Officials said Tata Sons chairman N Chandrasekaran is ready to boost FMCG arm Tata Global Beverages Ltd.’s (TGBL) product lines and to diversify beyond tea, coffee and water — categories in which the company is a leader.
Acquiring Hector Beverages would be a further step into entering fast-growing segments to broaden TGBL’s product portfolio and to truly compete with the likes of majors such as PepsiCo and Nestle.
Bengaluru-based Hector Beverages was founded in 2010 by Coca-Cola executives Neeraj Kakkar and Neeraj Biyaniis. The company is famous for its Paper Boat brand and range of ethnic Indian juice drinks such as Rose Tamarind, Ginger Lemon Tea and Aam Panna.
Since its inception, the drinks have quickly caught on in major Indian cities, with their attractive packaging and lively local flavours.
While Paper Boat is still running at a loss, it is expected to turn a profit within the next financial year. Hector Beverages claims that it has a year-on-year growth rate of 44%.
The Economic Times reported that Kakkar has so far denied the possibility of a takeover.
“We are strongly committed to building a long-term, sustainable and — most importantly — an independent business,” said Kakkar.
“We have complete support and ready patronage of our bouquet of investors, which includes our majority stakeholders, Catamaran and Sequoia.”
Kakkar said that while most of the business comes from the top six cities in India, they have partnered Indo Nissin Foods to expand into smaller Tier 2 and Tier 3 cities. This is expected to take place within the coming months.
TGBL, which owns Tata Tea and Tetley brands among others, is said to be the world’s second-largest branded tea company.
Based on a regulatory filing on February 2, for the quarter ended in December, TGBL reported a 30.51% increase in consolidated net profit to Rs1.88b. This was against a net profit of Rs1.44b in the same period in the previous year.
Upon speculation about the acquisition, the share price of TGBL surged by over 3% last week. It hit an intraday high of Rs286.50 per share on the Bombay Stock Exchange (BSE) on February 12.
Nonetheless, in January, we reported that TGBL was continuing to divest its loss-making tea plantation assets.
The company has also been cutting losses in divesting operations in China, Russia and Eastern Europe.