Tata Tea Ltd

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Tata Tea Ltd Merrill Lynch Investor
Conference Presentation
February, 2006
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Presentation Overview

• Tata Tea Overview
• Tea Market Overview
• Brands Overview Initiatives
• Plantations Overview Initiatives
• Instant Tea Business
• Coffee Business
• Way Forward

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Tata Tea - Overview
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Tata Tea Overview

• Among the top three players in the global tea
  market in terms of market share
• Market capitalization in excess of US 1 billion
• Consolidated Revenues of over US 700 million
• 29 ownership by the Tata group FII ownership 22
  Domestic institutional share holders 15
• Primarily a branded tea operation with presence
  in over 40 countries with significant market
  share
• - Tata Tea in India
• - Tetley overseas
• Plantation ownership in India and Sri Lanka
• Includes Tata Coffee (Asias largest coffee
  producer)

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The Tata Tea Group - Structure
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Consolidated Turnover 2004/05
Segment wise turnover
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Performance Highlights Tata Tea Standalone
Rs in Crores
The Tea Industry is seasonal in nature and the
nine months results do not necessarily reflect
the pro-rata performance for the full year.
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Performance Highlights Tata Tea Consolidated
Rs in Crores
The Tea Industry is seasonal in nature and the
nine months results do not necessarily reflect
the pro-rata performance for the full year.
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Tea Market Overview
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Global Tea - A Snapshot
World Tea production in 2004 3200 mn kgs
(approx)
India is the largest tea producing and consuming
country in the world.
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Global Opportunity for Tea

• Growing Black tea markets define opportunity for
  geographical expansion of portfolio in overall
  Black tea although stagnancy is reported in world
  markets
• - Potential sector revenue of Rs 48,000 Crs.
• Top 30 Tea markets account for 90 of the
  market volume in the packaged black tea segment
• Tata Tea Tetley present in only 35 of this
  market with a combined revenue of Rs 3000 Crs.
• Green / Fruits Herbal / Flavours / Specialty
  tea account for 49 value of all global packaged
  tea revenues !
• - Potential sector revenue of Rs 48,000 Crs.
• RTD operates in a beverage arena that is at Rs
  128,000 Crs.

SIGNIFICANT POTENTIAL FOR ADDRESS OF REVENUE
GROWTH
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Brands
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India - Overview

• 2nd largest player after Hindustan Lever
• Value market share of 21.6 (A C Nielson)
• Brand presence across segments and price points
  represented by Tata Tea, Agni, Chakra, Gemini and
  Tetley
• Super brand ranking for Tata Tea Premium
• Distribution network connecting over 2200
  stockists and 1.5 mn retailers

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India - Initiatives

• Existing brands restaged in India
• Launch of Kanan Devan Strong leads to a major
  jump in market share
• Sania Mirza drives double digit growth of Tata
  Tea
• Tata Gold captures 2 of market share within 14
  months of launch
• Restage of Tata Tea Agni
• Launch of specialty teas under the Tetley brand
  new face of innovation

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Overseas - Overview

• GBTetley continues to outperform major
  competitors with brand leadership at 27 Growth
  in specialty teas segments
• Canada Specialty tea market leader at 23 black
  tea at 44
• Australia Growing market share of tea bags at
  21
• USA USA share up year on year. Value share of
  black tea 10.
• France Growing market share of tea bags at 11
• Poland, Portugal, Spain, Jamaica Baltics
  improved performance during the period
• Russia, Pakistan, Bangladesh South Africa - new
  market entry shows promising results

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Overseas - Initiatives

• Acquisition of Good Earth in the USA
• Brands
• Fruit herbals new launches in various
  geographies across the globe
• Test marketing of iced teas in UK
• Increased market share in developing markets.
  Success in opening up of new markets like
  Bangladesh, Pakistan, South Africa and Russia.

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Redefining Innovation
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Plantations
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Tata Tea Plantations Restructuring

• Pre Restructuring
• TTL
• NIPO SIPO
• Est 24 26
• Emp 31K 18K

• Current Status
• TTL
• NIPO SIPO KDHP TCL
• 24 2 17 6
• 31K 2K

Objective TTL Plantation Business
Minority Interest
100
51
19
100
TEA
Alternative Crop
TEA
TEA
Alternative Crops
Tourism
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Plantation Restructure - rationale

• Company focused on brand growth
• Management skills different for plantation and
  brands
• Global Sourcing opportunities
• Complete ownership not essential
• Some long term supply arrangements needed
• Considerable scope to enhance plantation value
  with focus

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Plantation Restructuring Initiatives

• In South India
• 17 estates recently transferred to a new company
  formed under the EBO model
• Majority ownership of employees including over
  10000 Workers
• 19 ownership with TTL with special rights
• 6 estates sold to a subsidiary
• Intention to exploit tourism potential in balance
  two estates
• In North India
• Options for similar reconstruction being
  evaluated for North India
• Alternative crops and usage of land to enhance
  value and returns

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An economic evaluation revealed that there are
several economically viable alternate models
Shortlist
Agriculture Traditional and Non Traditional
Tomato
Agriculture - Traditional
Patchouli
Glory Lily

• Vegetables Chilly. Tomato
• Fruits Banana, Pineapple, Papaya
• Spices Ginger, Turmeric

Pepper
Banana
Chilly
Turmeric
Chilly
Papaya
Periwinkle
Pine- apple
Agriculture Non Traditional

• Medicinal and herbal
• Floriculture

Ginger
Gross Margin ()
Animal
Citronella
Orange

• Fishery
• High demand
• High revenue and good returns
• Returns can be enhanced by combining with duckery
  and piggery

Aracenut
Lemon

• Dairy
• Good demand
• High revenue and good returns

Innovative

• Tea and nature tourism
• Complementary to tea

Gestation Period (Years)
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Welfare activities

• Progressive shift of existing welfare activities
  in South India to an independent trust
• Upgradation of Schools and Hospitals which offer
  potential
• Dedicated senior managerial responsibility-
  Director projects
• Upgradation and outsourcing possibilities for
  select North India institutions

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Instant Tea Coffee
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Instant Tea

• Instant tea plant in Munnar with 4.5 mn lb
  capacity supplying instant teas across the world
  with specific emphasis on Tata Tea Inc, USA
• Products from Tata Tea Incs packing facility at
  Florida present in many famous labels
  (Kraft, Snapple)
• Global turnover of instant tea at Rs 94- 100
  crores
• Group exploring growth opportunities

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Tata Coffees Businesses
TCL Businesses
Plantations
Soluble Coffee
Marketing
Coffee
Spray Dried
Brands
Vending
Pepper
Agglomerated
Freeze Dried (In Progress)
Timber
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TCL Coffee Business - Coffee Plantations

• 4 share of Indian Production
• Leader in Quality International Recognitions
• Best Robusta in the World,2004
• Selected for supply of Premium Coffee to leading
  coffee chains Starbuck,Illy Café
• Series of Flavor of India-Fine Cup Awards
• Expansion plans of freeze dried coffee
• Cost consciousness
• Rationalized employee strength
• Stringent cost controls

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Tata Coffee
Rs in Crores
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Way Forward
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Brands

• Prioritize growth agenda across the globe and
  meet growth challenge through
• Organic growth
• Appropriate strategic partnerships
• Acquisitions
• Sustain growth in key markets through
• Value added segments e.g. Fruit Herbal Launches
  
• Consumer driven insights
• Utilize distribution networks to leverage
  product/category extensions

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Way Forward

• Plantations
• Enhance sustainability of model
• Discharge of social responsibility
• Improve returns to Tata Teas shareholders
• Drive Cost Rationalization
• Supply chain
• Overheads
• Instant Tea
• Explore growth opportunities
• Coffee
• Initial focus on B2B model with product expansion
  in instant and freeze dried coffee
• Selective forays into out of home and consumer
  segments

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Thank You