Why Bisleri is a good fit for the Tatas | The Financial Express

Why Bisleri is a good fit for the Tatas

Ramesh Chauhan wants to sell; TCPL is the front-runner

Why Bisleri is a good fit for the Tatas
Bisleri is the market leader, with a 32% market share at end FY22, in the organised packaged water market.

Bisleri International chairman Ramesh Chauhan is negotiating with a few companies, including Tata Consumer Products (TCPL), for selling the company that he had bought from an Italian firm, Felice Bisleri, for Rs 4 lakh in 1969. While Chauhan is not divulging the deal value or the buyer as yet (he termed “incorrect” reports that the Tatas have clinched the deal already), the buzz is getting stronger that the discussions between the two have reached the final stages.

In a communique to the stock exchanges on Thursday, TCPL said “it evaluates various strategic opportunities for growth and expansion of the business of the company, on an ongoing basis…The management remains in discussions with various parties, including Bisleri”.

While Chauhan and TCPL are being guarded in their response, brand experts and analysts say Bisleri will be a “beautiful fit” for TCPL. “While Himalayan mineral water is bringing in the value, Bisleri will bring in the volume for TCPL,” one of them said. Besides, Bisleri is an iconic brand, which is synonymous with the category and one that commands a lot of trust. “The whole beverage segment can see a lot of innovation and, backed by the Bisleri distribution, is certainly a plus for the business,” analysts said.

Also Read: Bisleri chairman says he is in talks to sell company to Tata Group

According to analysts with Nomura, if the deal goes through, assuming purchase of Chauhan’s entire stake, Bisleri could contribute 12-14% to Tata Consumer’s FY23 sales and profits owing to margins of the two companies being similar.

Akshay D’Souza, chief of growth and insight at Bizom, agrees. “Water, as a segment, needs a lot of credibility because it is something you are consuming. And Tatas have also been generally associated with a lot of brand credibility. Therefore, Bisleri fits well into their structure,” he said. Apart from Himalayan, TCPL’s value-added water business under the brand NourishCo has products like Tata Copper+ and Tata Gluco+.

“We view Bisleri’s business as a good fit for TCPL, owing to its strong leverage opportunities in manufacturing, distribution and synergies with its existing value-added water business without any major margin dilution to overall business. Bisleri has demonstrated strong leadership and robust growth, despite competition from Coca-Cola’s Kinley and PepsiCo’s Aquafina. It remains to be seen whether the deal materialises and what the terms of the deal are,” Nomura said in September.

Experts believe that the acquisition would provide a significant heft to TCPL in the packaged water business. Besides giving a toehold in the entry-level segment of packaged water, TCPL will also get access to Bisleri’s strong distribution and manufacturing network, which would be critical for Tata Consumer’s value-added water businesses, along with immense brand credibility that Bisleri enjoys.

TCPL currently outsources its entire manufacturing and recently set up a separate dedicated sales force to cater to this channel, according to Nomura, while Bisleri has over 150 manufacturing plants, 4,000 distributors with over 5,000 trucks across India.

Analysts say that the deal will give Tatas a readymade network across retail stores, chemist channels, hotels and other institutional channels. Bisleri also dominates the bulk water delivery business in offices, housing societies and wholesalers. So it would give a large market to Tata Consumer to gain volumes. Bisleri is the market leader, with a 32% market share at end FY22, in the organised packaged water market.

The packaged water as a category is poised for strong growth and having a leading brand along with a full portfolio of products that the Tatas are building, “you know you are assuring growth for yourself”, said D’Souza.

In terms of distribution, TCPL aims to enhance its direct touch point to 1.5 million by the end of FY23 from 1.4 million at the end of September quarter. And with Bisleri being a more mass market brand, it will scale up tremendously and rapidly, he said.

The other big synergy is the digital capability of the Tata group. The whole digital play of Tata synergised with the brand reach of Bisleri is going to be a potent combination, he added.

Tata’s NourishCo business grew 64% in Q2FY23 to Rs 138 crore and contributed around 2.1% of its overall sales, aided by increased distribution. Bisleri’s turnover for FY23 is estimated at Rs 2,500 crore with profit at `220 crore.

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First published on: 25-11-2022 at 05:30 IST