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Tata Coffee may buy a coffee brand

Reeba Zachariah

Tata Coffee is eyeing the possibility of acquiring a national coffee brand, the Bangalore-based company's managing director, M H Ashraff, said on Monday.

Tata Coffee, which has recently picked up a 34.3 per cent stake in Barista Coffee for Rs 260 million, is open to more such acquisitions, he said.

Furthermore, Ashraff added that Tata Coffee -- which has so far remained a regional player and has restricted its presence to South India -- is planning to go national with its brands.

Its current brand portfolio includes Tata Coorg Double Roast, Tata Coorg Coffee, Tata Cafe and Tata Kaapi. "We plan to go national first with Tata Coorg Double Roast, a filter coffee brand," he explained.

Finally, he said, the company is also looking at expanding its production capacity. It currently has more than 7,000 hectares under coffee and recently bought a large coffee plantation in Coorg for Rs 320 million.

"We are sounded almost every other week on whether we'd be interested in buying a coffee plantation, but we'd only look at large ones,'' he said. Tata Coffee happens to be Asia's largest integrated coffee company.

Asked which company in India had a national brand, Ashraff said that only Hindustan Lever had any national brands, quickly clarifying, however, that both companies had not held any brand acquisition talks.

Unilever, the Anglo-Dutch conglomerate that owns a majority stake in HLL, has exited the coffee business and HLL is one of the few Unilever subsidiaries that has a presence in coffee (its brands are Bru Expresso and Brooke Bond Green Label). Nor does HLL have any coffee plantations in India.

But an HLL spokesman clarified that Unilever had permitted subsidiaries to continue with businesses they were in if they were "local jewels" (that is, market leaders or had dominant positions).

He said that deals like the Barista one made sense because they would lessen Tata Coffee's dependence on auctions as an outlet for the 10 million kg of coffee that the company turns out.

"The deal with Barista does not prevent either partner from exploring other similar opportunities." Barista will source 70,000 kg from Tata Coffee.

Not long ago, US coffee retail chain Starbucks had e-mailed Tata Coffee seeking blends from the company. Tata Coffee then sent product samples to Starbucks. Though Tata Coffee has not heard from Starbucks since, it could one day strike an alliance with Starbucks.

According to industry sources, Starbucks is all set to enter the Indian market by year end and will have to source its requirements locally.

Ashraff explained that brand and other acquisitions and taking brands national was part of a comprehensive strategy to move up the value chain from being a bulk exporter of coffee.

Meanwhile, Tata Coffee's marketing network has been merged with that of Tata Tea. The two companies now have one national marketing organisation and Tata Coffee's branding, sales and distribution are now vested with Tata Tea.

Ashraff added that Tata Coffee had forayed into vending machine operations. Tata Coffee plans to expand from the current 1,600 machines to 4,000 by the end of this year.

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