Download - Tata Globalw2w Sep 13
-
7/29/2019 Tata Globalw2w Sep 13
1/38
Sector : Beverages
6th September 2013
www.way2wealth.com
Accumulate
Analyst Name : Shivani Vivek Vishwanathan Nilesh Doshi
Tel : 022-66638956 022-66638950Email : [email protected] [email protected]
www.technoworld.in
-
7/29/2019 Tata Globalw2w Sep 13
2/38
CMP `147.15
BSE SENSEX 18980
NSE NIFTY 5593
EQUITY CAP `61.8 crsFACE VALUE `1.0
MARKET CAPITALIZATION `9093.9 crs
BSE CODE 500800
www.way2wealth.com
www.technoworld.in
NSE CODE TATAGLOBAL
BLOOMBERG CODE TGBL IN
EPS (FY14E) `7.6
52 WEEK HIGH/LOW `181.5/ `122.0
SHARE HOLDING PATTERN AS ON 30.06.13
PROMOTERS 35.2%
INDIAN INSTITUTIONAL & FII 37.2%
PUBLIC & OTHERS 26.7%
2Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
3/38
Investment Themewww.way2wealth.com
www.technoworld.in
Globally, the organized retail tea sector is dominated by three players Unilever,
Tata Global Beverages & Associated British Foods. Unilevers retail value sales
amounted to nearly four times those of second-placed Tata Global Beverage Ltd
(TGBL). In terms of growth rates, TGBL outperformed Unilever in 2012, growing
at13%. Changing from being an Indian tea specialist to an overall beverage
player, TGBL as a corporate expanded significantly on all fronts throughacquisition and entry into new categories. In tea, TGBL outpaced Unilever in Asia
Pacific,Australasia and North America in 2012.
Source: Euromonitor
Company 2010 2012
Unilever Group 1 1
Tata Global Beverages Ltd. 2 3
Associated British Foods Plc (ABF) 3 3
Orimi Trade OOO 4 4
Ahmad Tea London Ltd. 6 5
Ito En Ltd. 5 6
Teekanne GmbH 7 7
Guangdong Strong (Group) Co. Ltd. 15 8
Zhejiang Xiangpiaopiao Co Ltd. 17 9
Mai Komopanya OAO 9 10
.
Share of specialty tea ( i.e. green tea & herbal tea) to double over next 2-3 years. Currently specialty tea is 15% of
the total tea sales for TGBL. This is expected to double in the next 2-3 years trending on the back of demand for
healthy alternatives for consumption.
Branded coffee business in the US to grow on the back of single serve and launch of new flavors. This segment is
the fastest growing segment in the retail coffee market. Single serve account for ~24% of the retail sales as
compared to 8% five years back. Profitability to improve.
Domestic instant coffee business to gain volume traction on the back of capacity expansion. Plantations to
improve realization as sales of certified and specialty beans increase. We expect Tata Coffee to grow at 15% p.a fornext 2-3 yeas.
Water segment the new focus segment. Domestic test marketed brands, Tata Water Plus & Tata Gluco Plus, to be
launched nationally in next 2 years. Increased investment in US subsidiary Rising Beverages to gain foothold invitamanised water market in USA.
3Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
4/38
www.way2wealth.com
www.technoworld.in
Macro Trends : Rising awareness and health consciousness in dietary intakes
globally
Business Drivers : New product development, capacity expansion and
Investment Rationale
increasing presence in ig growt categories riven y eman or unctionafoods and beverages to aid profitable growth.
Short-term Positives : Favourable rupee movement and raw material price
movement to aid in growth and profitability.
4Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
5/38
www.way2wealth.com
www.technoworld.in
Rising awareness and health consciousness in dietary intakes globally in a bid to counter risingincidence of lifestyle diseases.
Investment Rationale:
Macro Drivers
Global 2008 2010 2012
Better for you Drinks $38615.3 $41478.3 $45160.5
Fortified/ FunctionalDrinks
$58714.3 $68321.3 $83559.3
Naturally Healthy Drinks $146327.9 $159315.8 $185682.9
Organic Beverages $3038.3 $3293.6 $3831.4
U.S. 2008 2010 2012
Better for you Drinks $14073.6 $14144.2 $14235.4
Fortified/ FunctionalDrinks
$19951.8 $20607.5 $24597.6
Naturally HealthyDrinks
$18822.4 $1854.1 $20879.8
Organic Beverages $807.2 $855.4 $943.4
Health & Wellness Beverage Sales ( in USD mn)
Source: Euromonitor International
5Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
6/38
www.way2wealth.com
www.technoworld.in
Nutraceuticals &Functional Foods/
Beverages
Nutraceuticals or functional foods are similar in appearance to conventional foods and are
consumed as part of the usual diet and may have the potential to reduce risk of cancers,coronary heart diseases, cardiovascular diseases, slow ageing effects and reduce oxidativestress.They may be anti-inflammatory, anti-microbial, and anti-diabetic and boost immunity.
Investment Rationale:
Macro Drivers
6Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
7/38
Investment Rationale :
Business Driverswww.way2wealth.com
www.technoworld.in
New ProductDevelopment
Increasing presencein high growth
categories
Capacity/Market
Expansion
Growth
7Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
8/38
Investment Rationale :
Business Driverswww.way2wealth.comwww.technoworld.in
o New product development, capacity & market expansion coupled with increasing presence in high
growth categories driven by demand for functional foods and beverages to aid profitable growth.
Some of the initiatives & focus strategies outlined by the company for this are as follows:
TEA
COFFEE
WATER
tea portfolio
These are value addedofferings with higher realizationvs. regular tea
Currently specialty tea is~15%of the tea portfolio . Next 2-3years co. plans to take this to30%
of instant coffee by 33% to8,500 in Theni in TN, India
Increase in sale of certified &specialty coffee from plantationbusiness enabling betterrealization
Single serve volumes expansionfor Eight o Clock operations.
Tata Gluco Plus & Tata WaterPlus in the domestic market tobe taken national over the next18 month period
Himalaya Brand focus onincreasing exports
Launched Activate, a vitaminsedwater offering, in the New Yorkmarkets
8Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
9/38
Investment Rationale :
Short Term Positiveswww.way2wealth.comwww.technoworld.in
Lower cost of raw material and price interventions across geographies supporting margins
Majority of Tetley's tea requirement is sourced from Kenya. Kenyan tea prices have corrected ~25%
YOY up until July 2013. Currently ruling in a band or $2.50 to $2.70 per kg prices are expected toremain subdued due to demand slowdown from Egypt and higher crop. Kenyan production for 2013 is52.5% higher in Jan to May period at 194.9 mn kgs.
300350400
rKg
Kenyan Tea Prices
Company initiated several price increases in Tetley markets like Canada & Australia in FY13 & FY12
respectively. We believe the retail brands across the globe will take cuts less than the raw material costdrops as consumers have accepted the new normal inflationary prices.
9Tata Global Beverages
050
100150200250
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
USCents
p
-
7/29/2019 Tata Globalw2w Sep 13
10/38
www.way2wealth.com
www.technoworld.in
Eight o Clock (EoC), is the companys branded coffee subsidiary in US. This subsidiary is showingimprovement in profitability as price of Columbian Milds Arabica coffee bean (EoCs raw material)
corrected 17.5% from FY13 average prices of 185 cent/lbs. Operating margins have improvedfrom a low of ~8% in FY12 to ~15% in FY13. We believe the ongoing correction entails further
rise in margins for EoC operations in FY14 as retailers have not taken significant price cuts ascompared to raw material price corrections.
Q1FY14 results are privy to this phenomenon as EoC margins expanded further to 21% vs. FY13
margins of 15%.
Investment Rationale :
Short Term Positives
23%20%
8%
15%
0%
5%10%
15%
20%
25%
FY06 FY11 FY12 FY13
EOC Margin Profile
10Tata Global Beverages
0
50100
150
200250300
350
2-Jul-09
2-Oct-09
2-Jan-10
2-Apr-10
2-Jul-10
2-Oct-10
2-Jan-11
2-Apr-11
2-Jul-11
2-Oct-11
2-Jan-12
2-Apr-12
2-Jul-12
2-Oct-12
2-Jan-13
2-Apr-13
2-Jul-13
Columbian Mild Prices
-
7/29/2019 Tata Globalw2w Sep 13
11/38
www.way2wealth.com
www.technoworld.in
The margins in the domestic operations of branded tea was also impacted by higher tea auctionprices in FY13.
The company initiated price increases in the range of 7-12% in FY13 and hence protected marginson the downside.
The current correction in Indian tea auction prices will help in improving margins to a certainextent curtailed by the rise in transport and packaging costs. We believe the price cuts to be less
than auction price correction on the back of higher demand for branded tea and to protect againstother cost escalations.
Investment Rationale :
Short Term Positives
Rupee deprecation to have a favorable impact
~ 65% of the companys business comes from overseas operations.
11Tata Global Beverages
50
70
90
110
130
150170
190
Jan-1
1
Apr-1
1
Jul-1
1
Oct-1
1
Jan-1
2
Apr-1
2
Jul-1
2
Oct-1
2
Jan-1
3
Apr-1
3
Jul-1
3
NORTH INDIA SOUTH INDIA ALL INDIA
-
7/29/2019 Tata Globalw2w Sep 13
12/38
Company Overviewwww.way2wealth.com
www.technoworld.in
Healthy for you drink beverages company ; with presence in tea, coffee and water India accounts for ~32% of its topline, 95% of sales from black tea and 5% from green tea. With green
tea demand growing at 50% per annum it expects green tea sales to contribute 20% to sales in thenext 3-4 year
On consolidated basis, TGBL derives 70% of its revenue from tea and balance from coffee segment.Tetley, its largest brand contributes 38% to the topline, main geographies being UK and Canada. Eight
O'Clock is a gourmet whole bean coffee brand in USA. It contributes 17% to the topline.
Focus on strategic alliance:
o Starbucks : Retail Coffee Space
o
NourishCo : Water Businesso Rising Beverage : Water Business
TEA
Globally the second largest manufacturer and distributor of branded tea;
Major brands beingTata Tea, & Tetley.
COFFEE
In the coffee space , it is present in India through its plantation and instant coffee subsidiary; TataCoffee. Globally the company has presence in US through its brand acquisition of Eight o Clock
Coffee in 2006.
12Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
13/38
Business Modelwww.way2wealth.com
www.technoworld.in
1313Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
14/38
RegionRegionRegionRegion----wise Business Outlookwise Business Outlookwise Business Outlookwise Business Outlook
www.way2wealth.com
www.technoworld.in
14Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
15/38
www.way2wealth.com
www.technoworld.in
Indian Operations
India Tea BrandsTata Tea,
Tetley, Kanan Devan,Chakra Gold,
& Gemini
~```2300 crs.
~```600crs
Tata Coffee A plantation &Instant coffee
Subsidiary
Water Business Himalaya,
Tata Water Plus,& Tata Gluco Plus
~```70 crs.
15Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
16/38
www.way2wealth.com
www.technoworld.in
Indian Branded Tea Operations
Tata Global Beverages operates five brands in India: Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini in thebranded boxed packed tea market.
KANAN Devan, Chakra Gold and Gemini are regional brands with market leadership
Tata Tea is the market leader in the retail tea market with above 20% volume market share
BRAND FAMILYTREE
Tata Tea Premium Tata Tea GoldTata Tea Gold
DarjeelingTata Tea Life
Gemini Chakra GoldKanan DevanTata Tea Agni
Market Leaderin AndraPradesh
Fastest
Growing
Economy
brand againstthe unbranded
Leading Brand
in Kerala
Premium
Brand in AP
Brand with
18% volumeleadership
16Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
17/38
www.way2wealth.com
www.technoworld.in
Indian Branded Tea Operations
Growth Drivers for the Standalone Brand Business
Pricing Power :Value growth continues to aid topline growth with volumes growth in the recentpast as pipeline stock levels continue to remain low.
Migration to branded: The total retail tea market is estimated at ~`11,000 crs.; branded tea is
~55% of this growing at 20% p.a i.e., double the rate of unbranded segment.
Specialty tea growing faster: Green tea is proving to be a high growth segment in India. Greentea accounts for 5% of total market currently but is growing at 50% annually and is expected to be4 times in next 5 years. Flavored tea market in India is growing at the rate of 25% annually. TGBL
has 27% market share in the green tea segment in India under its Tetley brand.
17Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
18/38
www.way2wealth.com
www.technoworld.in
Indian Subsidiary:Tata Coffee (Standalone)
Last 1 years higher commodity prices and rupee depreciation favorably impacted the plantationbusiness. Arabica sales volume ( the premium quality bean) is higher by 18%. Also the higher share of
Specialty and Certified coffee has enabled the company to improve per kg realizations.
o
Plantation business to grow on the back of initiatives to improve per unit realizationthrough superior offering as well as improving yield on the back of re-plantation.
The instant coffee business to grow on the back of penetration in non Russian markets. Currently it
is 40% of the total share of instant coffee sales. The company plans to further extend it to othercountr es.
Value added instant coffee offerings, like freeze dried coffee, are rising in share of percentage to totalsales. This will continue to impact profitability positively. The share of freeze dried which wasnegligible 2-3 years ago is now 13% of instant coffee sales in the current year.
o Increase in extraction capacity of instant coffee by 33% to 8,500 in Theni in TN, India.
The newly added capacity is for the premium freeze dried segment. This expansion to
aid in volumes growth as the company was operating on 100% capacity utilization
before this.
o Standalone business gets a natural hedge between the instant coffee an plantation
business.
18Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
19/38
www.way2wealth.com
www.technoworld.in
Indian Business New FocusArea: Water
Equal Stake JV with Pepsi Co. in India , Nurischo, to enableTGBPL to leverage on Pepsis distribution network.
Successful test launches ofTata Water Plus and Tata Gluco Plus in Tamil Nadu in 2012,. Both these offeringsprovide functional benefits versus existing packaged drinking water options in the market.
o The company is planning a nation wide launch in next 2 years.
The company acquired Mount Everest in June 2007 to gain foothold in the niche naturally sourced packagedwater. Himalaya has since grown its brand and per unit price in a bid to become the nations largest springsourced packaged premium drinking water.
o The brand is now present in both India and Singapore. The company is focusing on export
.
increase distribution.
Indias packaged drinking water to grow at 20%+ on the back of rising issues related to water contaminationand other health related objectives.
Consumption of bottled water on a global scale has doubled over the past
10 years, according to Canadean.
In 2013 bottled water volume in Asia is expected to increase by 16%. the
region absorb every 1 in 3 litres of packaged water consumed globally
While China is a huge market and the largest consumer of packaged water
in Asia, it is fragmented. India, in fact is the country seeing the most growth
with more than 20% a year
19Tata Global Beverages
Asia/Pacif
ic
32%
West
Europe
23%
North
America
16%
Africa/Mi
ddle East
11%
East
Europe
9%
LatinAmerica
9%
Regional Packaged Water Sales byvolume
-
7/29/2019 Tata Globalw2w Sep 13
20/38
www.way2wealth.com
www.technoworld.in
20Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
21/38
TETLEY The Giant Tea Bush
Tetley revenues account for ~38% of the consolidated topline.
Since its acquisition in 2000, the Tetley operations have grown at a CAGR of 3% from `1900crs to
`2794 crs.
Tetley is world second largest retail tea brand with presence in over 40 countries. The main
geographies for the Tetley brand are: UK, Canada, US and Australia.These account for ~75% of Tetleysrevenues.
The largest tea brandAccounts for ~50% of TetleyRevenues.
www.way2wealth.com
www.technoworld.in
Source : Company
This region is ~5% of
Tetley operations
Second largest geography forTetley at ~15%..
Australia one of the fastestgrowing regions is ~4% ofrevenues.
ROW - 25%
UK
CANADA
USA
AUSTRALIA
21Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
22/38
Tetley UK
Tetley is the single largest brand in UK with a 27% market share followed by PG tips (Unilever)which has 24%, Typhoo (Premier Food) with 13%, Twinings (Associated British Foods) with 11% and
Yorkshire tea (Bettys and Taylors) with 6% share.
UK is a highly matured tea market with very high penetration with almost 8 in 10 drinking tea and
has dropped to 81% in 2010 from 88% in 2006
Demographics have played a key role in creating new trends for the market. Mintel research found
that while 88% of Brits over 65 years of age drink tea, only 73% of young 15-34 old adults drink tea.This sta nanc / decrease volumes have decreased while rices have increased has been offset b a
www.way2wealth.com
www.technoworld.in
rise in soft drink sales.
537610 667 655
0
500
1000
2006 2009 2010 2011
UK Retail Tea Market ( In UK
Pounds mns)
10905
11070
11
245
11
610
1
2350
12985
13345
0
5000
10000
15000
2006
2007
2008
2009
2010
2011
2012
UK Soft drink consumption : Value, million
22Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
23/38
Tea drinks in UK trends are seeing a shift from traditional English breakfast tea to specialty tea.Apart from that UK, which is primarily a black tea market, is witnessing a higher growth in demand
for green tea.
The demand for specialty tea like herbal, fruit tea, decaff and other premium format like red bush
has been rising. These offerings are typically priced at 2 to 2.5 times the traditional tea henceproducing the industry value growth.
www.way2wealth.com
www.technoworld.in
Tetley UK
Source : Company
-1.5% 10.0% 8.0%
83.0%
16.0%
-20.0%0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
English
breakfasttea
bags
Fruitand
Herbalbags
Specialitybags
Greenteabags
Decaffeinated
bags
Growth in 2011 Sale of Various Tea Categories
Englishbreakfast
tea bags
74%
Fruit andHerbal
bags
9%
Specialitybags
8%
Green teabags
3%
Decaffeinated bags
6%
UK Tea Market Breakup - 2011 Sale(in mn)
23Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
24/38
The UK tea market expected to grow at 1.5-2% to Euro 708mn by the end of 2016. Growth to be value driven as
volumes for black tea continue to fall but that of speciality tea keeps rising. The company plans to grow market share
through value added offerings.
Over a long term we believe that the declining traditional tea market will be offset by higher demand of specialty teai.e. green tea, ready to drink tea, herbal tea etc..
The concern of demographic demand shift will also be addressed over the next decade as the additional 65+ agegroup is expected to increase. The older demographic bent to help keep up the demand for tea.
o Tracking Tetleys innovative index in UK to tackle these trend shifts shows that the company has
over expanded its offerings and hence maintained market share in a declining environment.
www.way2wealth.com
www.technoworld.in
Tetley UK
o Tetley recent launches, in the premium segment such as Tetley Estate Selection and the pitch in Teapigs(a subsidiary ofTGBL, UK) are expected to drive value growth.
o We expect Tetley UK (including Teapigs) to grow ~6-8% over the next 3-4 years on the back of premium
launches and their rising contribution to topline.
Innovation TableFY10 TEA4KIDS
FY11 Tetley Green Blueberry and Lemongrass & Honey
FY12 Tetley Redbush
FY13 Tetley Estate Selection
1547.1
1476.0
1357.8
1383.4
1239.4
1390.2
1326.7
1193.8
1162.0
0.0500.01000.01500.02000.0
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
UK Sales ( In ```Crs.)
24Tata Global Beverages
CAA
-
7/29/2019 Tata Globalw2w Sep 13
25/38
CAA
CAA Canada,Australia & America account for 27.4% of the group turnover.
In particular the company has operations in USA, Canada, Australia & some of the South American
nations.
The company is present in these countries in both the tea & coffee segment through its brands Tetley
& Eight O Clock respectively. ~ 55% of this region sales is coffee & rest is tea.
www.way2wealth.com
www.technoworld.in
Canada,
America,
Region-wise MixAustralia
8%
South
America
2%
Region-wise Mix
Tea
Product-wise Mix
FY09 FY10 FY11 FY12 FY13
USA 1132 1303 1227 1352 1453
Canada ,South America & Australia 428 462 483 497 558
CAA 1560 1765 1710 1849 2011
(In `crs)
25Tata Global Beverages
us ra a
27.4%
Others
72.6%
USA
72%
Canada
18%Coffee
54.6%
.
CAA t
-
7/29/2019 Tata Globalw2w Sep 13
26/38
Brand Presence in CAA
In USA, the company is present in the brandedcoffee retail space with Eight o Clock (EoC). EoC
account for ~ 75% of the revenues out of USA.EoC is a premium whole bean coffee brand.
In Canada the company is present in the tea
se ment throu h its brand Tetle . This is second
CAA cont.
USA
BRANDS BEVERAGE CATEGORY
Eight o' Clock Coffee
Good Earth Tea
Tetley USA Tea
Activate Water
www.way2wealth.com
www.technoworld.in
largest geography by sales for Tetley and is a marketleader in this segment.
Australia, though this region only account for 7-8%it is the fastest growing nation. The company ispresent in this region through its brand Tetley.
Brand-wise EoC account for ~50-52% of thisregions sales and Tetley ~ 38-40%.
CANADA
BRANDS BEVERAGE CATEGORY
Tetley Tea
Tassimo Tea
AUSTRALIA
BRANDS BEVERAGE CATEGORY
Tetley Tea
26Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
27/38
The Canadian tea market is estimated at $415.1 mn in 2011, it is expected to grow by 30%+ overthe next decade driven by demand of specialty tea.
This region went through distribution restructuring last year. This coupled with high competitive intensity
impacted FY13 topline growth.
o The company has initiated price increase and trade activation programs to regain lost
sales.
o The company is focusing of growing its special tea segment i.e. green tea and herbal
Canadawww.way2wealth.com
www.technoworld.in
. .
o The company ventured into the single serve market and tied up with Kraft Tassimo.
Australia
A highly competitive beverage market, Australia has gone from consuming tea in majority to acoffee market. TGBL has played on this and has launched Tetley Chai Latte to play on consumermind as a healthy option to a coffee latte.
This region bounced back in FY13. FY12 performance was moved due to restructuring initiativesand aggressive competitive activity.
27Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
28/38
USA
In USA, TGBL is mainly present in coffee segment through its brand EOC. ~75% of US revenue arefrom coffee and rest from tea through Tetley and Good Earth.
The growth in this region has been under pressure due to recessionary trend and highercompetitive intensity.
www.way2wealth.com
www.technoworld.in
756844
910
800900
1,000
Sales (In ```crs)
6.9%
6.0%8.0%
Constant currency growth chart
59 55 60123 132 148
-100200300400500600
700
FY11 FY12 FY13
Good Earth Teas Inc.
Tetley USA Inc
EOC Holdings Inc. (Consolidated)
-10.6%
-3.7%
2.6%
-1.7%
-5.3%
-12.0%
-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%
4.0%
FY12 FY13
Good Earth Teas Inc.Tetley USA IncEOC Holdings Inc. (Consolidated)
28Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
29/38
COFFEE
EOC has tied up with Green Mountain Roaster for Keuring single serves: This segment is the
fastest growing segment in the retail coffee market. Single serve account for ~24% of the retail sales ascompared to 8% five years back
EoC profitability to improve: Columbian mild coffee bean prices continue to slide. YTD prices are lowerby ~11%. We expect further expansion in margins in FY14 as pricing environment remain stable. Thoughtopline to be flat and to report only currency translation growth.
www.way2wealth.com
www.technoworld.in
USA
TEA
TGBL has presence in Tea segment through Tetley and its super premium brand Good Earth, though not in a
big way.
Tea is growing in demand in USA on the back of growth demand for functional drink RTD/Tea is current at
$6.7bn and is expected to grow to $8bn by 2015.
We believe the companys focus to remain on coffee in this region.
Apart from that the company latest increase in stake in Rising beverages and a successive launch of
Activate-cup twist water based vitamin drink in New York to further its step to increase its foothold
in USAs fast growing functional drink markets.
29Tata Global Beverages
Entry into USA s Liquid
-
7/29/2019 Tata Globalw2w Sep 13
30/38
Entry into USA s Liquid
Refreshment Beverages Marketwww.way2wealth.com
www.technoworld.in
14.3%
9.5%
5.8% 4.9%2.3%
-1.5% -1.8% -4.1%
1.0%
EnergyDrinks
RTDCoffee
BottledWater
RTDTea
SportsDrinks
ValueAdded
Water C
SDs
FruitBeverages
TotalLRB
US LRB % Change Volume by Segment
CSDs
45%
Bottled Water
32%
FruitBeverages
11%
Sports Drinks
4%
RTD Tea
4%
Energy Drinks
2%Value-Added
Water
2%RTD Coffee
0%
LRB Category Share,2012
58,714.3
68,321.3
83,559.3
19,951.8
20,607.5
24,597.6
-
50,000.0
100,000.0
2008 2010 2012
Fortified/Functional Beverage
Global (in USD mn) US (in USD mn)
Fortified/Functional Beverage - These beverages are enhancedduring the production by adding nutritional ingredients to provide
healthy benefits. For ex. Energy drinks, sports drinks and fortified water
The company recently increased stake in its US based JV
Rising Beverages to ~47%.
The product it has to offer Activate is a clear fit in theincreasing demand for functional beverages.
The brand just launched its twist cap Vitamin releaseflavored water in the East coast( New York) and plans togradually work up its distribution.
Clearly targeted for the age group between 25-28, thebrand continues to see double digit growth.
We believe this innovation will help the company create
a foothold in the growing segment of value added water.
30Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
31/38
www.way2wealth.com
www.technoworld.in
ROW - Rest of the World
Russia
Russia is an oversaturated blacktea market
Growth is seen in premiumvarieties of tea like fruit/herbaltea
In 2009, the company acquired
South Africa
Growing consumption of Rooibosand specialty tea in South Africa
slow decline of 2.3% in volumesseen in black tea
Acquisition of 33% stake in Joekelin 2006, which has some
Europe
Acquired Jemca brand in 2006to get the presence in CzechRepublic, where the teaconsumption is high especially
during cold seasons
In 2007, TGBL acquired Vitaxand Flosana brand in Poland toet the further ran e of fruit
largest in Russia in tea and coffeein the economy segment)
In 2012, they acquired SuntyCoHolding, (the owner of Grandbrand) with the remaining 49%
of share along with EBRD toexpand its sale in Russian market
economy brand under itsoperation
In April 2013, production capacityincreased by 80% to 20,226 kg oftea per day , thereby increasing thereach of Joekel to supply 95% ofhousehold tea in S.A. Toplineexpected to double here.
Its focus is now to tap the Africanmarket and to increase the exportto rest of the continent.
and herbal product apart fromTetley.
Tetley brand gaining traction inFrance.
Vitax expand offerings toincrease presence in growthsegments.
31Tata Global Beverages
Risks &Val ations
-
7/29/2019 Tata Globalw2w Sep 13
32/38
VALUATIONS
www.way2wealth.com
www.technoworld.in
Risks & Valuations
RISKS
Volatility in tea & coffee prices.
Vagaries of weather.
Volatility in currency rates.
Any sudden fall in demand from developed nations due to worsening of economic conditions.
Globally we believe TGBLs churn in product portfolio aided by product innovation to enablegrowth is in high demand product categories such as specialty tea & water segments. The fallingcommodity prices coupled with a weaker rupee make both topline and bottom-line look
attractive. A leadership position in the Indian packaged tea market, No. 2 position in the global
tea market, the business of brands and improving operating margins could augur well for thecompany. At the CMP of`147.15/- TGBL is trading at 19.4x FY14E EPS of`7.6. We believethe cost saving as well as the product innovation pipeline will support growth overthe medium to longer term and hence we recommend investors to ACCUMULATE
the stock.32Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
33/38
Consolidated Financials
In `Crs..
FY11A FY12A FY13A FY14E
Net Sales 6003.2 6640.0 7351.0 7768.1
Total Expenditure 5395.0 6017.0 6582.5 6887.8
Operating Profit 608.1 623.1 768.5 880.3
OPM 10.1% 9.4% 10.5% 11.2%
Other Income 97.19 94.52 86.01 92
Interest 121.03 70.35 84.44 92
www.way2wealth.com
www.technoworld.in
. . .
PBT 484.9 551.1 664.9 770.3Exceptional Items 9.5 22.5 -28.2 0.0
Tax Expenses 202.3 141.7 164.1 208.0
PAT 292.1 431.9 472.7 562.3
PATM 4.9% 6.5% 6.4% 7.2%
Share of Profit/(Loss) in Associate Company 20.3 -15.1 -27.7 -15.0
Minority Interest 58.0 60.7 72.3 78.0
PAT after Minority 254.3 356.2 372.7 469.3
Basic EPS 4.1 5.8 6.0 7.6
33Tata Global Beverages
C lid d Fi i l
-
7/29/2019 Tata Globalw2w Sep 13
34/38
In `Crs..
FY11A FY12A FY13A FY14E
Share Capital 61.7 61.8 61.8 61.8
Reserves and Surplus 3895.4 4503.9 4748.3 5086.7
Total Shareholder's Fund 3957.1 4565.8 4810.1 5148.6
Minority Interest 1108.1 1065.9 813.9 901.9
Non-Current Liabilities 1038.9 1134.8 1022.2 1082.0Current Liabilities 1660.4 1512.3 2147.6 1870.4
Sources of Funds 7764.5 8278.8 8793.9 9002.9
NON-CURRENT ASSETS 4377.8 4887.9 5184.7 5334.5
Consolidated Financialswww.way2wealth.com
www.technoworld.in
. . . .
Goodwill on Consolidation 3038.1 3468.7 3598.1 3673.1Non-Current Investments 480.0 473.5 576.0 619.0
Long-Term Loans and Advances 91.1 88.3 83.6 106.0
Other Non-Current Assets 4.2 33.3 0.0 5.0
CURRENT ASSETS 3386.6 3390.9 3609.2 3668.4
Current Investments 106.5 93.0 1.9 2.0
Inventories 1069.7 1160.7 1382.9 1422.1
Trade Receivables 573.3 651.8 712.9 794.0
Cash and Cash Equivalents 997.3 736.2 697.7 672.7
Short-Term Loans and Advances 626.4 732.1 792.4 752.5
Other Current Assets 13.5 17.1 21.3 25.0
Uses of Funds 7764.5 8278.8 8793.9 9002.9
34Tata Global Beverages
C lid d Fi i l
-
7/29/2019 Tata Globalw2w Sep 13
35/38
Consolidated Financials
Ratio Analysis FY11A FY12A FY13A FY14E
Profitability Ratios
EBITDA(%) 10.1% 9.4% 10.5% 11.2%EBIT(%) 8.5% 7.9% 9.0% 9.9%PBT(%) 8.1% 8.3% 9.0% 9.9%
PAT(%) 4.2% 5.4% 5.1% 6.0%Tax Rate(%) 40.9% 24.7% 25.8% 27.0%ROCE(%) 9.9% 9.2% 11.3% 12.1%RONW(%) 6.4% 7.8% 7.7% 9.1%Valuation Ratios*
www.way2wealth.com
www.technoworld.in
EPS4.1 5.8 6.0 7.6P/E
35.7 25.5 24.4 19.4
CEPS5.7 7.3 7.7 9.4
BV64.1 73.8 77.8 83.3
DPS2.0 2.2 2.2 2.2
EV/EBITDA16.6 16.4 13.2 11.6
Debt/Networth 25.8% 19.5% 21.1% 18.0%Growth Ratios
Net Sales 3.4% 10.6% 10.7% 5.7%PBIDT 13.4% 2.5% 23.3% 14.6%PAT -34.8% 40.0% 4.6% 25.9%
Net Sales to Net FA (x times) 7.9 8.1 7.9 8.3
35Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
36/38
Team
Analyst Designation Sector Email Telephone
Nilesh Doshi President (Research) [email protected] +9122-6633 8950
Debashish Mazumdar Sr. Research Analyst Information Technology, Media [email protected] +9122-6663 8952
Shivani V. Vishwananthan Sr. Research Analyst FMCG [email protected] +9122-6663 8956
Nisha Harchekar Sr. Research Analyst Chemicals [email protected] +9122-6146 2952
Debashish Mazumdar Sr. Research Anal st Information Technolo , Media debashish.mazumdar tssl.in +9122-6663 8952
www.way2wealth.com
www.technoworld.in
Institutional Sales Designation Email Telephone
Shilpa Venugopal Senior Manager [email protected] +9122-6164 2969
Institutional Dealing Designation Email Telephone
Ajay Prabhudesai Assistant Vice President [email protected] +9122-4027 8930
Vipul Mehta Manager [email protected] +9122-4027 8931
Gaurav Shah Manager [email protected] +9122-4027 8933
36Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
37/38
Strictly for Private Circulation only. All rights reserved. Techno Shares & Stocks Ltd & Way2Wealth Brokers Pvt. Ltd.
www.way2wealth.com
www.technoworld.in
DISCLAIMER: This information & opinions in this report have been prepared by TECHNO SHARES & STOCKS LTD & WAY2WEALTH BROKERS PVT. LTD.The report & the information contained herein are strictly confidential and meant solely for the authorized recipient and may be restricted by law or regulationin certain countries. This report is for information purposes only for the authorized reader and does not construe to be any investment, legal or taxation advice.
This report is based on the information obtained from public sources and sources believed to be reliable, however, no warranty, express or implied, are given forthe accuracy or correctness of the same and it should not be construed as such. It is also not intended as an offer or solicitation for the purchase and sale of anyfinancial instrument.Techno Shares & Stocks Ltd &Way2Wealth Brokers Pvt. Ltd. and/or its subsidiaries and/or directors, employees, officers or associates including the persons
involved in the preparation/issuance of this report may have (a) from time to time, any interest or positions (buy/sell etc.) financial (including inderivatives/commodities market) or otherwise in the companies/securities covered/mentioned in this report and may have acted upon the information &/or (b)been engaged in any other transaction, commercial or otherwise, in respect of the companies/securities covered in this report, like earning brokerage,
commission or act as a market maker &/or (c) performed or may seek to perform any merchant/investment banking services for such companies or act asadvisor or lender/borrower to such companies &/or (d) have other possible conflict of interest with respect to any recommendation or any information/opinionsthat could affect the objectivity of this report. As a result, the authorized recipients of this report should rely on their own investigations and analysis & seekprofessional advice. Any action taken by any one solely on the basis of the information contained herein is their own responsibility alone and Techno Shares &Stocks Ltd,Way2Wealth Brokers Pvt. Ltd. and its subsidiaries or its directors, employees or associates will not be liable in any manner whatsoever for theconsequences of such action taken.
No data/information contained in this report shall be copied, forwarded, transmitted or distributed, in part or in whole, in any form or in anymedia, without the previous written consent of Techno Shares & Stocks Ltd. & Way2Wealth Brokers Pvt. Ltd.
37Tata Global Beverages
-
7/29/2019 Tata Globalw2w Sep 13
38/38
www.way2wealth.com
Corporate Office:
3rd Floor, Hincon House, Tower - B,
247 Park, L.B.S. Marg, Vikhroli (W),
Mumbai, Maharashtra 400083, India.
Website:
www.technoworld.inwww.way2wealth.com
email: [email protected]
38Tata Global Beverages