Margins will remain firm in next quarter

Written by Lalitha Srinivasan | MG Arun | Updated: Feb 1 2013, 12:01pm hrs
After posting a 25% rise in its consolidated net profit at Rs 80.26 crore in the fiscal third quarter, Tata Global Beverages (TGBL) is chalking out strategic growth plans to sustain its growth momentum, going forward. As the company's key focus is on innovations, Harish Bhat, managing director & CEO, is planning to invest more on its research and development projects to launch new products. With an annual turnover of $1.4 billion, Tata Global Beverages today has a presence in 40 countries across the globe, and derives 60% of its revenues from overseas. In an exclusive interview with Lalitha Srinivasan & MG Arun, Bhat talks about the company's medium and long-term growth strategy. Edited excerpts:

Tea, your primary product, is growing only moderately in volumes. How did you manage a double digit profit growth

The significant growth in our operating profits is led by an unrelenting focus on margins, costs, innovation andexecution. In India, we are growing ahead of the market. We are also happy that our strategic partnerships with Starbucks and Pepsico have made significant progress during the quarter.We have grown ahead of the tea marketinIndia.

Will you be able to sustain this growth over the next quarter also

Yes, I think so. Our margins will continue to remain firm in the next quarter as our brands are strong.

With good margin management, investment in brands, cost management and innovation, we will be able to sustain this growth in thenextquarter.

At present, you have a heavy dependence on tea in your portfolio, compared to coffee and water. Will this see a change over the next few years, given that tea is growing flat in the developed world and moderately in emerging countries

At present, tea constitutes 70% of our revenues, with coffee at 25% and water 5%.We want to grow the water portion to 15% in the next five years. We are not keen on the ordinary water business, but health focussed, value added water, at affordable prices. We are planning to build the Tata Water Plus brand, which is now being test marketed in Tamil Nadu and Andhra Pradesh, and take it gradually across the country. The Rs 2 pouches of Tata Water Plus and the Tata Gluco Plus energy drinks will also target the mass markets.

In the Dec quarter, the company had taken 3% price hike across all its brands. Will there be a further price hike in the fourth quarter

It all depends upon the movement in commodity prices. If the prices of tea go up, we have no choice but to take price hikes.

Is TGBL looking for any strategic alliances or acquisitions this fiscal as part of its organic growth strategy

Our focus is clearly on organic growth. We are planning to nurture our two strategic alliances-onewith Starbucks and the other, with PepsiCo. We are not looking at acquisitions too, as we have enough brands in our portfolio. Our objective is grow our key brands namely Tetley, Tata Tea and Tata Coffee.

What has been the response to Tata Starbucks stores

At present, we have six stores and the consumer response has been very positive and encouraging.

What is the current status of Tata Tea in the branded tea markets in India

We are still leading by value and volumes in the branded tea markets. This quarter our volume growth has increased. Last quarter, we were leading with 19.9% and 21.5% volume and value marketshare, respectively.