The Tatas have embarked upon a major restructuring of Tetley’s US operations. The company has entered into two separate manufacturing joint ventures with Harris Tea, a major private label players.
The move is part of Tetley’s business model which emphasises outsourcing tea requirements to service different geographies and concentrating on brand building.
The US is one of the biggest markets for the company. Tetley has two manufacturing facilities in the US — in Georgia and New York — which have now been hived off into two separate joint venture companies with Harris Tea.
As per the arrangement, Tetley holds a majority 56 per cent stake in Emperical (New York), which will be managed by Tetley. The other plant, Southern Tea, is a 50:50 joint venture, which will be managed by Harris Tea.
The ventures will continue to service the US markets, and Tetley will source its requirement from the companies, Anil Goel, vice-president (finance) at Tata Tea, said.
"The primary driver behind the move was that the margins were proving to be low in the private label business. As we had significantly large excess capacity, we felt the joint venture option would be better. Brand-building would now be the main focus," Goel added.
Similarly, the entire manufacturing operations of Tetley (Australia), located at Yara, has been shut down and transferred to India.
India will be a major base for Tetleys’ Australia, Eastern Europe, Polland, France, and emerging markets like Russia and Middle East.
Tetley had also closed down the Greenford factory in West London. The entire facility was shifted to Eaglescliffe — which houses the world’s largest tea factory — near Middlesborough in northeast England.
The Canada market will be serviced from the UK facility. As Goel puts it, the move is to not own facilities and be more competitive in the market. The UK facility will service Tetley Canada.
The group last year relaunched Tetley with a new positioning on the health plank in the UK, its hometown.
Tetley’s market share in key markets has risen after the acquisition by Tata Tea in 2000. Its share in the UK rose to 26 per cent (21 per cent) and to 40 per cent (34 per cent) for black tea in Canada.
In Australia, it is the fastest growing tea brand with a 17 per cent (12 per cent) share.