INDIA – Eveready Industries has decided to bring in a strategic investor for its packet tea business after hiving it off as a separate entity.
The company, part of the world’s largest bulk tea producer Williamson Magor Group, plans to complete the restructuring of the packet tea division by March to sharpen its focus on the business which has sunk under the shadow of other ventures such as appliances and batteries.
“Tea is a matured category which requires sustained brand investment but with Eveready’s entry into small appliances, most of the investment is being applied here,” Amritanshu Khaitan, managing director of Eveready Industries India, said.
The Eveready board, which met today, entrusted Khaitan with the task to examine the relevant aspects of the restructuring.
“While the packet tea business will continue to leverage the company’s distribution network, we shall examine all options for the business.
For example, continuing with the business in a subsidiary/special purpose vehicle or induction of a strategic partner, etc,” Eveready told bourses.
The company forayed into the small home appliances business in the beginning of this financial year.
The battery major’s annual report for 2015-16 revealed the company’s waning interest in packet tea.
“The company has not really invested any money in advertising for the brands Tez, Jaago, and Premium Gold that are targeted at different consumer segments,” it said.
Khaitan said forming the subsidiary would help the sector to arrange the required capital for its growth.
“If we do find a strategic partner, we expect the tea business to not only double in the next four years but to also become profitable,” Khaitan said, adding Eveready would continue to have a majority stake.
According to the industry, a strategic partnership can be expected between McLeod Russel India, the largest tea planter in the country, and Eveready.
“Both the companies are part of the Williamson Magor Group and it is a known fact that any new plan adopted by them remains within the group,” said a senior tea planter.
“The risk with the category is one of low growth which limits its ability to become profitable. Should loose tea prices fall, it will further affect profitability.
The problem needs to be tackled through a mix of branding efforts, good blends and competitive pricing,” the company had said in its last annual report.
“This new initiative of having a separate unit for tea will help improve Eveready’s overall financials in the current fiscal,” he said.