Tata and Nestle Courting Arizona Tea

A report in the trade publication Beverage Digest that Tata Global Beverages and Nestle are possibly courting Arizona Beverage Co. caused a buzz of speculation last week.

Citing several unnamed sources, Beverage Digest reported the two companies have held talks with the Arizona-based tea manufacturer. Arizona, founded in 1971, currently holds about one third of the market for canned/bottled tea. The publication estimated the enterprise value of the privately held firm at $3 to $4.25 billion.

The pace of acquisitions as returned to pre-recession levels and multiples are again rising. Ready-to-drink tea is experiencing a double-digit growth spurt in grocery, mass-market and convenience channels as health-conscious consumers abandon carbonated soda. PepsiCo-Unilever Inc.’s Lipton brand, Cadbury-Schweppes Snapple and Nestea trail Arizona in RTD tea sales. Arizona has expanded its distribution to include the Caribbean, South America and Mexico as well as Asia and Europe.

In June the vice chairman of Tata’s board of directors announced the firm is seeking a strategic partner to help finance acquisitions. The $1.5 billion firm has amassed $1 billion and is looking closely at US-based beverage firms, Vice Chairman RK Krishna Kumar told reporters in London. Tata owns the Tetley brand, the largest tea brand in the UK and Canada and second by volume in the United States.

Nestle Water North America recently acquired $53 million grossing organic SweetLeaf Tea and its Tradewinds Brand and is also reported to be on the hunt. Swiss parent company Nestle Ltd. owns the Nestea brand. The firm owns seven regional bottled water brands and Nestle Pure Life and earned $4 billion last year making it the largest bottled water supplier in the U.S.

Beverage Digest reported that Coca-Cola Co., was not mentioned as a suitor. In February Coke completed its acquisition of Honest Tea, a small but fast-growing organic tea brand.
Market researchers predict RTD sales will top $4.4 billion in 2011.