Tata Global Beverages, a global beverages company with multiple brands: It owns tea, coffee, and other beverage brands globally, with a leading position in the tea market. It also has 0.4% stake in Tata Sons. Revenue grew at a 5% CAGR in the last five years with the international business underperforming. Margins have been volatile, but have recovered in the last two years.
Management targets measures to improve returns and growth: Over the last 2Y, its strategic priorities have been to strengthen core brands, invest in growth, and increase efficiencies. Margins have improved, but growth initiatives are yet to show results. The new leadership team at Tata Sons (the parent company) targets domestic consumption and brand leveraging as key priorities.
Low ROE and growth historically, but improvement in margin: Over the last five years, TGBL’s revenue has grown at a 5% CAGR. Ebitda margins have been volatile over the last five years, falling from 10.5% in FY13 to 8% in FY15 and recovering to 12% in FY17. 1Q FY18 margins were 14%.
TGBL believes that levers for margin improvement include optimisation of the international operations, business mix changes, and other operational efficiencies. Growth will depend on the execution of new product launches, aggressive distribution, and new geographies.