Tata Group considers merging food and beverage businesses into single company

Tata Group, India’s biggest conglomerate, is evaluating a proposal to integrate its food and beverage businesses into a single company, people with knowledge of the matter said.

The Mumbai-headquartered group is considering separating the salt and branded lentils businesses of Tata Chemicals Ltd. and folding them into Tata Global Beverages Ltd., according to the people who asked not to be named because the information is private. It’s also weighing merging Tata Coffee Ltd., which owns coffee plantations and tea gardens, with the beverages company, and entering dairy, they said.

The proposal is part of Chairman Natarajan Chandrasekaran’s larger strategy to combine related businesses under a single umbrella to increase efficiency and simplify the conglomerate, which includes more than 100 independent operating companies. In April, the Tata group said it will create a single entity called Tata Aerospace & Defence by merging all allied businesses.

Tata Global Beverages, one of the biggest branded tea sellers in the world, could be renamed to reflect the broader focus on the foods business, the people said. The company sells tea under brands including Tetley and Tata Tea, coffee under Eight O’Clock and bottled water under Himalayan.

Shares of Tata Global Beverages climbed as much as 7.4%, their biggest gain since August 16, as of 2.41 pm in Mumbai. Tata Coffee surged as much as 18%, the most in almost six years. Tata Chemicals rose as much as 3.8%. The benchmark S&P BSE Sensex advanced 0.4%.

Different options

Another alternative being considered is consolidating the businesses under Tata Chemicals, two of the people said. The second-largest producer of soda ash in the world, the company also sells salt under the Tata brand name and introduced branded pulses, including black gram and pigeon peas, in 2010.

The group is weighing different options and a final decision hasn’t been made about the units that will be merged and into which company, the people said. A special task force has been formed and has made presentations to the board of Tata Sons Ltd., the group’s holding company, they said.

Representatives of Tata Group and Tata Global Beverages declined to comment on market speculation. Tata Chemicals also declined to comment, while Tata Coffee did not immediately respond to a request for comment.

The merged entity will also look to set up an integrated dairy business either through acquisitions or by building it from scratch by leveraging the refrigerated shipping capabilities of group companies, the people said.

There are also deliberations that are at an early stage about bringing the group’s various consumer and retail businesses under one umbrella, the people said. There is no timeframe for a decision or certainty that it will result in consolidation, they said. The group has companies including Infiniti Retail, an operator of consumer electronic stores, Landmark, which runs a network of outlets selling books and music, and Titan Co., which sells watches and jewelry through its retail chain.

-- With assistance from Anto Antony