What is the strategic rationale of Tata Tea Limited

acquiring Tetley? Would alliance be better?

2. Assuming that Tata Tea acquires the same for Brand,
what is the brand value of Tetley?
3. What are the integration challenges to realize the
value of Tetley?

Strategic rationale of Tata Tea Limited acquiring Tetley

Deregulation in the offing in India Indian tea production not competitive Free import to
India Local players can source from Sri Lanka, Kenya and China- International players to
break into India By acquisition Tata can reposition themselves take competition to
opponents court and can also put entry barrier by using sourcing power of Tetley
Tata Tea with 54 tea estates and second largest in India in the packaged tea segment with
a presence in developing countries through exports. Tetley was the second largest tea
brand in the world, with a presence in developed geographies. Developed countriesmatured market source of growth is branding - Acquisition will give market access
Tetley strong in buying, blending and logistics management and innovator in tea
packaging. Acquisition provides access to global sourcing - reduce costs and gain
economies of scale - capture higher end of value chain

Would alliance be better?

Factors

Tata tea - Tetley

Preferred
Strategy

Remarks

Types of Synergies

Reciprocal

Acquisition

Knowledge sharing process involved.

Tata need to get best of
blending/packing innovation from
Tetley.

Nature of
Resources(relative value
of soft to hard
resources)

Medium but
towards softer side

Acquisition

we assume the capabilities of Tetley

were institutionalized and the same will
be continuously available irrespective
of the employee turnover

Extent of Redundant
Resources

Medium

Equity alliance

R&D capabilities, innovation in packing

Can eliminate redundancies across
value chain

Degree of Market
Uncertainty

Medium

Acquisition

Market in Developed countries matured

But fluctuations in auction price while
retail price unaffected

Level of Competition

Medium

Equity Alliance

Sara lee, Uni lever, nestle not in

acquisition mode. But move from
acquisition to alliance may bring in
Sara lee and Nestle

For the companies to take better off the industry structure, , synergy
and nature of resources criteria assumes greater significance and
hence we prefer acquiring Tetley by Tata.

Integration challenges to realize the value of Tetley?

Arriving at common vision for the fully integrated company and the marketing company
What level of integration? Full integration or Board level involvement?
Tetley is double the size of Tata tea, dominant nature of Tetley need to give way to TATA
corporate culture
Cultural integration learning from each other and creating better value proposition
British employees in all probability would not like to be managed by Indian Managers.
Arresting employee turnover is crucial. Attitudinal and mindset change among employees
of both companies will be challenging
Being leveraged buyout, Bankers need to be taken into confidence before any change in
the way in which company operates

Integration challenges to realize the value of Tetley?

Integrating the different but complimentary skill sets Tata managing estates, dealing
with huge employees, selling teas ; Tetley buying quality tea, blending, innovation in
packing, marketing
Agreeing upon which brand to focus on which market
Building common systems and common database for market and collection of data
Agreeing to global product mix and avoiding cannibalization to the extent possible
streamlining and standardising marketing to have coherent and cohesive approach
Blending the supply chain teams of both companies towards common sourcing strategy
Setting up and adopting benchmarked processes by both organisations
Back office integration of support services like Finance, Legal, R&D, HR, IT

Thanks!