tag.
D’Souza neither confirmed nor denied the reports, but said the group had clearly identified places it wanted to expand, adding that the company was holding $300mn in cash on its balance sheet. “We’re carrying it because we want to keep our powder dry,” he said.
“We know some of the categories we can do organically, but we also know that there are certain places where we will have to go inorganic,” he said, adding that the company was in discussion with multiple people “on a constant basis” about potential acquisitions.
Tata consumer products are sold in approximately 4mn retail outlets in India, now considered the world’s most populous country. The company could as a result rapidly roll out any new acquisition domestically, said D’Souza, but ideally it would be a brand he could “plug into international markets”.
“Internationally tea or coffee is the entry point, because that’s the strongest category,” he said. “Once you build distribution and relationships, then you can plug in various categories.”
Revenues from outside India, predominantly from the UK, US and Canada, account for up a third of Tata Consumer’s total business, but have fallen from 33 per cent when the company was founded in 2020 to 29 per cent in the last financial year.
The 155-year-old Tata Group consists of dozens of companies spanning airlines, cars, steelworks and IT services. Tata focused its shopping spree on the UK in the 2000s, buying up Jaguar Land Rover, Tetley and steelmaker Corus, making it one of the country’s largest private employers.
While in India Tata is one the best-known names across categories including consumer, its brand recognition in this sector abroad is limited.
The company has decided to steer clear of acquisitions in sectors where there is too much concentration or fragmentation. Smaller and regional manufacturers in the sector have in recent years been winning share from multinational players such as Hindustan Unilever and biscuit maker Britannia.
“If there’s concentration then you can become collateral damage when giants are fighting.” D’Souza said. For example, the group will not look to enter the fizzy drinks market, which is dominated by PepsiCo and Coca-Cola, or the crisps and processed snacks market.
“I don’t think we can play the potato game like the large multinationals do,” he said.
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