Tata Global Beverages Ltd (TGBL), the Tata group company that owns Tata Tea and Tata Tetley brands, is in talks with Hector Beverages, the Bengaluru-based maker of ethnic juice brand Paper Boat, according to people aware of the matter.
Founded by former Coca-Cola executives Neeraj Kakkar and Neeraj Biyani in 2010, Paper Boat sells Indian ethnic drinks like aamras, jaljeera and aam panna. Kakkar didn’t immediately respond to an email sent Monday morning, while a TGBL spokesperson said the company would not respond to “market speculation”.
The move, said one of the people quoted earlier, is part of the larger strategy being steered by Tata Sons Chairman N Chandrasekaran to lead TGBL into categories other than tea and coffee and enter fast-growing segments. “TGBL has had informal discussions with Global Hector Beverages. Nothing has been finalised yet,” added this person, pointing out that the buyout would be a perfect fit for the portfolio of TGBL, which has been looking to have a more diversified presence in beverages.
According to Vishal Gutka, an analyst at Phillip Capital, besides the fact that the acquisition will lead TGBL into a category where it doesn’t have a presence currently, there might not be any merit in the move. “It’s a very niche segment with premium pricing in select markets. Plus, TGBL will need to build a separate distribution network for the ethnic juice business. Therefore, it makes little sense for the company to buy it,” he said. The ethic juice category, owing to a low base, has been expanding at more than 20 per cent per annum, year on year, said Gutka. Besides tea, TGBL has presence in branded packaged water and coffee retail chain through a joint venture with Starbucks.
As part of the larger strategy to make Tata group companies
more agile and profitable, Chandrasekaran has chalked out a plan to prune the group’s presence and exit from non-core, non-profitable entities, and enter high-growth segments. Under this, TGBL has been exiting its loss-making businesses. During the quarter that ended in December, TGBL divested its holding in its overseas associate, Estate Management Services Pvt Ltd (EMSPL), to withdraw from the plantation business and focus on packaged branded tea.