Tata Tea and PepsiCo have initiated steps to enter into a joint venture, by signing a preliminary agreement to form a new non-carbonated beverage company, which will market its products exclusively in India.
A Memorandum of Understanding (MoU) has been signed and the details are yet to be worked out between the two companies.
The future of the present joint venture between PepsiCo and Hindustan Unilever to market, sell and distribute Lipton Iced Tea was earlier in question owing to the new MoU. This is particularly because of HUL and Tata Tea being competitors in the packaged tea market. However, a joint statement has been issued by Tata Tea and PepsiCo stating that the new venture does not intend to clash with the existing arrangements of both companies.
Company insiders say that the new company to be formed may also absorb PepsiCo’s non-carbonated beverages like Aquafina packaged water, Tropicana juices and Nimbooz lime juice into itself. Tata Tea’s liquid beverage like Himalayan packaged drinking water and a fruit juice and tea-based drink called T!ON are also likely to be a part of the new entity.
The listing of the new venture is still unclear as Tata Tea is listed in India whereas PepsiCo is not. The new company’s shareholding pattern will also have to be decided upon. As of Friday, Tata Tea’s shares closed with a 2.83 percent rise at Rs 1,000.05 on the Bombay Stock Exchange.
Veterans in the industry say that Tata Tea is following in the footsteps of Nestle to position itself as a “health and wellness” company by adding to its value. This could be due to a recent report by the Tata Strategic Management Group pointing out the 24 percent annual growth in the health and wellness and food sector in India. It has already changed its position once from a plantation brand to a beverage brand. The company’s global acquisitions include companies such as Tetley, Good Earth and Eight O’Clock Coffee.