TGBL to focus on scaling up operations
Tata Global Beverages Ltd (TGBL) is looking at consolidating businesses which are “marginal”, and at exiting non-core foreign markets which lack scale of operations.
According to Tata Group Chairman, N Chandrasekaran, the company will look to expand where it can achieve a certain scale of operations and build a “high-class consumer product company”.
“The company has a number of subsidiaries and is present in various markets. Some markets we will look to exit, and some subsidiaries we may consolidate. We will be in areas where we can scale up,” Chandrasekaran said during the annual general meeting of TGBL here on Tuesday.
As part of the ongoing effort to simplify its organisational structure, The Tata Group had recently N Chandrasekaran, Chairman, Tata Group
announced its decision to merge the consumer businesses of the two listed entities — TGBL and Tata Chemicals Ltd. Tata Chemicals will transfer its consumer foods division to TGBL and the merged entity will be renamed Tata Consumer Products.
The merger will help TGBL scale up its portfolio, he said.
TGBL had witnessed poor growth due to a “marginal presence” in many international markets, and consolidated operations by exiting China and Sri Lanka and restricting operations in Russia in 2017.
The company has also restructured its EMEA (UK, Europe, the Middle East and Africa) and CAA (Canada, Australia and America) businesses under a singleoperating unit, it said in its latest annual report.
“Nearly 40 per cent of the total revenue comes from the international markets. There has hardly been any growth in these markets. We need to keep the growth momentum,” Chandrasekaran said.
Unless TGBL is able to focus on the domestic market and improve its operations, its earnings may fall short of ‘acceptable levels’, he added.
According to Chandrasekaran, the stagnation of growth in international markets, achieving scale of operations and improving financial matrix are three key challenges confronting the company at present. A majority of these, however, could be addressed by the merger of Tata Chemicals and TGBL, likely to materialise in 12-18 months.
The Group Chairman also highlighted the need for having a well-diversified portfolio.
“In the FMCG segment, we need a large portfolio. We cannot just be a single tea player and depend on it to attain scale. Tea, water...these things are good but they are not going to give scale. The company has to gain scale by a wide range of products,” he said.
While the merger will initially focus on food and beverages, it will also explore diversification.
Responding to a shareholder’s query on the possibility of rolling out specialty restaurants under TGBL, he said the Indian Hotels Company is considering the proposal.