Tata Global Beverages, (TGB) one of the world’s largest beverage suppliers, has reaffirmed its confidence in the tea segment following a strategic review.
Company executives said they will cast off unproductive units in favor of boosting tea initiatives in Asia, beginning with China. TGB recently introduced its first bottled green teas for the Indian market and last week announced it will retain its 41 percent investment in Amalgamated Plantation Private (APPL), the largest producer of orthodox black teas in India.
Shares rose to a record high after the company said it will partner with Talking Rain to enter the U.S. market with its ‘Himalayan’ premium water brand, a first for an Indian FMCG (fast-moving consumer good company).
TGB is experimenting with ayurvedic ingredient-suffused teas in India and currently testing Fruski, a tea-based ready-to-drink beverage in North India.
The Indo-English company is the largest tea company in the UK and Canada, and the second largest in the US by volume. Tetley’s manufacturing and distribution business is spread across 40 countries.
“We want to drive aggressive growth profitably,” managing director Ajoy Misra told the Times of India. “We are very clear we want to bring focus into our portfolio of business. We are looking at rationalizing our businesses to cut out the loss-making businesses and make the overall profile more profitable.”
In China “we are appealing to the new generation with black tea,” he said.
Global tea consumption is growing steadily, driven mainly by China, which accounts for one-third of world tea consumption. Tea consumption is dominated by Asia, particularly China and India, which together accounted for an estimated 58 percent of global demand in 2016, according to the Economist Intelligence Unit (EIU) report.
Tea in China will continue to face competition from coffee in urban areas, but demand for tea will remain strong, with younger segments of the population showing a growing preference for black tea (consumption of black tea has risen by an average of 40% per year since 2002, while green tea consumption has risen more gradually), according to EIU.
During an earnings call Misra told reporters the company will sharpen its focus on tea, coffee, and premium waters. Singapore, Malaysia and China have been identified as large tea consuming markets. He said the joint venture with Starbucks has constructed 94 coffee shops and will soon top 100 and that TGB will construct an instant coffee factory in Vietnam that will produce 5,000 metric tons annually.