Tata Tea Quest for Growth 19832001

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Tata Tea Ltd The Tetley Group Half Yearly
Results 2003/04
November 4, 2003
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Presenter Panel

• H. R. Khusrokhan (Managing Director Tata Tea)
• P. T. Siganporia (Deputy Managing Director Tata
  Tea)
• P. Unsworth (Managing Director Supply
  Support- The Tetley Group)
• A. P. Goel (Vice-President Finance I.T. Tata
  Tea)

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Outline of Presentation

• Highlights of Performance (HRK)
• Branded Tea Scenario in India (PTS)
• The Tetley Group Review (PU)
• Tata Tea Financials (APG)
• Questions Answers

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Highlights of Performance

• H R Khusrokhan

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Highlights

• A strong H1 performance for the Group
• Tata Tea performance continues to improve,
  despite a continuing recession in the Indian Tea
  Industry
• Revenues for H1 up 3
• PBT for H1 up by 11
• PAT for H1 up by 14
• ORG Market Share restored to 2002 levels in a
  market that has continued to slip by 12
• Tetley H1 performance well above previous year
  PAT 6.32 m (PY- 2.97 m) PBT 9.97 m (PY-
  4.79 m)

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Strategies that have helped

• Clear separation of focus between Branded and
  Plantation Operations
• Transfer pricing of all Teas used captively by
  our Brands at Auction Equivalent Prices and
  freedom to brands to buy the components required
  for blends
• EVA driving decisions in branded and plantation
  operations
• Clear Brand positioning
• Innovator (Tetley)
• National /Flagship (Tata Tea)
• Economy (Agni)
• Regional (Kanan Devan Gemini Chakra Gold)
• Improved distribution effectiveness
• Launch of new Variant Tata Tea Gold

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Strategies that have helped

• Plantations
• Re-engineering of SI Estates (5 Clusters)
• Labour Productivity up by 10-12
• Man-days reduced by 12
• Productivity linkage in wages
• Mechanisation of plucking operations
• Productivity Linked Bonus Payments now both in
  North South
• Overheads
• Network Optimisation
• Improved Working Capital Efficiency
• Aggressive Treasury Management

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Strategies that have helped

• Geographical Growth
• Domestic Brands now in the Middle East, (Gulf,
  Syria, Iraq) WANA Countries (Yemen, Sudan)
• Tetley Brand in Kazakhstan and other CIS
  Countries
• Far East incl. China, HK, Singapore Thailand
• Pakistan for Bulk Tea

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Revenue Mix (2002/03 Actuals)
N.B. Branded Teas now constitute 86 of Total
Revenues of the Group
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Outline of Presentation

• Highlights of Performance (HRK)
• Branded Tea Scenario in India (PTS)
• The Tetley Group Review (PU)
• Tata Tea Financials (APG)
• Questions Answers

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Branded Tea Scenario in India

• P.T. Siganporia

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Market and Competition
ORG Volume Market Shares

• Decline in Volume Market Share arrested and now
  growing -
• back to 2002 levels
• Share of Regional Brands stagnant/ falling for
  last 3 quarters

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ORG Market Shares

• Brand Tata Tea at 7.2 Volume Share for Q2,
  grows by 6.4 over Q1 records 8.6 Value Share
  for Q2, grows by 7.4
• Agni, Tetley grow Volume and Value shares while
  Kanan Devan, Chakra Gold and Gemini shed shares
  in Q2 compared to Q1
• Kanan Devan, Gemini and Chakra Gold report growth
  in volume share during September,2003 over
  previous month
• Overall Company portfolio gains volume and value
  shares in Q2 over Q1 with Volume share of 16.6
  growing by 2.2 and Value share of 19.7 growing
  by 2.3

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Brand Performance Initiatives

• Turnaround in brand performance, via several
  marketing initiatives during the last 12 months
• Tata Tea Brand re-launched. Upgraded variant Tata
  Tea Gold launched in September 2003
• Kanan Devan, Chakra Gold and Gemini brands
  re-staged
• Tea Sourcing and Blending track consumer driven
  formulations
• Tetley teabag volumes grow
• Major enhancement of AP funding

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Brand Performance Initiatives

• Key Challenges
• Tea becoming a low involvement category, leading
  to commoditization
• Threat to volume and profit from regional and
  local brands
• Negative market growth due to reverse migration
  to loose and store-packed tea
• Recent competitor initiatives

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Brand Performance Initiatives

• Strategy
• Invest behind building the Tata Tea brand
• Drive consumer insight based innovation to
  modernize category and enable profitable growth
• Selective strengthening of sales and distribution
  to drive
• - Top and bottom ends of the opportunity pyramid
• - Geographic brand thrust
• Enhance processes and culture to drive change

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Outline of Presentation

• Highlights of Performance (HRK)
• Branded Tea Scenario in India (PTS)
• The Tetley Group Review (PU)
• Tata Tea Financials (APG)
• Questions Answers

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The Tetley Group H 1 Review 2003/04

• Peter Unsworth

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Tetley - Key Financials
m
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Key Financials

• Sales down year on year
• Disposal of the US RPLT - 11m impact
• GB share at record levels but sales down in soft
  market and changed promotional environment
• Canadian sales up 4 - Continued market
  leadership
• Challenging for brand leadership in Australia but
  sales down after last years new broker sell in
• French sales up 7 - Strong trading and exchange
  rate benefit

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Key Financials

• EBITDA up 9 to 20.2m
• Reduced promotional spending
• Cost savings from US and Australian
  reorganisation
• Lower tea prices
• Cash generation remained strong
• cash conversion 88 of operating profit before
  restructuring costs
• lower capital expenditure
• 174m refinancing took place on 28th February 2003

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Market Shares
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TETLEY GB (153m, Rs1100cr)

• Previous 12m Latest 12m
• Tetley brand share 27.5 27.6
• PG Tips (Unilever) brand share 23.6 21.9
• Good News
• Established value share leadership vs PG Tips
  (now 26.3 vs 25.5)
• Awarded Category Partner status in Tesco (27
  brand leading retailer)
• Issues
• Likely sale of Safeway retailer, changed
  promotional mix
• Market performance -5 through 2003
• Current Agenda
• New launches of speciality/FH teas (Tesco)
• Eveil des Sens
• Tetley and herbal black teas
• Test launch of T of Life

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TETLEY USA (48m, Rs345cr)

• Previous 12m Latest 12m
• Tetley brand share 11.1 11.7
• Lipton brand share 46.8 46.7
• Good News
• USA business re-structure implemented created a
  new platform for growth
• British Blend teabags growing
• Strong position maintained in decaffeinated
  sector
• Much planning for future growth
• Issues
• Relatively low brand equity
• But.high recall as strong base for growth
• Current Agenda
• Ready-to-drink tea
• Speciality teas
• Mainstream range extensions

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TETLEY CANADA (24m, Rs173cr)

• Previous 12m Latest 12m
• Regular sector Tetley brand share 43.0 43.3
• Regular sector Unilever brand share 31.6 31.5
• Speciality sector Tetley brand share 21.1 22.1
  
• Speciality sector Celestial brand
  share 13.0 12.0
• Good News
• Strengthened leadership of speciality teas
• New Canister pack launched September 03 for all
  speciality products
• Issues
• Continued decline of regular black tea market
• Unilever focus
• Growth of speciality
• Current Agenda
• New products and formats

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TETLEY AUSTRALIA (14m, Rs100cr)

• Previous 12m Latest 12m
• Tetley brand share 15.7 17.9
• Lipton brand share 22.6 21.7
• Good News
• September 03 the smallest gap vs Lipton ever
• Tetley 19.4
• Lipton 20.7
• Issues
• Black tea market down in 03
• Broker settling down
• Current Agenda
• Packaging developments
• New market entries

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Key influences on EBITDA

• Positive trading in Canada and France
• Changed promotional environment in GB and France
• Phasing
• UK brand re-launch at start of 2002/3
• Cost of sales benefiting from
• Lower raw tea prices
• Labour savings from US and Australian
  reorganisations
• Overhead benefit from US and Australian
  reorganisation
• EBITDA up 1.6m at 20.2m

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4 Year EBIT summary (6 months to August)
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The Tetley GroupHalf Yearly Results - 2003/04
m
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Other Issues

• Raw tea price outlook
• Exchange rates
• New market entries
• UK pensions environment
• Cash position and debt management

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Outline of Presentation

• Highlights of Performance (HRK)
• Branded Tea Scenario in India (PTS)
• The Tetley Group Review (PU)
• Tata Tea Financials (APG)
• Questions Answers

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Tata Tea LtdH 1 Financials - 2003/04
A.P. Goel
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Operations Highlights

• Sales Income
• Main line branded tea portfolio witnesses healthy
  growth volumes up by 4
• Auction volumes up, albeit with pressure on
  prices
• Branded tea export volumes improve
• Commodity export volumes under pressure
• Instant tea export volumes marginally up
• Overall top-line improves by 3 during the first
  six months

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Operations Highlights

• Expenditure
• Increased expenditure largely linked to 15
  increase in production across plantations
• Labour costs controlled with improved plucker
  productivity and lower bonus
• However, in aggregate staff costs increased due
  to higher production/salary revisions
• Consumption of raw materials higher due to
  increased purchase of green leaf in plantations
• Higher promotional spends behind brands
• Increased investments to manage supply chain

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Operations Highlights

• Treasury
• Cost of term debt declines from 11.3 to 7.25 pa
• Raised Rs 75 crores in May,2003 _at_ 5.85 to retire
  existing debt in 2003/04
• Interest expenditure down by 35 to Rs 10.08
  crores
• Interest Income declines by 16 to Rs 5.57 crores
  
• MF portfolio earns returns _at_16
• Tight working capital management-debtors/sales _at_
  7
• Fixed Deposit scheme being phased out

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Tata Tea LtdHalf Yearly Results - 2003/04
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Other Issues

• Consolidated Tata Tea Group Results will be
  tabled from 3rd quarter of the current year
  onwards

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Tata Tea Ltd Share Price Movement
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Outline of Presentation

• Brand Scenario in India (PTS)
• Tata Tea Short Medium Term Strategies (HRK)
• The Tetley Group Review (KP PU)
• Tata Tea Financials (APG)
• Questions Answers

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Thank You