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McLeod Russel India, the country’s largest producer of bulk tea, has entered into a joint venture with Eveready Industries India to packet teas.
Both the companies are part of the BM Khaitan-owned Willamson Magor Group.
Eveready has hived off its packet tea vertical, which owns brands like Tej, Premium Gold and Jaago, into a 50:50 joint venture company — Greendale India Ltd — with McLeod.
“Both the companies will invest ₹20 crore each, in one or more tranches, to develop the business,” said Amritanshu Khaitan, Managing Director, Eveready.
In February, the Eveready board had authorised Amritanshu to explore ways of restructuring the packet tea business. Accordingly, the company had roped in a consultancy firm to determine the growth strategy for the vertical.
Eveready’s 4,000-tonne packet tea business contributes to about 5 per cent of its turnover (₹69 crore in FY17).
Strong demandAccording to industry experts, a number of bulk tea producers are looking to enter the packet tea business to improve profitability and de-risk portfolios. The ₹10,000-crore packet tea market accounts for roughly 50 per cent of the country’s total tea consumption pegged at one billion kg.
The segment is dominated by brands such as Tata Tea (a product of Tata Global Beverages Ltd), Brooke Bond (Hindustan Unilever Ltd) and Wagh Bakri Tea.
“Eveready and McLeod will bring their respective skills in marketing and distribution and tea plantation to develop the packet tea business. We are expecting to emerge as the third largest packet tea brand in the next five to ten years,” Khaitan said.
Financial performanceRiding on the back of a growth in volume and value sales, McLeod posted a nine per cent rise in net profit to ₹144 crore for the quarter ended September 30 against ₹132 crore in the same period last year. Total income grew two per cent to ₹512 crore (₹501 crore).
The average selling price was up by almost four per cent at ₹180.64 a kg during the quarter under review, against ₹173.82 a kg in the same period last year.
On the other hand, Eveready saw an over 40 per cent rise in net profit to ₹36 crore in Q2 FY18 (July to September period). Trade channels reported “a decent recovery” in the quarter, resulting in improved demand for key segments of batteries and torches, and lighting.
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