Merger is a combination of two or more companies into a single company where one survives and the others lose their corporate existence. The survivor acquires the assets as well as liabilities of the merged company. Merger is also defined as amalgamation. The Companies Act, 1956 vide sections 394 and 396A explains amalgamation which will be discussed separately under Legal Aspects of Merger. However, the term will be used interchangeably with "merger" wherever the circumstances would so require.
Acquisition / Take over:
Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company. A 'takeover' is acquisition and both the terms are used interchangeably.
Consolidation:
Consolidation is known as the fusion of two existing companies into a new company in which both the existing companies extinguish. None of the consolidating firms legally survives. All the assets, liabilities and stocks of the consolidating companies stand transferred to new company inconsideration of payment in terms of equity shares or bonds or cash or combination.
Holding company:
Section 4 of the Companies Act, 1956 defines the 'holding Company' and 'subsidiary' which is quite relevant in the present context. The main criteria of becoming holding company is the control in the composition of the Board of Directors in another company and such control should emerge from holding of equity shares and thereby more than 50%of the total voting power of such company.
Types
Based on the objectives of a company different types of mergers and acquisition are considered which are as follows:
Vertical Combination:
A company would like to takeover another company or seek its merger with that company to expand espousing backward integration to assimilate the sources of supply and forward integration towards market outlets. The merging undertaking would be either a supplier or a buyer using its product as intermediary material for final production. The following main benefits accrue from the vertical combination to the acquirer company:
It gains a strong position because of imperfect market of the intermediary products, scarcity of resources and purchased products
Has control over product specifications.
Horizontal combination:
It is a merger of two competing firms which are at the same stage of industrial process. The main purpose of such mergers is to obtain economies of scale.
Circular Combination:
Companies producing distinct products seek amalgamation to share common distribution and research facilities to obtain economies by elimination of cost of duplication and promoting market enlargement.
Conglomerate Combination:
It is amalgamations of two companies engaged in unrelated industries. The basic purposes of amalgamations are to utilisation of financial resources and enlarge debt capacity through re-organising their financial structure so as to service the shareholders
Within Stream Mergers:
Such mergers take place when subsidiary company merges with parent company i.e. the downstream merger or parent company merges with subsidiary company i.e. the up stream merger.
LITERATURE REVIEW
MOTIVES BEHIND MERGER
There are multiple reasons for engaging in merger and acquisition activity. Globalisation,
Economic Development, Technical Innovation, etc All these factors contribute to the growing popularity of M&A.
Growth
Growth seems to be one of the basic reasons with the objective of expansion in product lines and increasing market share. Usually companies grow in 2 ways:
Internal Expansion:
Here the growth is at a low rate and has its own risks and consequences
M & A:
This process helps the company to capture market quickly and enables the company to acquire the established business rather than starting a new one (Gaughan, 2002)
Synergy
This is used to refer the economies of scale at the firm level. It arises when the combined firm's value is more than the sum of their pre acquisition. It can also arise out of the intangible assets of company in a industry (Thompson, 1978)
Hubris hypothesis
Hubris hypothesis also means managerial pride. It play a vital role in M & A for personal reasons and not company as a whole as the managing capabilities are tested it was first proposed by Roll (1986) which implied that over optimistic managers commit errors in evaluating mergers at the company's cost.
Mangers make mistakes unintentionally in the process of merger, sometimes leading to excessive premium payments to the target company. On the other side the rational manager may deliberately pay more to the target company at the expenses of shareholders. (seth, 2000)
Diversification
Diversification plays a vital part as a motive for M & A. According to Thompson (1978) a company which tends to have more cash or credit facility is influenced to grow rather than distributing the excess resources to the share holders. Conglomerate merger is one example which allows diversification of risk though acquiring companies from different industries. Though it gives many benefits to an organisation there are questions put against it.
Berger and Ofek (1995), found that in a conglomerate acquisition, firm value drops by 13% to 15% on an average.
Brealey and Myers (2004), had an argument that diversification is easier and cheaper for shareholders than for the corporation, investors don't pay premiums for a diversified firm.
Economies of scale and scope
Every company has a objective of achieving the economies of scale as a natural goal in the horizontal merger. It has an advantage of decreasing the average cost of production due to mass scale of production.
Brealey and Myers, (2004) and Alchian, (1998) say that operating economies can also be achieved by way of combination of different firm at different levels which can also lead to better coordination at these levels.
Deregulation
One of the major factors for increase in the number of mergers and acquisition is deregulation in a specific industry. Here opportunities for the companies are created through deals which were prevented earlier.
SUCCESS AND FAILURES OF MERGERS AND ACQUISITIONS
With a combination companies get a benefit of achieving something which they couldn't separately. Whether merger is a success or a failure for an organisation and its mode is an difficult thing to assess. There have been studies which show that:
Marks and Mirvis, (1998):
Approximately 80% of the mergers don't meet their financial goals, producing high costs and lower expected returns
Nahavandi and Malekzadek, (1993):
Approximately 50% of the mergers are failures.
Porter (1987):
When companies in the same line of business merge together by way of horizontal merger, they show a better success rate then the companies coming together from different sectors of the industry, reason could be economies of scale and ease of knowledge transfer.
There are many reasons for a company's failure one of the major reason is merger from different sectors of the industry. The following highlights other reasons for failures by Sudarsanam (1995) and Damodaram (2001):
Flawed strategy
A strategy which is not sufficient to achieve the expected plan of the will be a reason of being acquired by a company with superficial strategic fit. But a strategic fit is not a surety of the success of a merger.
Clarity in the objective
The objective of the merger should be clearly stated regarding the motive of the merger i.e. value creation or expansion or the goal of the company. The KPMG (2005) survey found that the respondents had no clear idea about the motive of the merger and different views about it.
No pre and post integration planning
The integration of the two companies must be tailored to the target and the aim of the merger should be explained and then preserved to avoid any confusion which could lead to bigger problems. Companies after the merger find it difficult to maintain their credit standing and this creates problems during integration process from various departments of the company. Also the top level struggles with powers and management of the companies after the merger. Sometimes the integration plan itself is so tough that it is impossible to modify them and accommodate ground realities while implementation of the plan.
Targets attitude and cultural differences
There is usually a cultural difference between companies and this can be one of the major reasons of the failure. It is generally seen in cross border mergers. The cultures differences reflect the decisions taken by the companies. Communication process is taken lightly and the process or plans are not conveyed properly. Such a problem can be a constraint at the time of increasing shareholder value.
CROSS BORDER MERGERS AND ACQUISITONS
There has been a substantial increase in the amount of funds flowing across nations in search of funds flowing across nations in search of merging partners. Globalization has prompted companies in the last few decades in cross-border M&A as privatization, corporate restructuring and deregulation has been on the increase. In today's world of cut throat competition and survival, companies are always looking for a competitive edge has followed their customers worldwide by way of cross-border M&A. This is the new characteristic of modern business, which has affected all industries to one or another and become a definitive business.
New strategies and tactical reasons prompt companies to go global, with the accelerated motive of growth in order to have a greater market share and in order to achieve maximum economy of scale with the access to cheap factors of production like raw material, labour market, etc. It also provides financial protection to the company from the market volatility, political and economical instability and changing business scenario. Cross Border Acquisitions are complex is difficult due to differences in political and economic environment, corporate environment, corporate organization, culture, tradition, tax rules, law and accounting rules between the countries of the acquirer and the target company. Apart from the company's perspective, there are other economic forces which have promoted. Cross Border Acquisitions such as the economic integration of the European Union by the single market.
Globalization of market, increase in competition, explosion of technology, availability of capital to finance acquisition and innovations in financial markets, etc. from the company's perspective, there are many reasons to go global like growth orientation and to extend markets, access to cheaper inputs of production, to response to clients need and the opportunities prevailing in the market.
But integrating a foreign acquisition is not an easy task but a complex one which presents formidable problems. Since the acquired company manages its own staff and managers who are not aware of the corporate governance structure of the acquirer, they need to be reassured about the intentions of the acquirer. The interface between the two companies must be handled with extra sensitivity. In carrying out the rationalization and the redundancies, the local employment rules must be understood and complies with or the acquirer may be bogged down in a bitter and prolonged confrontation.
GLOBAL SCENARIO
Over the last decade the tea industry has been going through a phase of transition worldwide and this transition has resulted in many new developments in the tea industry. The mergers and acquisitions played a huge role in shaping up the tea industry worldwide. The merger of Tata Tea and Tetley had its many pros and cons. everyone had their doubts on how the merger would shape up. The following factors will explain the reasons for such doubts in the minds of people related to tea industry worldwide:
Growing Disparities
There are not many countries that can produce tea. The production of tea depends on availability of suitable climate, soil and availability of cheap labour. India is not very well placed in terms of crop productivity and growth of tea cultivation. India is the largest producer and consumer of tea. China being the second largest producer, India and China together have about 30% share of the world tea market exporting 25% of their produce.
Kenya, Indonesia and Sri Lanka are also major producers of the tea, together producing 25% of the world tea and each exporting about 85% of their production. Kenya specially has been increasing its tea production at tremendous speed and efficiency over the last four decades. Kenya has increased tea production 25 times during this period and the land under cultivation of tea has also multiplied by times in the same period. During the same period India's land under cultivation has seen an increase of 33%. China, India and Sri Lanka have tea production growing at CAGR of 4.6% p.a., 2.3% p.a. and 0.9% p.a. respectively.
The reason for such growth in countries like Kenya, Sri Lanka can be attributed to the facts that they do not have such stringent labour laws in their countries so the labour is cheaply and easily available. Also these countries enjoy a superior crop yield which boosts their production per hectare of land.
Developed countries account for about 62% of the world tea imports. The larger tea imports include the UK, The US, the Netherlands, Australia, Canada, Japan, South Africa, Ireland and Russia. The Russian federation is the largest importer of tea followed by UK. In 1995, UK alone imported around 1.36 lakh tons of tea which is more than that imported by the rest of Europe. Which means that any changes in the UK market would, therefore, have a direct impact on producers?
Many tea consumers have been shifting to coffee or other soft drinks lately resulting in a slow and steady fall in demand for tea. Nevertheless, tea is still the most preferred and number one drink there and the world tea majors have been fighting hard to maintain market share and stimulate the demand. Total demand for tea was estimated at 2.7 bn kg in 1998, which is growing at about 2% p.a.
The stats above clearly show a lot of disparities in the global tea market as production and consumption both are concentrated to certain countries and each of these countries can play a major role in deciding how the global tea industry shapes up.
Competing For the Global Tea Cup
Today the tea industry worldwide is highly concentrated in the hands of a very few firms like Uniliver, Hillsdown Holdings, Lawrie Group, James Finlay, The Cooperative Wholesale Society, Tata Tea, etc. And above all, the concentration of the industry is such that the top three firms have a 60% share of the market of the UK, 9% in France, 67% in Germany and 66% in Italy.
Consolidation is the mantra followed by the global tea giants as they look for competitive advantage and economies of scale. Larger estates and companies look for buying out smaller estates and companies for consolidation to have a larger corpus of the global tea produce. Companies have been closely monitoring their production costs and this trend is expected in the future too as the competition grows. The companies would be looking for complete reorganisation of its production parameters be its machinery, leaf handling, plucking standards, and configuration in drying technology, etc.
Though the prices in tea industry are largely determined by demand and supply, tea giants have great amount of control over these factors and therefore they enjoy high bargaining power over the others in terms of pricing.
Looking at the stats it is not difficult to talk about concentration in tea industry where
90% of the western trade is in the hands of seven trans-nationals and almost 70% of the world
Tea production is sold by trans-nationals. These giants have great amount of influence on price movement and demand for certain qualities of tea. They also have an advantage of horizontal integration as they own plantations and processing factories at the same time, while ownership of transportation companies and shipping agencies gives them advantage of vertical integration.
Demand Pattern
The tea prices have been decreasing due to the fact that demand for tea has been decreasing. This fall in demand doesn't necessarily mean that people are consuming less number of cups of tea or the number of people consuming tea has come down. The use of tea bags and soluble instant tea has effectively reduced the quantity of tea needed per cup which has resulted in the decrease in demand. Also there has been an increase in demand for plain cheaper tea, reducing the demand for expensive high quality tea. Tea bags alone account for 10% of the volume of world production. Prevalence of tea vending machines and ease of use have also resulted in the increase in the consumption of instant tea.
Changing Faces of Tea
The tea giants are looking for constant innovations in the usage of tea in different forms and they have also been successful in innovating and cashing in on the innovations. These innovations have completely changed the way tea is used and viewed worldwide. There has been a complete shift in image of tea in many markets.
Some of the major innovations in the market are tea bags, instant tea, iced tea, specialty tea, and gourmet tea in the ready-to-drink market. There has been a shift in the production form from hot to cold, from the conservative to the flavoured, from sheer cup page to convenience.
Tea bags are the most common and successful innovation and it is preferred by almost 75% of the UK tea drinking population. Tetley has been the market leader in tea bags segment since its inception in 1940's. People in US prefer instant tea and it is also catching up in the European markets lately. In the US, ready to drink category has grown by leaps and bounds.
HISTORY
TATA TEA LTD.
Tata Global Beverages Limited (formerly Tata Tea Limited) is an Indian multinational non-alcoholic beverages company. Tata global beverage's headquartered is in Kolkata, India. It is a subsidiary of the esteemed Tata Group. It is the world's second-largest manufacturer and distributor of tea and a major producer of coffee.
Tata Global Beverages markets tea under the various brands which are internationally renowned like Tata Tea, Tetley, Good Earth Teas and JEMCA. Tata Tea is the biggest-selling tea brand in India, whereas Tetley is the biggest-selling tea brand in the United Kingdom and Canada and the second biggest-selling in the United States and JEMCA is the biggest-selling tea brand in the Czech Republic.
1980's to 1990's was a major year in growth & establishment for Tata beverages, the industry in India was suffering from rising input & labor cost as well as high taxes. Also it was facing competition on the world market. In 1983, Tata Tea bought the stake belonging to the James Finlay group to form the individual entity Tata Tea. The first brand Tata Tea was introduced. This was followed by other brands like Kannan Devan, Agni, Gemini and Chakra Gold. In spite of being the largest market in the world, the concept of branded tea took time to be accepted. In 1987, Tata Tea set up a fully owned subsidiary, Tata Tea Inc., in the USA. 1990's was majorly a phase of expansion of the company. Tat entered into numerous joint ventures & mergers to make its presence felt in global market.
Since 2000 the company has done enough to get recognition not only in India but also globally. The latest step taken by Tata Tea is on 30 January Tata Global Beverages and Starbucks announced the creation of a 50-50 joint venture called Tata Starbucks Limited, which will own and operate Starbucks outlets branded as Starbucks Coffee "A Tata Alliance" in India. The stores will start beginning to operate in 2012, launching initially in Delhi and Mumbai.
FINANCIAL ANALYSIS OF TATA-TEA PRE-ACQUISITION
In the pre- income tax operation which increased from 1180.60 INR in FY 98 to FY 99 a significant improvement has been noticed.
Incomes were declining marginally from 1998-99, though there was a declining trend for some years. There was a tremendous increase in the pre income tax in 1998 by 74% over the past years figure which shows 4854 INR crores.
The net sales and profit for the last five year period ending march 31. 1999 registered at CAGR IS 20.8% and 21.4%. Due to discontinuing of the business there was a decline in the net sales 2.5% in FY 99 on year to year basis where as those which were continuous showed improvement of 22%.
Return on capital employed grew to 37.60% in 1999 to 35.07% in 1998 which improved gradually over a period indicating efficient utilization of funds and improved productivity.
The operating profit margin and net profit margin in 1998 was 22.05% and 11.62% which increased significantly to 26.71% and 14.55% respectively.
Earnings before interest tax and depreciation rose to 18.9% in FY 98 to 23.8% in FY 99.
Cash flow as a percent of gross sales was 6.4% in 1997, which grew to 25.07% in 1998, but was low again in 1999 to 18.9%.
The net profit margins and gross profit margin increased over the years.
The cash profit from FY 95-96 INR 5582 million grew to INR 14843 million in FY 98-99.
Cash profits were 118.63 INR in 1998 which grew to INR 146.43 in 1999
Total reserve and surplus at the end of the financial year was 399 crores.
TETLEY TEA
Tetley brothers Joseph and Edward started to sell salt from a pack horse in in 1822, at Yorkshire. They started to sell tea and became a success that they set up as tea merchants, "Joseph Tetley & Co.", in 1837. They relocated to London in 1856 and set up "Joseph Tetley & Company, Wholesale Tea Dealers". The first company that launched tea in tea-bags in the United Kingdom in 1953 was Tetley.
The period of 1980's was a major year for Tetley group just like Tata's. As the business flourished the company extended its services to include blending and packing. The company was ready for its next major step-an agreement with American agents to distribute Tetley's teas throughout the United States by 1888.
In 1992 changing the shape of the market Tetley contributed by innovating round tea bags to U.S. Designed to squeeze every possible drop of flavour into every cup, for the lovers of hot tea Tetley drawstring tea bags have become favourite.
The Tetley Group was created in July 1995 when a group of investors bought the worldwide beverage business from Allied Domecq as a result of a buy-in management buy-out. In 1997 Tetley further revolutionized the industry with the unveiling of the first drawstring tea bag.
THE DECISION
Leveraged buyout (LBO)
Leveraged buyout is an acquisition financed more by borrowings of the stocks or assets of the company by a group of investors. In an LBO, debt financing represents 50 % or more of the deal price. The debt is secured against the assets of that firm and amortized over a period of less then 10 years. LBO is implemented majorly for three things i.e. to generate additional cash flows, to reduce capital expenditures and for sale of assets.
Indian Market has more preference on cash deals but this deal was unusual unlike the Take over of Indal by Hindalco. This deal was different from other on the basis of their leveraged buy out mechanism for financing the acquisition. In an LBO, there are many advantages like the acquiring company could have a special purpose vehicle as a 100 % subsidiary of the acquirer having minimum equity share capital.
The SPV leveraged the equity capital to gear up debt to buyout Tetley. Debt was paid off by the SPV through Tetley's own cash flows. Assets were pledged to a lending institution only after the repayment of that debt the acquiring company (Tata - Tea ltd) had an option to merge with the SPV. Thus, limit the liability of Tata - tea ltd to the extent of its equity capital in the SPV. Thus, LBO financing the take over through the target company's future internal accruals reduced the burden for acquiring company's balance sheet and making this deal a low risk affair. During this merger Tata tea was with reserves of around Rs. 4 billion, which didn't have any possibility of such a big acquisition on its own nor could it afford the debt associated with it. Hence, leveraged buyout played an important role in this deal.
The deal was so structured, that although Tata Tea retained full control over the venture, the debt portion of the deal did not affect the company. Also, lenders had no recourse at all to Tata Tea in India. It was also described as a classic buyout of cross - border finance. This deal helped Tata Tea to satisfy two major requirements of financing, minimum exposure for Tata Tea but at the same time retaining 100 % ownership of the company, a win - win deal indeed.
STRUCTURE OF THE DEAL
The Acquisition was funded by equity capital of Tata Tea Ltd and by the debt from financial institutions. Tata Tea created SPV to acquire all the properties of Tetley. It had a Capitalization of 70 million pounds which consisted of 60 million pounds contributed by tat tea of which 45 million pounds were raised though global depository receipts issue. Rest 10 million pounds were raised from the U.S. subsidiary (Tata Tea Inc).
70 million pounds was leveraged by SPV into equity 3.36 times to have a debt of 235 million pounds in order to finance the deal. It comprised of 4 parts(A, B, C, and D) and the tenure varied from 7 to 9.5 years, with a coupon rate of 11 % and it was 424 basis points above LIBOR. Of the 4 parts A and B were for funding the acquisition, C and D were meant for capital expenditure and working capital requirements respectively.
The debt was taken against Tetley's brands and physical assets. The valuation was done on the basis of future cash flows that the brand was expected to gain along with the synergies out of the deal. The actual cost of the deal was 271 million pounds. 9 million pounds were spent on legal, banking and advisory services. 25 million pounds were spent for Tetley's working capital and additional funding plans. Hence the total cost of acquisition was 305 million pounds. Since securitization was based on Tetley's operations, Tata Tea's exposure was limited to equities of only 70 million pounds and effectively acquiring a 264 million pounds company.
After clearing the debts through Tetley's operations Tata was then able to acquire Tetley on 10th march 2000, one of the world's largest integrated tea business.
ROAD AHEAD
Merger Implications
Position in the value chain
Increase In Outsourcing
Margins
Global Foot prints
Tata had all the plantations and good tea crops and customers all over India and by merging with Tetley it brought in the technical expertise and significant experience of making tea bags.
Changes in Culture & Workforce
Globalizing Tata Tea had lead to both structural as well as operational changes.
Structure Change:
The major structure change made by Tata Tea in its organization during last quarter of 2002-03 began to pay off in 2003-04.
The separation of company's branded and plantation operations into independent economic value added centres gave greater value in terms of its operations.
Integration of sales and marketing operations gave Tata Tea a required market place synergy.
Business Process Change:
The merger of Tata Tea and Tetley gave both the companies the opportunity to put together a totally new global company that would combine the best of both the companies.
The company's main priorities were to Implement the Tata Business Excellence Model and to make it positive on the economic-value-added scale.
The combined Tata Tea-Tetley business, had a combined market share of 4% which ranked 2nd in the global stakes, well behind Unilever.
The entire manufacturing of Tetley, Australia, was shut down and transferred to export oriented unit in Kochi so that the factory would source tea from across regions, add value to it and then market the product.
The company eased out the brand of Tata Tetley from domestic market and focussed more on exports.
Tetley role was restricted to that of tea bag convertor for Tata Tea in the domestic market and launched" Tetley" brand tea bags under a brand license agreement with The Tetley Group.
Change in workforce:
Due to globalisation, Tata Tea employees were given cross cultural training and also the mission, vision and technology of Tata Tea were changed which led to operational changes in the company.
Barriers to Change
Size Difference:
Tata Tea was half the size of Tetley in terms of revenue and number of upper management.
Financial Constraints:
There were 3 major constraints which formed a barrier to change:
The first constraint was the legal and capital controls in India made the listing of Tetley shares in India unattractive.
The second constraint was that the Tata Tea didn't want to carry heavy debt burden held by the SPV.
The third constraint was the restrictive covenants at Tetley as a consequence of the leveraged buy out (LBO).
Regional Players:
After the merger the highly fractionated regional tea maker in India grew faster, putting pressure on Tata teas market share and profit.
Cultural/Racial:
There was a great deal of concern that the British employees resent having British manager. This is because India was a former British colony.
Corporate philosophy:
The two companies had different opinions on how the business should run. Tata tea was a collection of estates that just happened to sell and Eastern Europe. Tetley was a marketing and packaging company that had relationship with Australia and Western Europe. The difference in customer base gave rise to three types of difference:
Objective of the company
Geographical spread
Difference in skill-set
Branding:
Both companies had very strong brand names in their respective regions. There was a debate as to the surviving name to the new entity.
Exchange rate:
The rupee was strengthening relative to the pound, which caused the acquisition of teas from India to be more expensive for Tetley and made the transfer money back to the Tata organization
POST MERGER
Major expectation from Tetley was to bring in opportunities for long-term and TTL volumes in the short-term.
Tata and Tetley formed several groups:
There were a range of steps taken by Tata Tetley to make sure that the newly formed alliance is a success. Various groups were formed for ensuring the success. Acquiring tea from different sources, geographical expansion and R&D sharing were some parameters on which grouping were done. The supply of tea, increasing the market on geographical front everything was diversified.
A higher debt-equity ratio of Tetley, actually delayed the legal. This was not possible unless it was brought down to 1:1
Initial Cultural differences:
An Indian company taking over a larger British group was a rare example. Initially, culture was a huge issue and had to be handled very carefully. Tata executives would often complain about being kept waiting when visiting Tetley's head office. On the other hand Tetley personnel had this grumble about being operated by Tata, which had knowledge only about India and nothing about Western markets. But, with the progress of time, the cultural integration turned out to be smooth for Tata Tea and Tetley. Tetley a being process-oriented while Tata Tea is quicker to respond and more action oriented complimented each other very well. Tata was aware that it needs to be sensitive to the potentially cultural. Both groups were aware of the culture difference that existed and rather than trying to dominate each other, they adopted a focused approach to blend the two cultures. They worked towards adding to each other's knowledge and skills and to create a business with better value prospects. Both the companies for good, decided to leave behind the separate cultures of Tata and Tetley and move towards defining a single company. It was the primary step towards unification. The Merger was considered positive for both the parties given the synergies that were expected. Tata's used this strength to improve their performance.
Noteworthy increase in sales volume:
Against the odds and the prediction of industry, the merger of Tata-Tetley was a success. The whole country & the industry had witness the success of the merger as the financial year 2012 saw a growth of net sales revenue of newly formed alliance grow from Rs. 6,870 million to Rs. 67,256 million.
Of the total revenue of Tata Global Beverages revenue in the year 2012, 40% is contributed by Tetley brand.
In spite the benefit of globalization, Tetley is the only brand under Tata Global Beverages with stable presence across the globe.
Easing out from the domestic market:
The major step that both the groups had to take was to put forward the interest of the new union ahead of their individual goals. After the acquisition, TATA had to ease out the Tata Tetley brand from the domestic market so that Tata Tetley could focus on exports and try to reach global markets.
Tetley moved its Australian operations into Tata Tetley and ramped up the capacity of the plant. The entire manufacturing operations located at Yara, were shut down and transferred to the export oriented unit in Kochi with the view that the factory would source tea from across regions; add value and the market the product.
